The proliferation of connected devices has garnered a general confidence in trusting others with serious online transactions. Companies such as Airbnb and Uber have tapped into this lucrative online market and normalised the idea of ‘online-first’ dealings.
UK consumers are looking towards, and demanding more from, comparatively traditional industries such as retail and travel when it comes to adoption of technology. Many have embraced technology while maintaining the full bricks-and-mortar offering, such as John Lewis and Virgin Holidays. Meanwhile, pure play online companies such as Boohoo.com and Expedia are growing to the extent that 30% of online travel bookings will be made on mobile devices alone by 2017 according to Euromonitor.
Questions are being asked of whether the estate agency market will embrace these online trends, and the potential profitability of the segment. We’ve seen some growth, with online estate agents estimated to hold between 2 to 5% of the market, within a relatively short space of time. Although the long term prospects on online-only agents remains to be seen, it has raised questions around whether we will see a further decline in the number of estate agents on the high street.
The traditional business model – fixed around bricks-and-mortar premises – hasn’t changed significantly in decades. Many have survived on reputation, providing a solid customer service, and cultivating long-term relationships with families and friends over generations. However, there are some pain points felt by UK home buyers and sellers when it comes to the more traditional facets of the agent-client relationship. These include charging excessive fees; not returning calls, showing properties that do not fit their requirements; undervaluing properties; impersonal service; inflexible working hours; and not being conveniently contactable (such as via text or email). These pain points, combined with the wider shift towards online as the first port-of-call for consumers, have given rise to the online estate agent.
Online estate agents initially gained prominence as a do-it-yourself option, whereby sellers could list their properties for a flat rate of up to £500, with the intention of cutting down on agent fees (which can often reach into thousands of pounds depending on the final sale price of a property). Many sellers also found online options more convenient because, unlike most high street chains, online agents work around the clock.
Britain’s largest online firm, Purplebricks, claims that 70% of its business is done outside of traditional working hours through its helpline, which allows customers to book viewings or give decisions on offers. There are around 40 online firms to choose from, including House Network, HouseSimple and Tepilo. It’s estimated that 4% of all homes are now sold through an online agent annually — around 48,000 — and predict that internet firms could handle up to 50% of all sales by 2020.
Over three quarters of the consumers surveyed by Dezrez suggested they would be happy to deal with the end-to-end process online, but these findings must be taken with a note of caution. For example, in recent months, Purplebricks has ramped up recruitment drives for local property experts across the country in order to supplement consumers’ preference for an online-first approach that still leans on the expertise of face-to-face interactions.
It’s been said that online estate agents have historically undercut the margins of traditional estate agents by minimising commission fees, instead requesting a one-off payment from sellers to conduct the process. On the face of it, this is an attractive prospect for both agent and consumer – the agent gets a guaranteed fee up-front, while the consumer can reduce the prospect of having to pay more further down the line.
However, this practice by online estate agents to offer cheaper fees is seen as a shop window technique, which is used to get home buyers to drop the price of their property and increase the chance of a speedy sale. The traditional bricks-and-mortar players argue that the fees they are charging are fair, as they offer the home buyer the personal touch and customer service that is not offered online. In addition, the personal and professional management of the sale process means that they tend to be able to achieve the desired asking price for the property – the best outcome for all. However, some – including Countrywide – are testing new business models that span bricks-and-mortar and online.
The Hybrid Model is a true reflection of devoting equal resources to marketing and selling properties by combining online and bricks-and-mortar (traditional) assets. Despite common misconceptions, the hybrid model extends far beyond a bricks-and-mortar estate agent simply running a website alongside a physical branch.
Purplebricks has moved towards a hybrid model by integrating the use of regional estate agents to supplement the online-first experience. But a truly hybrid approach connects online and physical to bring together the best of both worlds – supplementing the convenience, responsiveness and functionality of online with the expertise and guidance of an estate agent with physical premises.
This digitally connected approach is being trialed by Countrywide. In June, it announced it will offer vendors and buyers a choice of using an online service, a traditional high street branch or a mix of the two in a pilot project involving three brands – Spencers in the Leicestershire and Rutland area, Austin & Wyatt in Dorset, Hampshire and Wiltshire, and Frank Innes across the East Midlands.
This move towards a hybrid model appears to be reflective of estate agents’ efforts to stay competitive but remains an important, integral, value-added part of the process. One particular feature of the hybrid approach is the flat-fee approach, which has been rolled out by YOPA. YOPA originally began as online-only but now also uses local experts to provide valuations and support sellers with viewings and other services.
For estate agents, the question is not how these models affect them, but how consumers are reacting to, or demanding them. Running parallel to online and mobile trends are the changing ways in which UK buyers are searching for, buying, and selling property. Whether they chose the traditional, online or hybrid model, house sellers will seek reputable agencies that will sell their property for the best price. The higher value home owners may also choose to look for premium brands that specialise in marketing prestigious properties. Traditional values will continue to have their place, as long as they are combined with slick customer service and increased customer responsiveness.
At present there is room for all three models – traditional, online and hybrid – to exist in the estate agency market. However, all will need to adapt and listen to the constantly evolving needs of the home buyer and seller, if they are to survive. The only thing we can be certain of it that estate agents now need to work harder to capture buyers and to deliver customer service later in the process.
Justin Morris, CEO, Dezrez
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