Rewind back a few years and traditional estate agents were running scared. Offering much lower fees and slick digital experiences, online and hybrid estate agents came in to disrupt the market, appealing to digital natives and anyone who turned pale at the thought of handing over thousands to an estate agent that they felt could more usefully be spent on their next property. These disruptors were predicted to steal a massive chunk of the market from the traditional players in a short space of time. In 2015 easyProperty went as far as launching their online business with a mock funeral procession through London for the ‘death of the high street agent’.
But since then, things haven’t really gone according to plan. Fast forward to the first quarter of 2019 and the market share of online and hybrid agents was still only 7.6%, an increase of only 0.2% from a year before. In the prime category, market share is only 0.85%. A number of the disruptors are no longer in business and much has changed. House Network ceased trading earlier this year, Hatched is no more and Emoov went into administration before relaunching, while Housesimple has recently changed its business model and is now offering to sell your house for free. Yopa needed more funding, but Savills are continuing to believe in the company, now the 20th largest estate agent in the UK. The ubiquitous Purple Bricks – impossible to ignore given their enormous marketing spend – are now one of the largest estate agents in the UK. But it’s by no means an out-and-out success story; they had to shut down operations in both Australia and America earlier this year, admitting they expanded too quickly, misjudged the market and took their eye off the ball in the UK, all of this leading to an accompanying slump in the share price.
Meanwhile, there’s been an understandable amount of I-told-you-so comment from the longstanding traditional estate agents. Many maintained that with something as important as property, people place real value on good service and personal relationships and aren’t prepared to do without the good service they get from a high street estate agent for the sake of saving on fees. They also questioned whether online estate agents would achieve the same results in terms of ultimate selling price – and whether they’ll actually sell the property at all, or just leave the would-be seller with an £800 bill that has not led to a sale. The failure of so many of the disruptors shows that to some degree the naysayers have been proved right, particularly at the higher end of the market. So, what else has gone wrong?
Here’s what Connells Group had to say when they announced the closure of Hatched, the online-only estate agent they bought back in 2015. “The decision underlines Connells Group’s belief that the ‘online-only’/hybrid business model is fundamentally flawed and affirms the Group’s absolute commitment to its high street estate agency operation…There is much talk of ‘disruption’ from hybrid estate agents, but from our experience we have found it significantly lacking when compared with the level of customer service, support and expertise that our high street operations provide. Ultimately, an upfront fee obligation – payable irrespective of whether a property sells or not – is not the right solution for the customer’. Meanwhile, in a recent interview for The Negotiator, Lee Pendleton, Chief Executive of London estate agent chain James Pendleton commented ‘Purplebricks will never reach 30% because vendors know good service costs money’.
Though many customers have clearly had good experiences with online/hybrid agents others have come away disappointed, complaining of a lack of service, lack of viewings and distinctly unhappy that the likes of Purple Bricks take their fee whether a property sells or not. Complaints about online estate agents went up 63% in 2018. There’s interesting reading at The Advisory which looks in detail at the service provided by traditional estate agents vs online agencies, outlining just how different the experience can be. It should be mentioned that the website is entirely transparent about the fact that in their view the best high street agents provide the ‘gold standard’ when it comes to sales. Traditional high street agent fees may be higher but generally speaking they have far smaller areas to cover which means they have expert knowledge of the local area, the market and potentially may be better placed to advise sellers on the price than someone with a 50 mile radius to cover for their hybrid agency. Then there’s the high costs for the online/hybrids of getting new customers when they don’t have a physical shop window; you only have to look at Purple Bricks £70 million pound marketing spend to see how it might eat up your profits.
Judging by the comments on forums and workplace review sites, another problem Purple Bricks had was their employee experience. While there are also overwhelmingly positive reviews, former Purple Bricks agents have complained of unsatisfactory levels of pay and high petrol costs from having to cover such large areas, as well as a poor work/life balance as they’re expected to be on call for their customers at all times – great for the customer, not so great if you’re putting your kids to bed or it’s 11pm at night. This might be another aspect that Purple Bricks need to look at long-term: how to provide the kind of attentive service customers want without running their agents into the ground attempting to do it.
But there are lessons to be learned from the online agencies, as Adam Walker writing in The Negotiator and others including Forbes have noted. Traditional agencies need to invest in their online experiences in order to provide the kind of seamless, high quality interactions that customers have become used to in other areas of their life. Customers want the kinds of self-service portals that will allow them to manage properties and tenancies quickly and efficiently and many functions can be both personalised and automated if the will and investment is there. This will also have the benefit of empowering estate agents to focus on hot leads and particularly valued customers as well as providing huge amounts of data that will help them gain an understanding of what customers really want.
They also need to focus more on innovation, trialling new features and services in order to serve customers better and increase revenues as well as showing they’re looking to the future. Many could also usefully cut their number of offices in areas where they are only a mile or two apart, with either fewer offices covering larger areas or larger ‘hubs’ in cheaper locations, linked to smaller high street branches. And finally, traditional estate agents need to be quicker to modernise and more savvy in terms of online marketing in order to stop the likes of Purple Bricks stealing all the attention.
There’s no doubt that the digital disruptors have livened up the industry, piling the pressure on traditional agents to respond quickly to our changing world. But if the latter can marry their expertise, knowledge and better quality customer service with the enormous possibilities offered by new technology, it looks like they might have the last laugh after all.