Digital disruption has now reached the most established of bricks-and-mortar industries – property. Thanks to online-only estate agents such as Purplebricks and Tepilo, as well as the reliance of traditional agents on advertising portals such as Rightmove and Zoopla, buying a house could be the next service to become disintermediated.
Entrepreneur and television property expert Sarah Beeny, who launched Teplio in 2009 as an advertising website before relaunching it as an online estate agent in 2013, says: “Selling is all about knowing where the buyers are and the buyers are no longer going into estate agents’ offices on the high street, so they are becoming defunct.”
She concedes that the industry has been “very slow to catch on” to consumers’ shift online, just as bookshops were initially blind to the rise of online sellers such as Amazon.
“WH Smiths and Waterstones could have taken that ground just by clicking their fingers, but they didn’t move quickly enough because they were stuck in their ways,” she says. And it’s a similar story for traditional estate agents who she believes have “got their fingers in their ears just hoping it will all go away”.
One of the major pulls of online estate agents is the huge difference in cost. Using Teplio, home owners can sell their property for £495 plus VAT, which includes a personal sale manager to organise viewings, negotiate offers and complete the sale. Meanwhile, Purplebricks, which was founded by Michael and Kenny Bruce who owned the Burchell Edwards chain before selling it to property giant Connells, charges £665 plus VAT, and assigns sellers with a local property expert.
Singling out London estate agent Foxtons for comparison, Purplebricks’ marketing director James Kydd says: “Foxtons is pretty adamant that it doesn’t negotiate on fees. It charges 2.5% plus VAT for sole agency and 3% for multiple agency, so if you sell a property for £2m you’ll shell out something like £60,000 in fees whereas we would charge under £1,000.” Foxtons declined to respond to the comments.
Kydd believes this huge gulf in fees is the reason traditional agents have been so reluctant to embrace digital, as it would mean they could no longer justify what he calls the “obscene” amount they charge, particularly if aspects of the sale process were automated.
Traditional estate agents are fighting back though. John Waters, a partner at upmarket estate agent Knight Frank, agrees that the first place people now go when looking for a property is online, but he is not threatened by the rise of digital agencies.
“Most people I deal with in prime central London have neither the time nor inclination to [handle the sales process] themselves,” he says. He admits it may be a different story outside London, however, as many vendors already host their own viewings.
It is the online property advertising portals Rightmove and Zoopla that he believes are having a bigger impact on how agencies operate, so in order to claw back some of the control Knight Frank and other agencies including Savills and Chestertons have combined forces to launch their own online portal called On The Market, which is being backed by a TV advertising campaign.
“It dawned on us that we’re providing all this data and information for other people when frankly there’s no need to do that,” says Waters. “We all run our own websites that are much more sophisticated than they used to be so the capability is there to run our own portal too.”
OnTheMarket is effectively run by estate agents for estate agents so it costs them far less to list a property than on Rightmove or Zoopla. However, the fact estate agents have to drop one of the other two big players if using On The Market has created some hostility in the industry, as many feel the agencies behind it do not have sellers’ best interests at heart, particularly as the reach of the new portal is smaller than competitors.
“It’s not saving the customer money or giving them a better service, it’s trying to ensure high street agents don’t have to pay [Rightmove and Zoopla] as much, as it’s hitting their profit margins,” says Beeny, who is further angered by the fact On The Market has banned online agents from using it.
OnTheMarket CEO Ian Springett responds that it is a “much needed competitor to Rightmove and Zoopla” and that the site has been designed to attract serious buyers, rather than people who are casually searching.
Not all traditional estate agents are feeling the pressure from online players, according to Beth Hilson, marketing director at Marsh & Parsons, although she admits it may sound naïve.
“There are so many industries that have gone online so we have to accept that it could happen [but] we separate ourselves from the companies that rely purely on using the web to generate their business and their enquiries. That’s part of it but it’s not the whole picture,” she says
Even though Marsh & Parsons uses both Zoopla and Rightmove, which Hilson admits do generate leads, she claims “we actually get more enquiries direct from our website because we’re constantly investing in getting people to come to us”.
She also warns that while there are some reputable online agents, because sellers are paying a flat fee upfront “there is no incentive for those businesses to get people the best price”.
While many have predicted the demise of the traditional estate agent – not least Beeny, who says she would be “stunned and amazed” if the number of high street chains doesn’t fall – Hilson says Marsh & Parsons is bucking that trend, having just opened a new office in Shoreditch with plans to open a further three later in the year.
“We’re not preparing for any drastic change in how people sell property,” she adds. “Quite the opposite. We are absolutely committed to growing and being on lots more London high streets.”