“The best model for estate agencies nowadays is an integration of online and the high-street.”
Mark Bowden / 123rf
When online estate agencies appeared on the property scene around a decade ago, many thought the industry was about to change for good. Promising cut-rate commission and unbeatable speed, the online-only model certainly seemed promising.
But fast-forward to 2019, and that game-changing vision hasn’t materialized. In fact, some of the UK’s most recognizable online agents are either stumbling or have already fallen.
Hatched has closed, Emoov has recently been taken out of administration, and the industry giant PurpleBricks has seen its share price tumble.
The picture in the wider online-only market is equally bleak. Although there’s some disagreement about the precise numbers, the online estate-agent market share is estimated to be between 4.7% and 7.2%.
This isn’t significant by any stretch of the imagination, and there are signs that the market is already experiencing some contraction.
Why online agents never took off
Online-only agents probably shouldn’t be holding their breath that business will pick up. This is because, in at least two senses, the model was flawed from the start.
On the one hand, there are issues with cost structures; customer acquisition expenses for online-only agencies have always been high in comparison to the fees charged to customers, and that’s led to serious profitability problems down the line.
On the other hand, the target market has never quite been there in the first place.
It’s often said that estate agency is a people business, and in the digital age, online agents misjudged how much that would still ring true.
A house sale and purchase is usually the largest single financial transaction that anyone undertakes. Very few, as it turns out, want to go down that route alone.
Sellers are conscious that, with an online agent, they’re missing out on the expertise of a traditional high-street estate agent who knows what sells in the area, what the pricing should be and may know potential buyers looking for what the buyer has to offer.
They’re also put off by the complex and time-consuming process of selling their home – conducting the viewings, carrying out the negotiations and monitoring the sale process from offer through to completion.
Lessons from online
None of this is to dismiss online agents out of hand. Clearly, there is a market for sellers who are happy to be in control of the house-selling process and to be the face of their property in a DIY approach.
Clearly, there are also lessons that can be learned from what online agents got right.
Notably, online agents weren’t wrong about the need for digitized services. No longer is the high-street office essential in order to either win instructions or to sell properties. At a time when there are so few in-person visitors to the office, the generation of agencies with staff a mile or two apart from each other is coming to an end.
Neither were they wrong about the demand for online. Sellers want speed, they want convenience, and they want value for money; online always has, and still does, provide the means to achieve that.
The trouble with exclusively online models was that, in their pursuit of speed and convenience, they ended up throwing the baby out with the bathwater. Sellers, as it turns out, want expertise as much as they want convenience; they want a range of personal services as much as they want speed.
These balanced customer demands mean that, in all likelihood, the best model for estate agencies nowadays is an integration of online and the high-street.
Moving towards a hybrid state
What does this hybrid state look like?
A high-street estate agency with a website could technically call themselves a ‘hybrid agency’. So could an online estate agency with a customer service line.
But a true hybrid offering really involves strong elements of both the high-street model and the online-only model.
For high-street agents, going hybrid is about having a greater focus on the online: from online marketing and improving the estate agency’s website.
It’s also a model that leans firmly on automation.
That means creating online services that will allow people to sign up to sell their home, arrange a viewing or book a valuation. It means having self-service portals allowing tenants, buyers, sellers and landlords to sign in and manage their properties and tenancies.
It also implies not spending hours a day telephoning weak sales leads. Instead, a hybrid agency uses technology to screen people so that those who are less likely to buy can be serviced by an automated email system instead.
Final thoughts
The online estate agent experiment may have failed to meet expectations, but it’s nevertheless given way to an exciting new model.
Hybrid represents the best of both worlds. It’s a system that balances personalization with speed and caters perfectly to the different needs of today’s sellers.
It’s a model that, for the foreseeable future, will be hard to beat.