Who really is going to cause disruption in the real estate industry?
I’ve been party to a number of conversations recently both online and face to face where agents are commenting on the various threats to their livelihood – conversations on lead-generator/interceptor sites, agency selection sites, vendor advocates and fee-discounters which I think in general are missing the mark slightly when they focus on these types of operation and rail against them and how they’ll “damage” the broader marketplace for agents.
In my view, there’s a place for the advocates and the discount or do-it-yourself models, but let’s not get confused – all these platforms are really doing is monetising an existing practice for their own reward by expanding on a practice that’s been around for years, so they’re not true disruptors.
The advent of these DIY marketing sites and the like can, in many ways, be attributed to the public perception of agents and the mistrust the general public has of the industry, but also to the industry’s inability to create value around what they do, and then communicate to potential clients that there’s skill involved in marketing correctly and negotiating the best outcome for the client – it’s more than just sticking an ad online and waiting for the enquiry.
Importantly, from my standpoint as an advocate, what I can see is a much greater disruption to the traditional estate agent which is already at play – that of the media companies and their advertising portals; and agencies now need to define and communicate their value points in the face of what could be a very real, very powerful disruption to their business model.
Without being alarmist or trying to create some sort of conspiracy theory, the reality is that two real estate advertising portals have become dominant over the past couple of decades, and as part of their protocols, they’ve quietly gathered the names and contact details of anyone who registered to undertake a detailed search on their sites or made an enquiry, along with their property preferences.
As this information matures, they are able to build a very, very clear picture of the Australian property client – you’ll note I’m saying “property client”, by that I mean vendors, buyers, landlords and tenants in all facets of the industry, not purely residential.
Think about it – somewhere in the cloud sits all the data from every online real estate search or enquiry made in the last 20 years or so since the advent of the internet as a means of marketing property; and that information is marketing gold to these portals, and they can and do now market to property clients directly.
So, imagine what would happen if they decided to create their own, branded real estate companies with the sole purpose of transacting property – their reach is already vast as their brand recognition is already national; a high number of the costs of operating a traditional “High Street” agency would be hegated within the framework of their current structure – from a marketing perspective they’re already highly visible; their costs would be greatly reduced as they wouldn’t need shopfronts, and they wouldn’t need anywhere near the number of staff that most agencies have to operate with. No agent or franchise group that I know of would be immune from their effect and they would change the landscape to the extent that agents could well face irrelevance.
And don’t think they won’t, they’re already making inroads into mortgage broking and other ancillary services, so guess which industry might be next in their broader strategy.
This next evolution won’t be the good news that they’ll make it out to be for either vendors or buyers, as the real value of agents lies in their ability and skill as influencers, negotiators and marketers of property, and this cannot be replaced by a DIY approach to the sale or purchase of an asset of high value such as property. At first there might appear to be savings for the property client, but as happens with this sort of market power, these would short-lived, and the benefit of this new landscape would evaporate rapidly.
Effectively, they’re already a duopoly, and the industry can only hold itself responsible for allowing it to evolve. I’d just about bet that somewhere within the strategy of these portals is a view of themselves as a market leader in more than just their media operations. If it’s not, it most likely soon will be.