It looks like a bleak future for cash-burning businesses.
With so many estate agencies burning through their cash reserves or under-investing in their teams and technology, it won’t be too long before we see the biggest shake-up we have ever seen in our industry, both online and on the high street.
This will inevitably be exacerbated by Brexit uncertainty and mixed messages about the global economy.
Back in 2016, I predicted there were more than 20% too many agents in the UK.
It’s taken a long time for my prediction to come true but we are seeing massive consolidation in our industry and I predict another 2,500 branch closures, probably in the next 18 months.
We’re already hearing the warning bells around Purplebricks, with analysts at Berenberg, a multi-national investment bank, downgrading the shares from a Buy to Sell rating and warning they have ‘flown too close to the sun’.
This has been reinforced by the comments from finance website Motley Fool which has warned that Purplebricks may run out of money altogether unless it abandons its global expansion plans.
It even says that shareholders may not be willing to support a business that is unlikely ever to be profitable.
As for House Network, its fate looks sealed. Just two weeks after it was bought out of administration, it appears to have ceased trading.
Other online agencies are also struggling with their low fee model and will have to increase their fees if they’re going to survive.
This will bring them on to a level playing field with the rest of the industry, so they’ll have to up their game when it comes to customer experience, service and, most importantly, the quality of their people – many of whom have failed in the traditional sector.
They will also have to fully employ people, rather than have people who are self-employed. It’s hard to maintain consistent service, brand awareness and contact, with the high turnover that they have.
Countrywide – time to come clean
As for Countrywide, I have a simple plea for its board. Isn’t it time you come clean with your loyal, hard-working team?
With ongoing losses, which I estimate at £4m a week given their £218m loss last year, who is it kidding with its misplaced confidence about their future?
For some reason, the board seem to be convinced that its Back to Basics strategy is working.
Even its last annual report implies it may have to close 267 branches, from 857 at the end of last year down to 600 branches.
Countrywide has some of the best estate agents in the country. But it needs to look after them and be a board that is truthful about what the future really holds so that the company can move on to its next chapter.
Given that its share price stands at just 7.5p as I write, isn’t there only one real direction? And that’s to split the business up and sell the remaining profitable assets.
Hundreds of job losses ahead
So what does it mean when an industry has a massive shake-up?
Firstly, the strong and innovative survive, and secondly, the best people get the best jobs.
Hundreds of people will also lose their jobs and the loyalty they’ve shown to their companies will count for nothing in this process.
Who will survive and thrive? I believe it will be the larger independents like my own firm Spicerhaart who have invested in people and new innovative technologies.
Businesses like Arun, Acorn, Dexters and KFH will all do well as they have good people as their core drivers.
My dad, who I started Spicerhaart with, always said ‘people buy people’ and, regardless of what you think of the internet disrupters, their models are based on the same; they just don’t know it.
Good estate agents will always survive, but their next career move could be crucial as being in a branch that has closed isn’t good on the CV.
Why I’ve Googled my business
I’m often asked why I share industry top tips with competitors which will boost their own online profile and sales in the process.
I actually believe I’m in a very privileged – and unique – position to have a better understanding than most about the impact of digital marketing purely because of the scale and size of my own business and the data that comes out of it.
I have previously said you should ignore Google at your peril, but thought it would be very useful to give some factually-based insight into why smaller independent agents should embrace the technologies that are available and not rely on people finding their business on portals.
For starters, when was the last time you updated your Google My Business profile, the box of information that gives more details about your business when people do a Google search on your brand name?
This includes branch photos, address and phone number, opening hours, a link to your website and reviews, plus information about your company.
Across the Spicerhaart business last year, incorporating seven estate agency brands across the UK, we had 11m views on Google My Business, which led to over 190,000 phone calls on a variety of subjects, resulting in over 1,500 listings. Free!
Plus many of those enquirers would have gone on to our website and purchased or rented property, though that’s a lot harder to track.
Reviews matter – but people won’t believe a five-star average
Those listings are twice as many as we had in 2016 thanks to a concerted effort to improve the way we manage our Google profiles and is tied in to Google reviews, one of the most important tools for enabling anyone who has had any interaction with your business to give their feedback, good or bad.
Those branches with a high number of five-star reviews also generate a substantial number of listings.
One of our branches, with 658 five-star reviews, generated 38% of its listings via Google My Business. I reiterate, Free! It’s even better than having sale boards in public view.
We invite everyone we interact with to give us a Google Review, even if they buy or sell with someone else. We’re clear that we want them to give us an honest review and we will take their feedback and learn from it.
Inevitably there will be disgruntled customers – often because of something that’s not of your own making. Lettings is a classic case where you will end up getting blamed for something the landlord hasn’t done, like fixing a dripping tap.
Plus there will be fake reviews that are hard to get rid of, sometimes left by rival agents. You just have to crowd them out with good reviews. And always respond to a comment, whether it’s to thank them for their feedback or to acknowledge an issue and explain how you’re dealing with it.
Our connections at Google have told us that those responses are an important factor in helping your branch move into a strong position on Google Search Engine Rankings.
We’re now in a top three position in two thirds of our locations, so we must be doing something right. Plus they tell us you need to keep everything updated and that you don’t want to have a five-star average or people won’t believe the reviews are genuine.
Google reviews are also a great way of keeping your staff on their toes (and we feel Google is much better than other ratings and reviews sites).
Inevitably there will be branches in any organisation that aren’t following these rules but are still doing well, because they have a good standing in their local community.
But they don’t know what they’re missing, or how well they could be doing, because they either don’t have the skills or think it’s a waste of time. What a missed opportunity!
* Paul Smith is CEO of Spicerhaart
Comments (20)
It’s time for a new era, well played to haart on their success thus far but they got complacent, just like all the other agents that will soon go down. They think starting a business is as easy as paying rent and uploading properties onto Zoopla whilst the other agents out there swim deeper and take away your customers. Keep up.
Care to expand on your comment?
No good throwing a bone into the pan if it has no meat on it.
And without heat it’s nothing but a pan of cold water with a bone in it.
I don’t want haart to close down – they’re useful fools who make the good quality agents shine brighter.
The bigger you are the harder you fall. Simple maths your overheads are so high with fixed costs. A long time ago you could have a poor performing branch supported by revenue from good performing. That’s stopped years ago as inflation bit into finances and led to the demise of many big players. Small agents can weather the storm far better but only if they are astute, many regrettably are not and get sucked into doing things and which they have lost control, commission/fee wars is a typical example. If you wait for customers …… doomed. If you really on the internet …. doomed, it is only a part of running a successful agency. The first to go will be the disruptors … the cheap, none viable/profitable on-liners as we have already seen start to disappear. The sooner they all disappear the better for the health of our industry and the public. Once PB have gone and it will happen, any left will quickly follow. Those agents who have double standard their business with what is effectively private listings, will have it come back to haunt them. The public perception is going to turn on agents who have to pick up the mess once the game is up with cheap fee on-liners and the bad publicity that will follow.
Agencies may close but the number will stay pretty static.
Why?
Every branch that goes ‘pop’ has at least one employee who is just waiting to go it alone.
Some will start a high street branch, some will be a bedroom franchise agent, some will be a self employed neg.
Numbers will stay static, but the roles will and landscape will change.
The worry is more for corporates like Haart. Big cumbersome offices, that find it hard to turn with the tide and managers not allowed to make commercial choices.Keep over valuing to win instructions, tie people into long contracts. Other agents need to sell property and have flexibility with offerings, fee, contracts and even service.
IMO this is an underestimate of the size of cull the industry is facing.
Was actually thinking the same Mike. Does anyone know how many estate agency branches there are in the UK?
Hovering 20,000 a couple of years back (not including on-liners).
Anthony,
You seem to know Mike, so please take a look at my earlier post.
Any chance he would open up to you?
There are 3500 activity centres in the country with a rough average 6 agents per centre, some centres have more than 6 some less. I class the minimum viable is an area that will support 3 branches.
There are currently about 6000 agents whose sales register does not appear commercially viable given what they are paying to the portals alone.
Transactions are compound falling at 2% per annum.
If independent agents weren’t so stubbornly resourceful at finding ways to keep the doors open about half ought to close.
I understood that according to the Property Academy and as published in the Best Estate Agent Guide last year… “There are an estimated 26,000 estate and letting agency branches in the UK.”.
Putting aside any personal views regarding Paul Smith and Spicerhaart, I believe the article makes a number of excellent points – particularly in respect of Google.
“We’re now in a top three position in two thirds of our locations, so we must be doing something right.” I would say you are doing something wrong. If you aren’t in the top 3 agents in your town, you are not the agent of choice. Just maybe, you should be concentrating on the 33% of your business that is clearly failing… In the towns I trade in, Haart aren’t even in contention.
I did even know he had 2500 branches to close.
I didn’t read beyond headline it only encourages him!
People actually need to be told this stuff by this guy?
Many SpicerHaart office will also close after the tenant fee ban.
It seems Haart take on property but never manage to sell them. They have school leavers door knocking in order to take on anything to hit branch listing target.
Chiswick office in West London was a great office which has now closed. This will be followed by Ealing and Wembley Park Office.
So not looking too good for Haart either in the coming months. Flink is not going to cut the mustard!!
Paul needs to see what is really happening at grass roots.
Not sure if estate agency is a good barometer of economy anymore but for what it’s worth, we have have record employment but no one buying and selling .
It’s a fake economy where even when you do work hard and accumulate a bit of money the Tories will take it off you.
Paul Smith reasonably asks: “So what does it mean when an industry has a massive shake-up”?
On the other hand.. What would it mean if the industry had access to a massively dynamic property sector game changer.
The rumble in the jungle says Michael Day is in the loop on something. Does anyone know what it is?
One hours work a fortnight is considered in employment. Wages are down 5% in real terms since 2010. Buy to let not propping the market anymore, Help to Buy just propping new homes. There will undoubtedly be more casualties.
It’s already starting to happen. My man in the know confirmed Countrywide have already quietly closed another 30 odd Branches surprised PIE hasn’t picked up on this not something you can hide that easily plenty of people happy to give CW a good kicking normally including Mr Smith.
Investing £1.5m in Rightmove, trying to play it big in the New Homes market…5 – 10 years off the pace trying to catch up with “leading agents”…Still think it’s the 00’s and can just bark at their staff and get more business out of them!
Flink!?! – paying them extra so it annoyingly pops up on a facebook feed! Brilliant marketing tool, wonder why no other agents haven’t thought of that!