Can ‘customer service’ be a differentiator in the service industry

One of Britain’s least popular professions, the high street estate agent, is facing a shake-up as the digital revolution finally reaches the business of selling and renting bricks and mortar. The growing popularity of property portals Rightmove and Zoopla has made it possible for homeowners to take control out of estate agents’ hands. It has enabled the rise of online estate agencies, which offer sellers and landlords a way of advertising on the portals without aving to pay the high fees that traditional high street agents charge. Portals do not allow individual sellers to list properties directly but they do permit them to list through online agencies. A recent survey by analysts Jefferies found that 79 per cent of consumers would list their homes directly if they were allowed to. Three-quarters said estate agents’ fees were too high. Most high street estate agents charge between 1 and 2 per cent of the property’s sale value, plus value added tax at 20 per cent of the fee. With the average British home now worth £265,000, that could cost the seller more than £6,000. Online agents such as emoov, Hatched and Housenetwork charge roughly £300–£600 for their main packages and have a sliding scale of fees, depending on which optional services a seller chooses. Options include photography, floor plans, and help with appointments and negotiations. Yet to date they have only claimed a tiny slice of the market – just 2 per cent of home sales. By contrast they make up more than 10 per cent in the US, France, Canada and Germany. Even the most established sites have sold only a few thousand homes so far; in total there are 1m properties for sale or rent every day on Rightmove. But in recent months there has been a flurry of activity in the online agency sector – spurred in part by rising house prices and transaction volumes – that is creating more business for all parts of the estate agency industry. This week veteran fund manager Neil Woodford backed start-up Purplebricks with a £7m investment. And next month entrepreneur Stelios Haji-Ioannou will launch his new site, easyProperty. ‘Traditional agents have got to wake up to the modern world – it’s adapt or die,’ says Robert Ellice, chief executive of easyProperty. ‘The portals have enabled people to know as much about a property as the owner does, before they even view it. Sellers are better-educated than ever before and they want flexibility but the existing agents don’t allow that. The industry is absolutely ripe for disruption, it’s a model that hasn’t changed in 30 years.’ Traditional estate agents argue that the new brand of online disrupters do not offer the same levels of customer service. Ed Mead, a director of London chain Douglas & Gordon, says ‘selling a property is not like selling a car’. ‘Eighty per cent of the work done in selling is after an offer is agreed, and involves a lot of hand-holding and time,’ he says. ‘The internet provides many things, a personal service is not one of them.’ More than a third of all deals fall through before completion and it takes agents three months on average to close a sale, Mr Mead adds. In an important test case last year, Country Properties, a high street agent, complained to the Advertising Standards Authority about Hatched., alleging that it was misleading advertising for Hatched to claim to offer ‘a complete estate agency service at a fraction of the cost’. Hatched won that case, with the ASA ruling that the online agent did provide a complete service that was comparable to high street agents. Adam Day, director of Hatched, says its model fuses the best of the old with technology to customize services. ‘We offer everything a high street agent does, if the client wants it,’ he says. ‘But it is a waste of a client’s money to advertise in a newspaper or having a window display or paying the rent on a prime high street office.’ This, however, makes online agents very dependent on portals – something which not all businesses are keen on. Other start-ups are bypassing Rightmove and Zoopla to create standalone sites. Aidan Rushby and Logan Hall launched Move bubble in June, using travel website Airbnb as an inspiration. ‘Yes Rightmove and Zoopla are great channels but from a business perspective it makes you quite vulnerable,’ Mr Rushby says. ‘It’s then a race to the bottom, who can be cheapest. That kind of business model isn’t a fun one to be in – low margins, high risk and ultimately you’re not the one who is finding your customers.’ Instead, Movebubble matches landlords directly with potential tenants. It is free for landlords and charges tenants a flat £50 fee if they take up a rental through the site. ‘This is the age of the collaborative customer,’ Mr Rushby says. ‘There is a very big shift in all areas of consumer business towards openness and transparency. People love the fact that they can deal directly with each other [on the Internet].’ While Move bubble focuses on the rental market, the Little House Company helps homeowners to find buyers directly. One of Britain’s oldest portals, first set up in 2000, it will relaunch with a new name and ambitious growth plans later this year. Miles Shipside, Rightmove’s commercial director, said the emergence of online agents was still only a small part of the total market: ‘Consumers now have more choice than ever before with a record number of agents in the market, and ultimately they will decide what level of service they want or need.’ The disrupter: Stelios Haji-Ioannou, easyProperty Now that budget airlines have become industry stalwarts, it is hard to remember how disruptive the arrival of easyJet was. Founded almost two decades ago, the airline aimed to ‘make flying as affordable as a pair of jeans’ and made direct booking popular, cutting travel agents out of the equation. Since then, easyGroup has brought this corporate insurrectionism to other industries including hotel rooms, car rental, bus services, office rental and gyms. Now it aims to take its tried-and-tested formula to the real estate market. Easily the biggest brand name yet to enter the online business, easyProperty will launch in September as a rentals site, with a sales site planned for next year. Having raised an initial £5m from friends and family in February, easyGroup founder Stelios Haji-Ioannou and easyProperty chief executive Rob Ellice have just launched a second funding round targeting ultrahigh net worth individuals and individual private City figures. With 10,000 properties already pre-registered, the site aims to be letting around 4,000–5,000 homes a month by the end of this year and is considering expanding across Europe within three years. ‘We have very aggressive targets, we are going into the market in a very big way,’ Mr Ellice said. ‘The main problem with high street estate agents is wastage – only around 25 per cent of the deals that agents pitch for actually generate cash for their bottom line. It’s a very inefficient model.’ By contrast easy Property plans to avoid upfront fees but users will pay for optional extras. Services such as hosting viewings, drawing up floor plans and advising on pricing will be carried out by its network of 400 freelancers. The big spender: Neil Woodford, Purplebricks The face of Invesco Perpetual for more than a quarter of a century, Mr Woodford’s new £2.3bn fund invests in small, rapidly growing companies. His latest – taking a £7m stake in newly launched online estate agency Purplebricks – marks the biggest investment to date by a major investor into the emerging digital home sales market. Launched in April, Purple bricks only operates in parts of southern England, and has sold fewer than 500 homes. But it has plans to roll out to the Midlands this autumn and aims to build to national scale and a £100m turnover within two years. Chief executive Michael Bruce previously ran a traditional high street estate agency chain. Seeing the scope for ‘a more cost-effective, convenient and transparent means of selling property’, he sold his business in 2011 and invested an initial £1.5m in creating a software platform and website. Since then he has put together a staff of 80 people, which will rise to 500 by the time the site is fully national. Four-fifths of these are ‘boots on the ground’ workers whose job it is to present a friendly and experienced face to potential clients. ‘People aren’t yet ready to go entirely online,’ Mr Bruce says. ‘They still want guidance from an expert on pricing and some local presence [in the property market].’ Purplebricks represents a fusion of old and new; its key goal is to make property selling into a 24-hour business. ‘You can book a restaurant or a hairdresser 24 hours a day, but you can’t currently do that with an estate agent,’ Mr Bruce said. The veteran: Sarah Beeny, Tepilo Television personality and veteran property developer Sarah Beeny was one of the first on the digital homeselling scene, launching in 2009. Initially set up to cut estate agents out of the sales process completely, letting sellers and buyers interact directly with each other, it relaunched last autumn taking on a more traditional intermediary role. That move, says Ms Beeny, was entirely driven by the need to get properties on to online property portals Rightmove and Zoopla. ‘Our customers wanted to be there, the vast majority of people buying a house will be looking on those sites,’ she said. But expanding into estate agency does not necessarily mean taking on all the trappings. ‘The old model of having a high street shop with branded cars and an in-house coffee shop and all those costs is part of the reason why estate agents have had to charge so much for so long,’ cautions Ms Beeny. ‘We felt there should be an option for people not to have to pay £6,000–10,000 just to get their home seen by buyers.’ Tepilo is selling around 50 homes a month and aims to reach £1m in turnover in its first year as an agent. It has about 25 employees, with a register of freelance local surveyors who visit advertised properties. Ms Beeny is a serial digital entrepreneur, having also set up dating website My single friend. She first got the idea for a property-selling website while working as a developer. ‘All my businesses have started from a sense of irritation that nobody else has done something that I’ve wanted,’ she says. ‘Tepilo was born when I thought that I don’t understand why I’m having to pay up to 2.5 per cent plus VAT to sell a house.’ The experience is now feeding back into her day job – this autumn she will host a Channel 4 show called Clicks And Mortar, in which families try to sell their homes online.

1 How can ‘customer service’ be a differentiator in the service industry?

2 How can a company such as easyProperty ensure ‘e-service quality’?

3 Do you agree with Ed Mead that ‘the internet provides many things, a personal service is not one of them’? Explain your reasons


Looking for help with your homework?
Grab a 30% Discount and Get your paper done!

30% OFF
Turnitin Report
Title Page
Place an Order

Calculate your paper price
Pages (550 words)
Approximate price: -