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