The failure of online agencies to significantly disrupt the industry is down to their being too cheap and creating a perception that they were too good to be true.
That’s the view of Russell Quirk, the former chief executive of Emoov who now runs property PR agency Properganda.
In an article on LinkedIn, Quirk says online agents failed to pass what he calls “the breakfast test.”
He says that for holidaymakers, for example, breakfast is very important - a benchmark of whether they’re enjoying a high standard break. So a cheap ‘all you can eat’ style breakfast which may mean hard poached eggs, cheap sausages, microwaved bacon and a runny cappuccino - so the discerning holidaymaker walks on by.
Instead they choose an alternative at what he calls a “proper” price.
He writes: “Why? Perception supported by two reasons - first because the quality is bound to be better if I pay more, isn't it (and I pose that as a question that's not rhetorical); and second because if my eggs are not runny and my sausage 'less Iceland' and more 'butcher's best', I have the RIGHT to complain most vociferously and justifiably. I simply perceive that my precious hour in front of a plate of early starter goodness may be compromised if I skimp.”
As a result of this psychology, he predicts that online agents - at least those remaining as low-cost mostly fixed-fee onliners - will never break a 10 per cent market share.
“Ten per cent is all that this niche endeavour will achieve, yielding dominance to the higher fee, contingency commission based agents that, after all, never ask their customers to write out a cheque (instead procuring their cost from the proceeds of sale); and rarely talk in terms of 'cash' fees rather than low (ish) percentages instead. This further psychological advantage cements the well-trodden, traditional estate agency fee model as the winner.”
Quirk dismisses the possibility that online agencies could also have failed because of their inability or unwillingness to provide a full service to vendors. “Some onliners such as Emoov and House Network genuinely delivered on the whole end-to-end process with aplomb (and yes, that included proper) sales progression” he says.
He also says the “they aren’t local” argument falls, too. “PurpleBricks pioneered Local Property Experts as a counter to this criticism of 'online'. Emoov, YOPA, House Simple (eventually) followed” he adds.
Instead he believes it is firmly perception fuelled by price that led to their failure to rise above a single-figure market share.
However, Quirk suggests that data from new property consultancy The Advisory - suggesting the top 10 online agents no longer reach five per cent market share - is in fact inaccurate and that Rightmove’s slightly higher seven per cent figure may be nearer reality.
“I reckon the Rightmove data is more accurate as it takes account of all the smaller online agents and not just the bigger players” he says.
You can see the full Quirk article here.