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By James Dearsley

Co-Founder, Unissu

TODAY'S OTHER NEWS

PropTech Today: Settled - people miss the point about failure

I recently read the news about Settled closing its doors. As of 6.29am on Tuesday morning, the article had been read by 8,642 people and attracted nine comments.

Most of those comments I felt were missing the mark in a considerable way. Let me explain why, as it is important if we are ever to move forward.

I met Gemma Young, the chief executive of Settled, early on in their journey. She is super smart and hyper-focused. Something you might expect from an ex-Googler, as one of the commenters phrased her yesterday.

By that point in my own journey, I had spoken to hundreds and hundreds of start ups. It was rare that one stood out for me, but Settled was one of those that made sense. Yes, it was a model that was already in existence but, there was the subtle difference in the act of negotiating that they were trying to solve.

I always felt that the negotiations between parties was, and indeed is, the most valuable and important intervention an agent/broker can make.

Here in the UK (certainly this isn’t the case in other countries I have been to), there is still an awkwardness about upfront, toe-to-toe, negotiation on the price someone is willing to pay for a house.

Us Brits find this the most difficult aspect of the housing transaction.

Settled seemed to be working on a way to solve this (in a way that only two weeks before my meeting with Gemma, I had seen a very well funded second hand car marketplace doing) and I was interested.

I didn’t hear much after that meeting, but I felt Gemma and her team were at least attempting to a) do something different and b) listen to difficulties of the customer base and address those challenges.

One of my disappointments about the article on Settled’s demise was expressed in this comment: “maybe just maybe all these people trying to find a so-called better way to do estate agency will have to conclude that the traditional way for most people is the best way and there simply isn't the demand for an alternative that is scalable”.

This assertion that the traditional way is the best way, whilst I have my heritage in this method, is crazy.

Settled, which raised £1.2 million (not a huge sum, if truth be told), is simply one company that has ceased trading in these most unprecedented times. How many traditional agencies will close their doors during this period? There will be too many to mention to get coverage in this national publication.

Another commentator, Paul, stated: “Another one bites the dust, the list is getting longer and longer!”. Again, how many businesses are actually going to fail at a time like this?

People are missing the point. There will be many failures, even in usual market conditions, as new business models emerge that test an existing and incumbent model. The key for the existing businesses is to learn from what they were doing well and look at adapting, not waiting till they fail and say ‘I told you so’.

Do not downplay the competitors and certainly don’t deter any action you need to take. 

This all comes back to the series I wrote for EAT back in 2019 about true digital transformation.

Putting it briefly, I was suggesting people do not:

1. Deny

2. Downplay

3. Deter

4. Delay

And I was saying they should:

1. Embrace

2. Enable

3. Encourage

4. Enhance

It would be worth reminding yourself of this series and then review what Settled (and others) have done around helping the industry.

This is not the time to be downplaying what new models have attempted to do. This is a time to realise that we are all in this together. There is no them and us. They are working just as hard as traditional agents with their customers front of mind, to provide a service that helps them in one of the most difficult situations they will experience in their lifetimes.

We should applaud the start ups that are helping us learn what to do with our existing business models. They are providing a valuable service (to those willing to listen).

Take another example of a business model that, before Covid-19, was starting to pick up traction here and elsewhere: the iBuyer.

I had argued before the benefits in this article, also in this publication, a year ago stating “the customer has certainty. You can’t put a price on certainty.”

I have also questioned its validity previously too, in particular with the crazy move from the Guild to look at this model.

This was all pre-Covid-19. The iBuyer model is now looking hugely flawed and the chickens are coming home to roost.

My comments from a couple of years back look like they are coming true: “Look at the risk in that business model. What happens when the market tanks and they are left with a load of property on their balance sheet that they a) can’t shift and b) is now worth a load less than their algorithms suggested in the first place?”

But, but, but...

Look at the benefits. With hindsight (and a touch of foresight perhaps), we can criticise the business model in a post-Covid-19 landscape but understand what it has taught you.

Embrace - to use one of my recommendations above - what was good about the model and adapt yours.

Coming back to the start of this article and my disappointment of the comments, this isn’t a time to slag anyone off.

This isn’t a time to criticise established businesses which are failing - we will only really hear of the big ones failing at a time like this but I can guarantee that there are many, many, many traditional agencies that will have to shut their doors in coming weeks and months - or to laugh or celebrate those brave entrepreneurs who are taking on the least disrupted industry on the planet.

Incidentally, perhaps this is a time to also pick up on another couple of comments about the £1.2 milllion that Settled raised through investors.

We have one of the most attractive, early stage investment vehicles in the world. Angel (and other, later stage) investors not only know the risks they are getting into but also have serious benefits from supporting businesses such as Settled.

Anyone interested in investing as an Angel - assuming they are lucky enough to do so, needs to realise the SEIS and EIS investment structures.

The former allows for up to 50% of your investment can be reclaimed back through income tax relief and the latter, up to 30%. There are therefore very solid reasons for investors to back these early stage companies and long may this continue. We need to help each other to test and evolve our sector for the customer.

This is a time to come together. Let’s not celebrate the unfortunate, let’s applaud them for trying (and steal their good ideas in the process).

*James Dearsley is a leading PropTech influencer and commentator, and is co-founder of PropTech platform Unissu. You can follow James on Twitter here.

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    Interesting that the tech boys now seem to want us all to work together, and that we are all in It together, after years of bullying and cajoling, slagging off our traditional methods and trying to make us all feel like outdated dinosaurs. Whilst online agents go bust we trad. Agents are STILL wrong! Even as another goes bust! How many more mugs are going to plough millions into these ventures before the penny drops? Why, even in Dearslys last column he was still harping on about the death of the high street office and how we now must all work from home as that is the future. It’s about time he and other tech boys stopped and looked, and realised that they are NOT always right and stop the constant attacks on a business model that 95% of British house buyers and seller are actually happy with. It’s like listening to a bully who uses words to constantly make their victims feel worthless because he knows best. It actually sounds a bit like Donald Trump. So, change the record for gods sake. I have just signed a 10 year lease on a high street premises and have seen footfall dramatically increase (save COVID period). My team thrive by being in a competitive environment together, in town. They don’t want to sit in their back bedrooms, alone, in their underpants sending spam email to thousands of people at 3 in the morning...go and work for Dominos if you want to do that. Just stop attacking us please .... it’s just boring now.

    James Dearsley

    You have missed the point again Andrew sadly.

    No attacking going on. Just a realistic look at the situation. Most businesses are struggling right now, and most will continue to do so in a changing market.

    What is important is learning the lessons from each other and not having a closed mindset.

    i do believe 75% of branches will close over the next 5yrs but that is not me attacking the traditional sector, just suggesting we will find a different model because of the changes that are happening and being shaped by customer demand.

     
    Christian Woodhouse

    "a business model that 95% of British house buyers and seller are actually happy with"
    I would question that statement and suggest that the 95% don't understand the benefits of a more digitally enabled model or in fact they don't know any different.

    What Gemma and the team at Settled did prove is that their Offer to Completion success rate was nearly 90% and the whole process only took 9 weeks (still too long in my opinion). This was achieved because they marketed properties with legal searches, contracts and documents upfront and provided transparency to all parties throughout.

     
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    75 pc is aggressive.
    Are we talking storefront offices of numbers of agents?

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    A thought provoking article - thanks James. Your point is well made imo. It’s essential for all agents to adapt and learn -it’s how the industry evolves. At Foxtons (and Marsh & Parsons for that matter) we were always looking for better ways to do things and we borrowed plenty of ideas from ours and other industries. We adapted them to how we worked and trialled them; sometimes they worked, sometimes they didn’t. It’s how to go from ‘good to great’. Thanks again.

    James Dearsley

    I remember those days well @Peter. However, at the time I was grass routes and had no real visibility of the 'borrow philosophy' but absolutely integral. You don't have to reinvent the wheel, just understand what is working elsewhere and integrate.

     
  • Georgina  Cox

    An excellent comment James and having heard you speak on a number of occasions I know that you are extremely well placed to comment with authority and knowledge. I find it sad that so many traditional agents simply dismiss the benefits of online as they see it as a threat. I work across both businesses and the benefits of both traditional and online agency when working together to give clients choice is very powerful and successful. If this current situation has shown us anything it is that change can come very quickly

    James Dearsley

    There are benefits of all models. We just have to open eyes and realise that we are not all right and are not all wrong. Bring the best ideas together, understand what is driving our customer and adapt. End of story.

    Thanks Georgina

     
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    It’s yet another nay-saying comment.... Hitler once said make the lie big enough and repeat it often enough and the people will eventually believe you ( or some such wording). 75pc closure! What utter nonsense. Tech people are constantly undermining the good solid work that we agents do. Add in the factor that commercial rents are absolutely bombing right now then why wouldn’t you want a high street office. I am more than content for my competitors to disappear of to a Crittal window office over the tyre and battery centre and lose all visibility whist my business benefits from 50,000 people walking past my office recognising my brand every day. At the moment a rent in a market town is unlikely to exceed £15k pa... that less that one exchange per month... is that so expensive... really? When you compare it to the amount if leaflets a tech company has to produce to keep the same level of exposure then it’s money well spent. I agree that one has to adapt but the lessons learnt from the online industry in my book is avoid doing it because it clearly doesn’t work.

    Anyway, I need to host my team meeting, in my high street office, with my analog staff who are raring to go and provide the customer with what they actually want, which is someone real to speak to.

  • Kristjan Byfield

    Traditional or tech we all have to readily admit that the sales process (from offer to completion) is crap. Its laborious, slow and fails far too often. Whilst I know many agents feel attacked (and there is some validity to this) the transformation of buying/selling isnt to destroy agency but is merely its evolution. Whilst the long list of online failures gets longer and the staggering amounts burned through increases, we have to acknowledge the successes achieved. Settled achieved a 90% success rate from offer accepted and completed transactions in 50% of the time of the national average. Those are successes (even if the business failed) that need to be learned from and (where possible) adopted. Whilst PB have attacked our industry, they and their cohorts, have forced us to lift our heads up and see what consumers want in their property journey and many agents are considerably better today as a result of the transformation and evolution they been forced to adopt over the last 5+ years as a result of these 'disruptors'.

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    Greater than 95% of property is still sold by the traditional route via High Street estate agents. The various ways & means (proptech/digital) to change this have COMPLETELY failed to move the needle. Maybe some people need to accept that the resilience of this model is the most telling feature here. It might not be perfect but doesn't need change just for change sake.

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    Way to many Proptech so called expert social media promoters with very little real experience In either prop or tech.
    Linked in is overloaded with them.
    Not many have done a day in an agents shoes.

  • Andrew Stanton Proptech Real Estate Influencer - Analyst - CEO Proptech-PR

    Now I have to be careful on many levels, not least because I want to buy in Winchester possibly and I may be wrong but Andrew Richardson may be the Manager at Jackson Stops in that ancient city.

    And Angus Brut - I am not sure how informed you are about the credentials of many in the proptech sector. Take James Dearsley - global thought leader and exponent of Proptech, has he any experience in selling property? that will be a big tick, his co-founder Eddie Holmes any experience in property big tick, Andrew Stanton any experience in property, only 35 years, and in my company Proptech-PR there are five of us, and all have Proptech credentials and how many years of agency experience? that will be 85 years. I could go on, but exactly how many years of experience have you in the real estate trade?

    Moving on - Settled has gone, so has 1.2M and is that the end of Proptech?

    Well lets see Countrywide the 'bastion of traditional we do it this way' - legacy agency model built on paper and 'man/woman power, and is the largest agent by size in the UK over 690 physical offices.

    This grey dinosaur managed to have an operating loss of 212M in 2017, and an operating loss of 251M in 2018, and the full horror show figures for 2019 are not in the general domain - but in the notes of the General meeting of 23rd of December when the aborted sale of Lambert Smith Hampton was discussed Countrywide stated ...

    ' Even if the Countrywide Group is able to fully realise its strategic goals and turnaround plan, there is no guarantee that the Countrywide Group will return to profitability promptly, or indeed at all.'

    So I am guessing that the 473M operating loss of the two previous years is going to be followed by a stinker. Is this relevant, after all maybe Countrywide are not the normal agent on the high street, but having done an analysis of every single brand inside Countrywide, they are actually your typical agent.

    Trading from a large or prominently located office on the High street, usually a goldfish bowl and scattered around them are other agencies who if you rebranded their shop fronts would look the same.

    So here is where I share my very privileged knowledge and insight gained by talking on a daily basis to four or five proptech companies with a number of real estate companies thrown in. I am not a re-seller of shiny new toys for agents, we are Proptech-PR.com because I am trying to save the Dinosaur nation from extinction.

    We speak to companies with real solutions some based in the UK others around the world and take it from me - in 36-months Angus and Andrew - real estate in the UK will bear little semblance to what it is now.

    Examples - Riccardo Iannucci Dawson a 27-year old, (Yourkeys) who luckily has very little idea of the world that you Andrew & Angus live in, has provided a solution to getting new homes from reservation to exchange in 162 hours. Is this significant? Well unless you are on another planet and enjoy slow cash flow, inordinate delays, and most importantly upset and stressed clients this has to be revolutionary.

    Now if the Proptech solution is rolled out into Residential agency with a cancellation rate of 29 - 31% and that was to be reduced to 9%, and the 20-week sale cycle was reduced to 8-weeks, then a typical 100 gross sales a year at £3,000 which normally would give £300,000 - 29% cancellations - £213,000 of income becomes £273,000 of income, which across a 400 branch network is an extra 24M of income.

    A tiny glimpse into the near future - and given that 65% of Proptech companies were first registered in the UK in 2017 so 36-months ago - they are doing absolutely brilliantly. The big problem at the moment is not that Proptech is failing, it is that agents are failing to understand what Proptech is, and if anyone wants to contact me or James Dearsley or the ever growing band of enlightened ex-property professionals I think you would be amazed at the amount of advice and technical assistance that is out there. Proptech is not the enemy, it is an enabler - ignorance as ever is always the enemy.

  • Chris Arnold

    From my perspective, as someone not operating as an agency, I believe the point being missed is not whether the business model works, but rather whether said model has a message that resonates with the audience.
    I started out firmly believing that high street agency was obdurate, even given the contempt that the public had for the profession. I have now come to realise that an agency can persuade anyone to its model if the message is strong enough.
    What we see from both online and high street agencies is a string of meaningless platitudes that neither inform, nor interest a seller. Witness the idiocy of the original eMoov, that tried to "create a movement". What on earth was a vendor supposed to make of those ads?

    Many different models can work. Message, then platform, then environment.

  • Andrew Stanton Proptech Real Estate Influencer - Analyst - CEO Proptech-PR

    Platform definitely, portal/platform possibly, and the customer now being overwhelmingly more tech savvy than you 30 year in the business agent, so all that product knowledge that gave agents the edge - alexa now bestows on the new buyer in 4 seconds, and the mobile phone in less than a second. So why are these clients going to stand for Dino-estate agents? - lets face it I like the Flintstones but I would not let them sell my cave.

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    Yes - am sure the market will get there.
    However the mass market still don't care.
    Covid has helped.
    Unfort most of these geniuses are running at huge losses and shareholders are over wearing all the romises

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