Property leaders un-eazi about Pam Golding’s move
Whether they think it bold, foolhardy or brave, the leaders of the traditional property industry have certainly been challenged by Pam Golding’s recent public announcement that they acquired the online set fee agency Eazi.com. Read what they had to say and whether they are going to follow suit.
The move is generally acknowledged as a bold one, even a brave one, but some wonder why an upmarket brand like Pam Golding would want to link itself to the more economical section of the property market. Richard Hardie, CEO of Knight Frank, finds it an odd business decision. “Why would you invest in the polar opposite of your business? It dilutes the brand, creates a sense of unease within the organisation and confuses the market,” Hardie says. Lew Geffen, chairman of Sotheby’s International Realty, reckons only time will tell whether the move will compromise the exclusivity of the Pam Golding brand. Personally he believes “One cannot be all things to all people”.
For Paul Stevens, CEO of Just Property, Pam Golding’s move, though bold wasn’t unexpected. He says it has been coming for some time, South Africa is just lagging behind with what is already happening abroad. Pam Golding’s affiliate, the international real estate agency Savills, recently bought a minority stake in Yopa, a hybrid property start-up, to strengthen their position against other hybrid agencies. It appears that Pam Golding is following their example says Stevens.
Set rates vs commission fees
Then there is the issue of investing in a set-fee agency while their own agents must continue asking high commission fees. Pam Golding indicated the Eazi.com service would be aimed at servicing the lower-end of the property sector while retaining the more personal service by commission-based agents for the high-end clients. Adrian Goslett, regional director and CEO of RE/MAX Southern Africa says while perhaps the move is a good strategy to enter new markets, it sends the message to their agents that their own franchise is now competing against them.
On social media platforms one of the main issues raised is that higher-end clients, being aware that a set-fee service is available, will opt for that rather than paying the commission fee. Hardie reckons it will be incredibly hard to manage the boundaries of the two brands. “The bigger problem being the typical Pam Golding client will now be looking for a lesser fee knowing that they have bought a fixed rate online agency,” he says.
Goslett observed that most of the property listings that Eazi.com had on their website did not fall into the lower end of the market. “In fact, many were well above PGP’s intended R500 000 to R2 million mark.”
Acknowledging that commission structures have come steadily under pressure over recent years, Ted Frazer, Seeff national marketing manager, says this highlights the importance to rethink what value traditional agencies are offering their clients in return for the fees paid. “I think the industry – both locally and internationally – is starting to accept that it needs to rethink what customers are looking for from a real estate partner and the dominant leaders in each industry would need to similarly consider how best to adapt to the changing needs – and demands – of its customers,” he says.
So, there is a space for set fee agencies?
The general opinion appears to be that while there is a place for set fee agencies, they can’t provide the expert service that a top-class agent can. Knight Frank’s Hardie says he has been asked many times about fixed rate agencies and he doesn’t believe the model can work long term. “I have seen them come and go in the UK and the Channel Islands. I believe it will affect Pam Golding,” he says. Hardie maintains an online agency can’t offer clients the experience, knowledge, local/global network, advertising, PR, marketing and service like a traditional estate agency can.
Geffen says ‘commission disruptors’ cannot afford to sustainably provide the full service that traditional agencies offer that ask commission fees. They expect the sellers and buyers to do most of the work, he says and adds he doesn’t believe set fee agencies are a real threat to the industry because in the end “a top-class, negotiating mediator” is needed to bring a sale successfully to conclusion.
On the other hand, Stevens argue that the traditional models with their high fees have always dominated the market share of the property sector, so it was inevitable that a space for competitors would develop that offer consumers options when it comes to the service provided and fees paid.
Frazer believes that while the set fee service appeals to some clients, the majority of homeowners still prefer the traditional model when looking to sell. Nevertheless, these are exciting times he says, and the debate is ongoing as to the role that technology will play in the future of real estate. “Ultimately, as with any service-industry, we need to provide value to our customers and I believe that these new entrants are showing us that this value perhaps needs to be redefined,” said Frazer.
Considering doing the same?
Some property leaders outright said they do not intend venturing into the online fixed price property market while others were more cautious.
Goslett said competing directly as franchisor with their agents is not an option for RE/MAX. He explains that one of the reasons online agencies have not exploded in growth is the low service provided to consumers due to the much lower margins with which they operate. “In other markets such as the UK, some low-cost operators have managed to make inroads in the real estate industry due to a pre-existing culture of low service and low value in that country. In the absence of value or service, all that is left to negotiate is price. If RE/MAX were ever to look at these types of models, there are two things we would avoid: competing with our own agents and offices and sacrificing on service to our customers – something impossible to avoid when running a sister company which does exactly that,” concludes Goslett.
Acknowledging that the traditional agent will have to keep up with technological advances, Hardie says “Knight Frank remain a different business model to the likes of a fixed rate agency and will not be following the bold move by Pam Golding”.
Likewise, Geffen said although there is a market for the online agencies the Sotheby’s International Realty brand has never competed for that section of the market as they wish to remain “a luxury brand servicing a niche market”.
Rawson declined to comment.
Just Property’s Stevens was non-committal in his answer but expects their agents to adapt to the changing demands of this high-tech dominated age. “To survive and thrive, a new breed/calibre of estate agent will be necessary, and they will need to be supported across all aspects of their roles by technology that is entirely customer-centric,” he said.
Neither did Frazer say yes or no, although he highlighted that at Seeff they believe in improving value or identifying new forms of value as opposed to cutting price. “In the long term, “Price” is not a sustainable competitive platform,” he says.
“It is always exciting to be pushed out of one’s “comfort zone” and to look for new opportunities and ways to do things better. This move merely reminds us of this,” Frazer concludes.
Only time will tell whether diverting into set-fee online real estate services will or won’t become the way forward for the local big players in traditional real estate. We’ll just have to watch and see.
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