Disruption: Let us face the facts, then plan the future
MAIN IMAGE: Jan le Roux, CE of Rebosa
Jan le Roux, CE of Rebosa, wrote the following article regarding the turmoil in the real estate industry over the new feature FNB added to their banking app enabling their clients to privately list and sell their properties online without estate agents.
I almost can’t remember when last the real estate industry was in such turmoil with emotions going through the roof – fuelled by genuine hurt, disinformation (or lack of information) and a fair degree of opportunistic activity.
The FNB initiative to start listing properties of private sellers, and more importantly, to enable the sellers to transact without using estate agents came as a shock – especially because of what was perceived as a long-standing relationship between the industry and the bank, and the total surprise of the announcement. Then there was the initial focus on not just giving customers a choice between using the bank’s platform to transact versus the services of an estate agent, but with strong promotion to pick the first and not the latter.
I think the emotion was real, warranted and understandable and can at best be equated to someone dating his girlfriend’s sister or her boyfriend’s brother! You give someone access to your family and circle of friends and the unthinkable happens!
Another and more important issue was the fact that FNB was in a position to launch their App on the back of data supplied by estate agents (introducing your sister to your boyfriend). Let’s be frank, it is difficult to get something like this off the ground if there are no or very little listings on display as you then have to stand on the benefits of your initiative only. Agents objected to this.
The industry communicated its hurt through talks of boycotts, closing bank accounts, etc. This kind of talk comes with its own challenges and can quite frankly be irresponsible. It is any individual or company’s right to express her/its anger by closing a bank account, removing data, etc., but if one tries to cajole others in the same industry to do this with you it may well constitute collusion which would expose you to a challenge from the Competition Commission (the fines in this case can be as much as 10% of your annual turnover). Of course, one can take those actions but then do so and hope one has a following – which is where the challenge comes in.
Emotion aside, FNB is now nothing more and nothing less than another disruptor of which there are many in the industry internationally and in South Africa. For all we know the new Discovery Bank might become just that – they have a very impressive client base. Would changing your medical aid make any difference should that happen?
I was amazed over the past few weeks how individuals, whom I can only describe as uninformed or opportunistic, not to mention suffering from a lack of curiosity (the few questions raised with Rebosa and Private Property amounted to the exploration of conspiracy theories instead of a straight forward “how does this work, what is happening, what are you doing?”), jumped on the bandwagon to stir the pot instead of looking for long-term solutions.
Private Property had a long-standing agreement with FNB to display the listings of estate agents which listings were viewed by FNB clients on the FNB App. Three million bank customers had the opportunity to view listings and contact agents directly. As we speak Property24 is doing basically the same with ABSA.
This is good, not bad. I am reasonably sure that all the Property24 clients have not explicitly given their permission to make this happen nor do I think it was the case with Private Property. I believe advertising agreements allow this and clients are allowed to opt out. It did however not matter as industry had the benefit with no downside.
After FNB launched their initiative the uninformed and opportunistic were loud in their calls for immediate almost “kragdadige” PW Botha type action instead of analysing contracts, meeting with people and solving the problem.
Rebosa was and is not in a position to organise collective action against the bank (note the collusion argument above) but can and did participate in the talks that followed with FNB which led to the result we now have, i.e. agents’ listings are no longer to be seen on the FNB App.
There are those who in the process stopped their feed (very limited I might add) to Private Property. The net result of this action is that they forego the display of their clients’ listings to millions of regular Private Property users (consumers). That is the negative result of forceful, unconsidered “action”. They did themselves and their clients no favour by this action.
One should ask oneself what the real threats are: Another bank launching a similar platform, Discovery bank doing something similar? Of course, a portal like Property24 could do the same and there are many indications that Zillow, the biggest property portal in the USA, is testing the waters in this regard. I personally doubt that Property24 would do that as it is never a good plan to try and become the cow when you can extract more milk from her without improving her diet. Private Property, in terms of the current shareholders agreement, is prohibited from following this line of thinking never mind action.
The industry will have to accept that there will be more and more disruptors as the “fortune”, industry is perceived to be making with the existing commission structure, is an attraction to many – until they find out what it really takes.
The industry cannot boycott the disruptors out of the market nor take collusive action to prevent them trying their luck. Estate Agents can and must sharpen their pencils, up their game, communicate their value proposition better, etc. I personally believe there will always be an opportunity for the diligent, committed agents rendering a decent service. I, for example, will never forego my insurance broker because I refuse to read the fine print and I want to transact with someone I know, like and trust and who looks after me. I can’t imagine someone “disrupting” my broker away from me – not that they have not tried. Same applies to an estate agent.
What about the portals? The opportunists of the past few weeks trying to get portals and businesses going for their own gain were rather disconcerting. Many of the statements made on social media has a Donald Trump like impact and I daresay will have results in a similar vein should it proceed.
The problem is that even if one builds the most amazing portal one will still, for all practical purposes, be the most attractive, biggest billboard in the Sahara Desert because no one will know where to find you. The challenge is to make oneself known to consumers so that you can deliver results to your clients – that takes money. To launch an alternative property portal in South Africa today with any chance of success will cost hundreds of millions of Rand. The two dominant portals at the moment, Property24 and Private Property, have the lion’s share of the market with a third portal, IOL Property, way down on the pecking order. Anyone launching a portal right now will face severe challenges catching up with number 3 and has no chance of catching numbers 1 and 2. Should an international player throw money at the problem they may well succeed in catching up with numbers 1 and 2 or surpassing same – this is a problem one can throw money at. Should they do that I daresay they would have no idea how they will ever recoup that investment going forward in a market this size.
Playing on the emotions of a hurting industry to launch portals and expecting them to support same is irresponsible. The best way to test this for any individual or company would be to now stop supporting Property24 and Private Property, put all data on this newly launched portal (because that is what it will take) and then hope the rest of the industry will then follow overnight – otherwise one will be doomed to failure. All of this while keeping in mind that you can promote your new business, invite agents to join you but cannot convince them to boycott/remove their listings from any other portal – that would constitute collusion which is illegal. If you can’t do this, leave it be.
Rebosa played a major role in the current transaction in which Caxtons became a shareholder in Private Property. This is a viable, and I daresay, the best option for estate agents to safeguard their future. When this transaction was done we were careful not to swop the devil we know for the devil we don’t know. We found a good partner and put together a very good shareholders agreement which protects the industry.
Incidentally, the rumour that a number of bigger companies became shareholders of Private Property 3 odd years ago are all true. The opportunists unfortunately use this information to create discord instead of asking how it works. Those agencies, now shareholders in the Estate Agents Property Portal Company (EAPPC), made serious commitments and signed big advertising agreements to make this happen and took up the only offer made at the time from the then owners of Private Property. Limiting the agents’ shareholding to a few companies at the time was not their choice.
Now that the Private Property ownership has changed, the EAPPC has already decided to extend it’s shareholding to the entire industry through a share offer which will reach everyone early in the new year. Every agent in South Africa will be invited to join the EAPPC and take up shareholding at no cost and with no advantage to the initial shareholders – big and small will all be treated exactly the same.
The original shareholders of EAPPC wrote cheques last year to buy shares in their own right at the same time as Caxtons when shares were bought from the international venture capital company that used to own the controlling stake in Private Property. Shares directly in Private Property will, in terms of the offer in the new year, be made available to every estate agent in South Africa at the same price that bigger shareholders paid last year. Once again big and small will be treated equally and there is no advantage to the initial shareholders.
It is for the reasons above that Rebosa supports Private Property as all the safeguards are in place, the industry is being treated fairly and industry exercises adequate control over the portal not to be taken advantage of.
That cannot be said of any other portal, existing or new. For the existing ones because they cannot offer those guarantees and for the new ones because they can’t get off the ground.
As an industry we are facing many challenges, the Property Practitioners Bill will by all indications be pushed through parliament this year and will have a number of ominous clauses. The new FICA arrangements kick in on 1 April next year and industry is still battling to come to grips with it and transformation is lacking and will be a serious focus point in the new year
Let us focus on what we have, make it work and jointly address the challenges of the future.
For those interested in facts and requiring answers, please mail me on firstname.lastname@example.org
Post publication note: Jan le Roux is also the chairman of Private Property. This should have been added to the original post, apologies. Ed.