We’re a tech-savvy, mobile-centric society. To see this, simply take a look at other industries such as retail, transportation and travel, and you will notice that we are now living in an on-demand economy.
Why is this? Because technology and its capabilities have allowed the consumer to fulfil their demands with the immediate provision of goods and services.
On-demand services are so ingrained in daily life that you can even order an afro wig for a dog on your phone in a matter of seconds without leaving your house, and it can be delivered by 11am. It may seem odd that many of us used to question whether this trend was simply a ‘bubble’. Now, the question is no longer if the on-demand economy will revolutionise the way people transact, but when this new way of transacting business will become the norm for every industry. Failing to spot the signs could mean missing out on huge opportunities.
Blockbuster vs. Netflix
In 2000, Blockbuster was offered to buy Netflix for $50m and refused. Their reasoning for declining to purchase was that they made $10m annually from late fees, and buying Netflix would ultimately abolish that revenue. Fast forwarding to 2007, online-streaming began taking off as a result of the on-demand economy growing but Blockbuster stuck to their guns, keeping their focus on DVD rental. Where’s Blockbuster today? Bankrupt. What’s Netflix today? Booming with a market cap of $100bn. To put that into perspective, Goldman Sachs has a market cap of $98bn. What was the fatal mistake? Blockbuster ignored the fact that it doesn’t matter how you want to do business with the marketplace, it’s about how the marketplace wants to do business with you. This way of operating is now a part of our daily lives and we prefer to interact with technology to undertake transactions and services from the comfort of our own home. It can no longer be ignored.
How does this affect the lettings industry?
Our glimpse at the answer lies with Generation Rent. You’ve probably heard this term thrown around quite a lot recently, but what does it actually mean? Well simply put, by 2025 a quarter of houses in the UK will be privately rented, with the 20-39 age group making up half of the tenants. Alongside this trend, the political landscape is changing in favour of tenants' rights. Whether it’s greater transparency over rogue landlords and agents, the ban on tenant fees, or even questions around the use of Section 21, all of this will mean three significant things to the lettings industry:
- We now have an increase of people renting, creating a bigger marketplace for letting agents
- A significant share of tenants will be millennials, who prefer to engage with services within the on-demand economy
- Tenants are becoming more powerful and now have more choice in their decisions.
We need to remember that millennials are a powerful group, often creating a new marketplace when their needs are not being met by the current options (take our Blockbuster and Netflix example earlier). This is why established companies and industries are adapting to these needs by putting technology at the core of their business - not only to serve that new market, but to combat other intruding tech-based businesses wanting to enter the marketplace. Fintech companies like Monzo and Starling are attempting to enter the previously closed world of banking, and even in our own industry online letting agencies are trying to ‘disrupt’ the established lettings landscape. The three points above are clear signs that traditional agents need to pivot with technology in order to serve the tenant as a customer. The recent news from Keller Williams could be an early example of this, with the company announcing their shift from a ‘real estate company’ to a ‘technology company’, with CIO Josh Team mentioning that "agents are data rich, but insight poor...and over the next 12-18 months, winners and losers are going to be chosen".
Why should UK letting agents adapt?
It’s great to understand how we should be engaging with tenants in the correct way, but what value does this bring? Why should letting agents go to the effort of making tenants the customers of tomorrow? What financial value will this bring? Well, a tenant’s journey is much more than just signing a few documents and paying rent. There is a world of services and experiences that tenants want to interact with which, again, arises as a result of accessibility to almost anything from the palm of our hands. Successful, proactive agents are looking at ways to extend products and services to their tenants with complete ease and convenience, and are already creating revenues from these transactions.
There’s more good news however. The ability to use technology doesn’t just develop the tenant into a valuable customer, it also brings operational efficiency to the business. With the tenant fee ban looming, tenants who are thought to become cost creators can easily be converted to profit creators. The same technology can be used to offer an efficient service thus leading to a reduction in the number of calls and emails from tenants, speeding up deal closure times and reducing the need for support.
Whichever way you look at it, tenants will have more of an impact on the lettings industry than they ever have before and the scale of this impact will continue to increase as Generation Rent becomes more and more prevalent. Many of Goodlord’s customers are already recognising tenants as valuable customers by offering a cutting-edge process and taking the opportunity to create revenue from additional services. It’s time traditional letting agents capitalise on the creation of an experience that matches the demands of the marketplace, whether that’s because of the uprise of powerful, modern renters or if it’s to fend off the intrusion of online agents. Don’t resist the trend. Don’t be Blockbuster.