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You’d think that a service that cuts estate agents out of the house-buying process would be hailed as the best thing since sliced bread. Such services already exist, and can save you thousands of pounds, yet for some reason they have yet to make any significant impact.

The Money Programme 'Beat the Estate Agent' explores the growing range of alternatives to the traditional high street approach to buying and selling houses. These include a number of internet-based services, as well as leading supermarket chains, all keen to grab a slice of the market.

"Estate agents have seen their fees skyrocket tenfold in the last 25 years"

Estate agents have seen their fees skyrocket tenfold in the last 25 years, without doing a jot more work. In addition, many customers complain of dubious practices and poor quality service. Against this backdrop, it’s not surprising that some see this market as long overdue for change.

The internet has transformed the way we buy and sell most things. It has proved exceptionally successful at disintermediation, which is the ability to cut out the middlemen, especially where they’re seen as adding little or no value to the supply chain. So could it damage estate agents’ stranglehold on the property market?

The internet offers alternative business models which are attractive to house sellers in a number of ways, and a growing band of sellers are eager to switch. But this doesn't appear to be enough in itself to change this marketplace.

Very few innovations that rely solely on technology are successful. Technological innovation must be matched by market need, and so far house buyers seem reluctant to embrace this change. This acts as a brake on private sellers who would rather have a sale with a hefty estate agent’s fee, than no sale at all.

It’s not clear why buyers are slow to take up these new opportunities. Whilst some 70% of people now search for their next home online, many people still seem to be uncomfortable with the notion of engaging in direct negotiation with vendors.

Understandably, estate agents are not keen to see any growth in private sales. They suggest that sellers will lose out by not realising the full value of their property and not having an agent to manage viewings and screen-out undesirables. As Peter Bolton-King, chief executive of the National Association of Estate Agents, puts it “if you are selling it privately, any Tom, Dick and Harry can just come round”.

Much of the competitive advantage that estate agents have comes from controlling the flow of information at the various stages of the house buying process. However, this is gradually being eroded. For example, the Land Registry decided a while ago that the prices paid for homes must be made public. So both sellers and buyers can find out exactly how much was paid for other houses in their neighbourhood.

The availability of this information helps private sellers place an accurate value on their properties, effectively deskilling the estate agent’s role. Hopefully, as more information enters the public domain the house buying market will be exposed to more transparency, which (in theory) should be good for customers.

"The role of the estate agent could be on the cusp of a radical transition"

Everything suggests that the role of the estate agent could be on the cusp of a radical transition. But it’s not yet clear what will be the tipping point which will push the old business model aside. Until then I guess it’s business as usual.

Further reading

• Beat The Estate Agent – The Money Programme investigates some surprising alternatives to estate agents
• Network effects – new technology doesn't succeed or fail on its own merits
• Money and Management Forum – would you buy a house online? Or trust Asda to sell your house?
• War breaks out on the home front as old and new estate agents clash
• ThisIsHousePrices.co.uk
• The Rise of the Network Society: The Information Age by Manuel Castells, published by Blackwell Publishers

About the author

Matthew Hinton is Senior Lecturer in Information Management at the OU Business School. His research addresses the impact of e-business on operations and information technology evaluation, especially the performance management of e-commerce applications.

Blogging about

Money Programme

Get the facts behind the big business and finance stories from around the world - and down your street.

‘Making it Big on eBay’ illustrates how eBay is now being used by thousands of people, either to earn their living or to augment their earnings from elsewhere. It appears that they use eBay because it provides them with three opportunities:

• a new route to market for an existing business
• an opportunity to create a business that wouldn’t have been possible before
• a host organisation on which to piggyback

A friend collects and trades military memorabilia, specialising in medals from the two World Wars. He – and his long suffering wife – spent many weekends with their thermos flasks in chilly village halls attending collectors’ fairs, both to search for and sell items.

eBay has provided them with a new route to market. They now spend their weekends in the comfort of their own home, but have still managed to increase the turnover of their small business. Part of this growth is trading with people from outside the UK who they never would have met via the collectors’ fairs.

"You’ll be surprised how many people you know are eBay entrepreneurs"

Meanwhile, a friend of a friend (if you ask around, you’ll be surprised how many people you know are eBay entrepreneurs) gets to spend her weekends doing what she does best: shopping. She spends her time at discount stores such as TK Maxx and Primark, buying heavily reduced items.

Buyers are infected by the ‘auction fever’ of eBay and pay higher prices for these items than they would if they bought them in the stores. The thrill of the auction is providing a new business opportunity for her.

However, it’s the third of the approaches that I find most intriguing – creating a business by piggybacking on the internet giant. Many companies provide services to other eBay users, for example some specialise in packaging products for those selling on the auction site. Others examples include the US chain iSold It, and its UK equivalent Auctioning4u, that offer to sell items on eBay for people who do not have the time or inclination to do it themselves.

Such businesses provide goods and services that only exist due to the presence of eBay. This has been described as the ‘piggyback economy’ and has been likened to remora fish, that survive by clinging on to the back of larger fish and turtles, or to the small birds that live by grooming larger mammals.

The piggyback economy has been estimated to be worth tens of millions of pounds, and isn't confined to eBay or internet businesses. In the offline world, Mike Ear (I understand you have to say it out loud) is a small business that buys, delivers and assembles Ikea furniture. It targets those of us who can’t face a trip to one of their stores or trying to make sense of their assembly instructions.

Like the examples from the animal world, the piggyback relationships are symbiotic rather than parasitical. In the case of Mike Ear, customers benefit as they get a more convenient and personal service than they can from the host company, Ikea. The piggyback company, Mike Ear, has low overheads and benefits from the brand of the host company. The host company, Ikea, benefits from increased sales.

The phenomenon of large organisations supporting a range of smaller organisations is not new. Large manufacturing firms were traditionally surrounded by small organisations supplying components or services.

"Failing to provide personal service allows a niche in the market for the smaller fish to fill"

What’s unique about the current piggybackers is that there’s often no need for geographic proximity with the host organisation. Also, more interestingly, they tend to be found operating between the host and the end customer, rather than as suppliers to the host. This suggests that despite the many benefits of large organisations, they’re failing to provide the personal service that consumers want, allowing a niche in the market for the smaller fish to fill.

Further reading

• Making It Big on eBay – The Money Programme follows a group of British sellers bidding for success
• What makes an entrepreneur? – Take a test to discover if you’ve got what it takes
• Money and Management Forum – How have you made money on eBay?
• Small Business Service
• HM Revenue & Customs
• The eBay Business Handbook: How Anyone can Build a Business and Make Money on eBay.co.uk by Robert Pugh, published by Harriman House Publishing
• The Ebay Entrepreneur: The Definitive Guide for Starting Your Own E-Bay Trading Assistant Business by Christopher Matthew Spence, published by Kaplan Business

About the author

Elizabeth Daniel is Professor of Information Management at the Open University Business School where she undertakes research and teaching in the fields of e-business and information systems. Elizabeth also undertakes consultancy work for a number of blue chip and leading public sector organisations.

Blogging about

Money Programme

Get the facts behind the big business and finance stories from around the world - and down your street.

At one level the problems with motorway service stations are not difficult to assess – little choice, poor quality and high prices. More often than not, customers are experiencing an acute gap between the service they expect and the service they’re receiving.

Yet, the solution of turning motorway services into a sort of retail centre, as explained in 'Motorway Attractions', leaves me feeling uneasy.

Overcrowded motorways and service areas epitomize one of the problems of our time: we all use our cars too much. Also, too many of the goods we buy are transported over long distances. We live in a consumer society. We have access to a previously unknown quantity and variety of consumer goods, and shopping has become a major pastime.

This enjoyment comes at a heavy price. Choked motorways are only one problem. Overflowing landfill sites have to take all the packaging and all those nice new goods at the end of their - sometimes very short - useful life. Global warming is linked to the energy used for travel and for the production and transportation of all those consumer goods we enjoy.

In this context, motorway service areas as retail havens ring all sorts of alarm bells. Do we really need yet more retail centres where we can spend yet more time, buying yet more things? And do we really want to encourage yet more traffic in order to get to such retail centres?

Perhaps there are different ways of consuming and enjoying ourselves, which still allow us to flow with the crowd, to hunt for new objects, to show off our good taste, to bring variety into our lives. Quirky second-hand markets, colourful farmers’ shops, exchange and sharing schemes: could we as a society make more use of these and thus give our poor roads and the environment a break?

Maybe then motorway service stations could concentrate on what they were meant to provide, that is clean toilets, decent hot food and a chance to stretch our legs on those unavoidable journeys.

Further reading

• Calling companies to account – explore the tactics used to keep companies in line
• Your trip at what cost? – what is the environmental impact of your holiday choices?
• The End of Over-Consumption: Towards a Lifestyle of Moderation and Self-Restraint by Marius De Geus, published by International Books
• The Myth of Green Marketing: Tending our Goats on the Edge of Apocalypse by Toby Smith, published by University of Toronto Press

About the author

Anja Schaefer is a Lecturer in Management at the Open University Business School. She’s been lecturing in marketing and corporate social responsibility for eight years. Anja has published material on consumer behaviour, sustainable consumption and corporate environmental management.

Blogging about

Money Programme

Get the facts behind the big business and finance stories from around the world - and down your street.

Avon competes in a global industry which, according to estimates from Datamonitor, was worth $120 billion in 2002. Avon, which was perhaps one of the first global cosmetics companies, is now overshadowed by industry leaders such as L’Oreal and Procter & Gamble. These companies are over three times the size of Avon when measured by turnover.

The Money Programme 'Avon’s Still Calling', highlights the very different set of competitive forces the company faces now, compared to those it faced when it was founded. Competitors have grown in number, diversity and financial power. Meanwhile, the demographics, preferences and brand awareness of consumers have changed.

'Avon’s Still Calling' also raises concerns about the company’s strategic response to these competitive forces. Can its cost and revenue structure and business model deliver a sustainable long-term profit? Yet the major problem identified is the lack of any retail presence. Avon relies too much on the direct selling channel.

The success of Avon rests on addressing some key questions. Some commentators have talked about the idea of “retail theatres”, outlets that offer the consumer a shopping experience rather than just an opportunity to buy the product. Would creating such a distribution channel be feasible?

Could the company generate the revenues and afford the costs associated with such a shift? If it went ahead, would Avon apply this model in all of its markets or just where its market share is static or declining?

Perhaps, and even more importantly, would they be trying to copy their major competitors? Most writers on strategy argue that “me too” strategies don’t work. You may copy a competitor’s approach, but your resources (money, brand and people) are setup in a different way.

For example, some traditional booksellers such as Blackwell in the UK and Borders in the USA launched online bookstores to compete with Amazon. However, a key source of Amazon’s advantage is their proprietary software. The competition just didn’t have the expertise or resource to successfully replicate this, and thus their online activities floundered.

Avon’s trying to improve brand awareness by increasing advertising spend and other activities, for example through its sponsorship of ITV’s Footballers’ Wives. It’s also addressed its product range and introduced internet selling.

However, the basic question remains: should Avon seek to imitate its largest rivals such as L’Oreal? Or should it take advantage of the unique capabilities and model it's developed over many years?

Avon’s model has allowed it to succeed in overseas and emerging markets (75% of turnover comes from outside the US) and to sustain profit performance. One way to expand the current model would be to sell additional products through their direct selling channel.

So far Avon has chosen to make changes within the current model. Will these be enough? Avon will need to blend strategic management thinking and thorough industry knowledge if it’s to continue calling!

Further reading

• Avon’s Still Calling – Avon’s share price is falling and the company’s out to reinvent itself. The Money Programme discovers what it’s got up its sleeve.
• Competitive advantage – how can companies ensure they've got a lead over their competitors?
• Securing your brand – how do you build value into a brand? More to the point, how do you preserve that value?
• The world's top beauty companies
• Contemporary Strategy Analysis by Robert Grant, published by Blackwell

About the author

Geoff Mallory is a Lecturer in Strategic Management and Director of the Postgraduate research Degrees Programme at the OU Business School. He has taught organization theory and strategy in a variety of countries and contexts.