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Disruption, industries and perhaps a tell tale sign from the Association of Residential Letting Agents (ARLA)

This may sound like a contentious and argumentative blog article, however it is merely written with the hope of stimulating a dialogue. The residential lettings industry is changing, evolving into a new ecosystem with new players and new challenges for both owner, renter and those businesses that serve them. As the landscape shifts like quicksand under our feet, old players and incumbents will go through the stages of disruption, as laid out in the Classic Disruption Cycle by Elad Gil.

classic disruption cycle

Taken from TechCrunch

These include:

Overconfidence

In this phase of the disruption cycle the traditional model thinks that the ‘newbies on the block’ are nothing more than young upstarts. A flash in the pan and that nothing could ever shake their hold over the status quo. There may be some simple regulatory action here, similar to when UberCab was made to change its name to Uber.

Sudden Collapse or #massmigration

This is the moment, when the incumbent realizes that they are on slippery slope to ruin. Massive migration occurs, and they lose a vast, sizeable chunk of their customer base quickly. This is the phase when others see others using the new service, and therefore think they should use it. I suppose this is the idea of social and peer reinforcement, or herd marketing as highlighted by Mark Earls in his book ‘Herd’. This is one of my favourite books by the way, some great insights.

“I’ll have what he’s having”…. is one of my favourite examples of this, and one I hear all the time in various forms.

Look at Airbnb and how quickly it spread around the world as more people knew others that had used the service.

Too little too late

This is the stage when the incumbents do what they should have done in the overconfidence phase. They try to save the situation, with innovations of their own but by this point they are already out of date and way too late!

Ongoing Decline

This is the stage when the older model of doing business is no longer relevant. It has been superseded with new customer expectations and better customer service.

So why does this matter, I hear you cry..?!?!? Well we think that we (Movebubble) are somewhere on this Disruption Cycle, with incumbents taking aim at anything new and regulatory bodies such as the Association of Residential Lettings Agents feeling the need to advertise on UK mainstream…(ish) television. Now this last point seems particularly odd, and I wanted to shed some light on ARLA for all of our trusted owners out there.

I felt I needed to gain some greater insights into ARLA and what it is like working at the sharp end of the industry. So I asked my co-founder Aidan Rushby about his experience and opinions on the subject. Some might not like his view, and for that I apologise. But without challenge how can we ever progress. It is our alternative viewpoint, that will after all likely challenge the status quo, which will always cause friction and disagreements along the way. Just to give you some context I am co-founder and CMO of the same business (Movebubble), and although this article does mention our business, it is in no way intended to be a sales pitch at all.

The words below are an executive summary of our discussion, and I really hope that this generates a dialogue around this subject. So please let me know your thoughts and comments.

Interview Executive Summary (05.01.14) with Aidan Rushby, CEO of Movebubble 

Most lettings agents will be proud to announce that they are members of ARLA, and are likely to even have ARLA stickers in the windows of the agency shop. It does sound impressive, but what does it really mean?

ARLA stands for “The Association of Residential Lettings Agents” and on the website it reads:

“The Association of Residential Lettings Agents (ARLA) is a professional membership and regulatory body for letting agents and letting agencies in the UK. ARLA recognized the requirements of the residential lettings market were so detailed and specific that a separate organization was required to promote standards in this important sector of the property industry.”

Now don’t get us wrong, this does sound great but what benefits does this produce for owner and the renter (aka landlord and tenant)?

I have previously worked within the residential lettings industry for around about 7 years, and have an opinion on this that I had wanted to share, as it may be a little unorthodox.

There are some great things with ARLA, such as the requisite that all agents operating under ALRA must maintain valid Professional Indemnity Insurance to ensure that ARLA member’s consumers are protected from errors or omission made by any agency. ARLA members also agree to comply with all the professional standards outlined in ARLA’s Byelaws and Code of Practice, demonstrating their dedication and commitment to high standards in Letting Agency. Great stuff.

Be sure to check out  http://www.arla.co.uk/about-us/why-use-our-members for more information

From my experience owners (aka landlords) and renters (aka tenants) do not get any tangible benefits from utilizing agents that are members of ARLA. It is so easy to become a member, pay the membership fees required, put a sticker on the shop window and voila..! You are now a ‘Bon-a-fide’ ARLA representative. What’s more, an agency has to have only one registered individual per branch to display that ‘all important’ sticker and give the impression that the branch is a registered member.

Online letting agents like Rentify even have the ARLA logo on their website. This seems very odd as they don’t even conduct viewings and surely thus can’t follow the code of practice. They also allow owners to upload properties for free, without even seeing the property. Considering the statement below, as found in the Code of Conduct, it would appear that to be an ARLA representative you have to qualify all descriptions of the property to be true and reasonable.

G. II  A Member must take reasonable steps to make sure that all statements, whether oral or written, about a property are accurate and not misleading. In particular, reasonable care should be taken when describing property as Unfurnished, Part Furnished, Furnished or Fully Furnished so that applicants are not misled as to what fixtures, fittings etc might be included.

Therefore, how can Rentify adhere to ARLA’s code of conduct? We are not sure that they do but perhaps this is another post altogether… I digress.

Even one of the most successful lettings companies in the UK, Foxtons, chooses not to be a member of ARLA. Is this because Foxtons fail to find any added value from being a member, either for themselves or their customers?

So lets talk about the ARLA examination process.

In order for you to become a vetted ARLA representative, and be able to speak with authority you have to undergo a grueling set of examinations that only the bravest, smartest and most qualified can pass. Apparently.

I have been there and done them, and got the ARLA tee-shirt.

I picked up the required book, read for half an hour and passed the 4 examinations. I was only 24 at the time. Easy. Now I was apparently qualified to advise owners (aka landlords) on perhaps their most valued investment. My employers would confidently declare that I was the man to talk to when it came to advice about being a property owner and the trials and tribulations of renting out a property. In hindsight, I feel that this was very far from the truth. Another business of which I was aware, even allowed its representatives who were not ARLA qualified to claim they were and give advice as such. Mmmmm…. Dubious. In my 7 years as Branch Manager I was never contacted by ARLA. Not even once.

Another more recent point of notice.

Interestingly there has been a new ARLA television campaign, and this is no doubt to drive awareness and acquire more customers i.e. lettings agents.

But I wonder if there is a slightly deeper and more pertinent reason for this new channel of marketing. There is renewed vigour to regulate the industry, and perhaps ARLA are trying to reinforce the ‘need’ for the agency model and thus their own position within the market. No agency model, no ARLA!

I think that they should be focusing on managing their membership more closely, so that all ARLA registrars are offering validated benefits to the end users rather than showing off with large TV adverts.

I feel that ARLA, (and for that matter any non market-driven or Government intervention), infact prevents innovation in the industry with strict, archaic and immoveable requirements. Hence why Movebubble is not a member of ARLA. This is for several reasons. The first being that it is not an agency but rather a trusted community marketplace (or customer collaborative platform #coined) centered on the rental agreement. Secondly, innovation is stitched into our very nature as a business, and to voluntarily adhere to any restrictions would seem detrimental to our future success.

In all I think this is a sign that we are already in the Overconfidence stage, and rather than the business model and businesses therein innovating and coming out with new solutions for the end users, they are simply cranking up the ad spend, and applying the band aids.

How long will this strategy last..? Lets put it this way, I would not want to own a lettings agency right now.

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August 2017
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