The world is evolving at a rapid pace, with new technological, cultural and societal boundaries being laid to waste by innovative business models. The traditional business cycle seems to be getting shorter, with the rise (and fall) being potentially far quicker than say 20 years ago. And, much like Moore’s Law, I feel this advance in the capabilities of businesses to fulfill customer needs will grow exponentially as businesses come to terms with the cloud, data and mobile/wearable technology and their endless possibilities. In turn, customer expectations will advance, and businesses will ever be playing catch-up with user demands. The sharing economy has been born, developed and surged in recent years, utilizing those aforementioned factors; and in the process fundamentally altering the way people expect to do business around the world. I feel that there are still substantial opportunities for both the sharing economy, and those larger companies that currently feel threatened by it.
Technology has certainly enabled businesses to build platforms that facilitate the sharing of assets already in circulation. Peer-to-peer sharing reduces the costs for the end user, as there is no requirement for an agent to moderate the transaction. Technology has reduced transaction costs, making sharing of assets easier and cheaper than ever before. This has enabled businesses operating in this space to acquire substantial market share quickly and expand operations on a much larger scale than has been previously possible. Airbnb is one such example where it now provides a service in over 30,000 cities globally, and has disrupted the well-established hotel industry with a punchy valuation of $10 billion in just under 6 years of trading. It is my belief that this emergence of a new model of consumption was driven by a desire for greater value, and less reliance on any middleman following the 2008 credit crunch.
Data has enabled businesses to disaggregate individuals’ assets into services. It has also enabled businesses to provide more contextual service offerings from other individuals based on preference, location, purchase history and peers. Sharing sites enable users to become ad hoc providers of a service, and make incremental or continuous income from already owned assets. For the end user or customer this is great, because access is more important than ownership of assets. Rachel Botsman has stated that the peer-to-peer rental market is worth $26 billion. Although there are opportunities for businesses to use this rental model for spare resources and assets, it is predominantly person-to-person rental within which they operate.
It is easy to see how “collaborative consumption” can offer greater levels of value and utility for customers, because owners can make money from underutilized assets and users can gain utility from using an asset they would not have otherwise been able to afford. This is bleeding edge capitalism, and solves the issue of overconsumption and materialism. It is focused on the efficient use of resources, which has environmental (and economic) benefits too.
Trust is inherently built into the mechanisms of these new business models with open, two-way review and referencing systems in place. Technology has enabled the platform providers to validate users, and ensure they are real people; which in turn only increases the trust of users in that platform. David Lee, founder and managing partner at SV Angles (an early investor in Airbnb) states that although a solid payment platform is paramount, the most important aspect of these business models is being able to build a trusting community and enabling users to ‘meet’ one another online before they meet in person.
There are however inevitable regulatory issues with these models, specifically around areas such as insurance, liability and tax. In 2012 the California Public Utilities Commission issued $20,000 worth of fines against three companies: Uber, Lyft and SideCar for “operating as passenger carriers without the required public liability and property damage insurance”. Frustrated incumbents will use outdated regulations to restrict, as best they can, the rise of such businesses. In many states in the USA, such companies are unable to operate and are fighting many legal battles.
Room sharing businesses are also causing a stir, and have run into issues around the zoning regulations and other rules governing temporary rentals in which the property owner is not present. Owners have served some renters notice because the renter was seen to be sub-letting the room on Airbnb. Interestingly it has recently appointed David Hantman, previously the head of government relations at Yahoo, as its head of public policy to tackle this regulatory issue.
Progressive businesses will always encounter fractious times. Inevitably regulatory bodies or governments will play catch up, mediating between the wishes of the end-consumers (which can be represented as the actions and purchase patterns of those customers supporting new business models) and the established businesses fighting to stay in the market, and keep its once loyal customer base.
Interestingly, the larger companies that face disruption are moving into the space through investment into these upstart rivals. GM Ventures invested $13 million into RelayRides in 2011. This has not only offered a vote of confidence to the sharing model, but it has highlighted how old and new business can work together to offer additional value to both the new and old business alike. In this instance, RelayRides was granted access to GM’s OnStar navigation system. Now OnStar equipped cars can now be locked and unlocked from an app, removing the need for individuals to meet and hand over the keys.
I have always felt that the sharing economy lacked any real coherent definition, and that it in actual fact was made up of many various value-adding models. And as with any great surge of capitalism it has been hacked, rebuilt and rolled out across many other markets and industries with a variety of results. The one thing that has seemed to remain fairly constant was that these models focused on the sharing of assets; it was about access and not ownership. Now I believe there is another step change in the sharing economy, and we (Aidan Rushby, Tony Edwards and myself) have built a company based on these beliefs.
Movebubble uses technology to disrupt an old, archaic industry, that of the private residential property lettings market. It does not enable people to share assets in a manner as that described above; instead it facilitates collaboration on key tasks centered on the long-term property rental process. Users are able to work together through technology to reduce the waste of a particular resource; time spent on a task. Through guided collaboration of tasks, aptly timed to reduce delays and confusion, via any device users are able to increase productivity on the move, ultimately reducing the time spent on such tasks. And as the old adage goes, “time is money”.
Such platforms will reduce waste, as user groups work together to achieve common goals, which in the case of Movebubble is a safe and secure rental tenancy agreement. Is the next step in the evolution of the sharing economy the emergence of platforms enabling users to reduce time spent on tasks, and to collaborate faster, remotely? Is this the rise of the Collaborative Customer?
In order for these Customer Collaborative Platforms (CCP) to work, users need to know that other users are validated, real and ultimately trustworthy. This is one thing that is held in common with the sharing economy. CCP’s must build a trusting community that is exclusive and not available to those who are not a part of it. The reciprocal nature of the review system requires that only those involved with transactions with another user are able to offer reviews and feedback. Not only do users need to trust the users of the platform, but they must also trust the platform itself. Data privacy is paramount, and CCP businesses must continue to invest in its security. It can take many years to build up trust in a brand, and unfortunately only a moment to destroy it. Executives of such businesses must work tirelessly to uphold and reinforce the messages that are central to such organizations: openness, honesty and transparency. Trust is the marketing currency of the future, with a vast number of Internet users still concerned about online privacy protection.
Consumers are primarily concerned with Environmental Control, i.e. the ability of the user to control the actions of the vendor (this could manifest as worries over supplying credit card information online) and the secondary use of that information (which is typically a worry that vendors will sell private information to 3rd parties). Although an older study, the 1997 Georgia Tech Graphics, Visualization and Usability Centers’ GVU 7th User Survey showed a whopping 87% of web users think they should have complete control over the demographic information websites capture, and over 71% feel there should be new laws to protect their privacy online. 63% of those reporting that they decline to provide information to websites have done so because they do not trust those collecting the data.
So that these businesses are able to ensure that customers can collaborate quickly and effectively these CCPs will tread the peripheries of public and legal interpretations of privacy. Such companies will need to pre-empt competitor actions with appropriate responses to calls for additional regulation on this subject. However, more importantly these CCPs will need to deliver an explicit social contract with the user, executed in the context of a cooperative relationship built on trust.
Any technology that can equip customers with the ability to undercut the current status quo through collaboration will ultimately win, as mainstream market adoption occurs via word of mouth (or word of mouse!). So get ready, as the rise of the collaborative customer is finally here.
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.
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!
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.
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.