Trade Me Property today announced a new pricing structure almost a year after the implementation of the radical switch from a subscription model to a pay-per-listing business model. That model has, so it seems, proved to be a too great a stretch for the industry to accept and likely as not, too troublesome an issue for Trade Me to continue to deal with as it approaches it annual reporting just 3 weeks away.
The new pricing structure is on the face of it, a significant win for the real estate industry as it re-establishes the subscription model, whilst at the same time offering a scaled per-listing fee and a regionalisation of pricing.
The real estate industry mobilised itself into action upon the announcement of the new pricing model last November with clear messages passed within the industry from, at the extreme a complete boycott of Trade Me Property, to merely advising clients that the website had changed its pricing and was no longer a mandatory component of marketing of a listing.
At the same time the industry circled the wagons around the ‘industry-owned’ website of Realestate.co.nz as a means to provide the home-shopping public with an alternative to Trade Me Property.
As the standoff ensued over the next 10 months there has been a clear demonstration that the impact on Trade Me’s business was being felt in both customer loyalty as demonstrated by listing numbers and in investor confidence as evidenced by the share price (although it is not accurate to entirely correlate share price to the issues with the Property sector, however it is a critical sector).
It is my belief that this new pricing scheme will in one fell swoop patch up the issues that Trade Me Property has faced, resulting in a solid re-population of the site to full strength and full loyalty (and if not loyalty then at least patronage). It will not deliver the much hoped for absolute gain to the bottom line that the original pricing model of a pure per-listing fee would have delivered but it will get the company back on track to build its business for the future.
So what are the details of the new price structure, who will benefit, who will choose which of the options and what will be the medium term outcome, as well as an assessment of the winners and losers within this tussle?
Return of the subscription
The new subscription service with unlimited listings will be open to all offices with a regional split with metro offices in Auckland / Wellington / Christchurch paying $1,399 per month, an increase from the previous monthly subscription from last year when fee was $999. For those offices outside of these 3 metro areas the monthly fee will be $999 - no change.
This subscription model based on location is a smart move in that it moves the company away from a single flat fee structure, to regional pricing. This will go down well with provincial customers who have long fought to be recognised as having a wholly different cost base than the metro real estate operators. Once established, Trade Me Property may well apply this regional structure to their premium property advertising and also potentially further segment by geography as I am sure Southlanders will likely argue that Hamilton and Tauranga should pay more than them or rather that they should pay less. Regional pricing makes sense and it will be interesting to see if Realestate.co.nz follow suit.
Listing fees based on rateable value price
Trade Me Property will continue with the per listing fees in what they describe as the "Flexi option" however to mirror the differential pricing that was introduced for private sellers a year or so ago, single listings will be $159 for a property with a rateable value over $450,000 and $99 for those under $450,000. This will also go down well especially with the smaller offices. On top of this they are making a very public statement that the scale of a customers business affords discounts in the form of Gold / Silver / Bronze.
The average office in NZ is actually quite small handling around 100 listings a year / 8 listings a month, with many of these offices in provincial areas of the country where the median listing is more likely $300,000 this change will be welcome news. A year ago these offices would have been paying $999 a month for unlimited listings. The per listing fees bumped this up to $1,272 whilst this new structure will cost them $800 - a win!
The retention of the listing fee based model is in Trade Me’s words a method whereby offices can seek to remove the sunk cost of Trade Me Property and appropriately pass the cost on to the consumer, in effect saving them thousands of dollars a year. Time will tell if this is how the industry see it.
So overall the industry will feel I think, vindicated in leveraging their collective muscle against Trade Me and maybe Simon Tremain of Tremain Real Estate in the Hawkes Bay and Tim Mordaunt of Property Brokers in the Manawatu and Hawkes Bay will be hailed as heroes for staunchly refusing to capitulate and effectively completely boycotting Trade Me Property for all this time across all their offices.
I think it is likely that the vast majority of offices will switch back to a subscription model, the metro offices absorbing the higher monthly fee and relinquishing the charging of the fees to vendors. Many small offices will choose the per listing fee not to pass the cost on, simply as a means of saving money.
So the question has to be asked - so who’s the winner and who’s the looser in this change?
For my money the short term winner is the real estate industry. They will be happy and as I say feel vindicated. In the medium and longer term Trade Me Property is the winner. They will once again re-affirm their dominance of the lead generation business for agents from the largest and most comprehensive portal of listings covering licensed agent listings and private sellers. They will now, once they have regained patronage (if not as yet loyalty) build a growing business in premium services sold more aggressively through a growing field-based sales team. They will naturally hike fees regularly and in time seek to move to a pure per listing fee, probably as a more bundled offerings as other leading portals do. This will deliver the bottom line that the company and the investors want.
As for Realestate.co.nz I fear that they will be the loser in the short and long term. They have emerged from this period a lot stronger in audience terms and with a greater industry appreciation, however with Trade Me Property back with a full listings complement the delivery of leads through Trade Me will return and Realestate.co.nz will be back to being judged by the industry as a championing industry site, yet hardly a comparable adversary. Compounding their problems will be a more aggressive and significantly larger resource base across the Trade Me Property sales team out in the field who will seek to develop a stronger relationship with agents and offices matched to a significant ramping up in their technology team.
Disclosure: I was CEO of Realestate.co.nz from 2006 to 2012. I provide consultancy services to Trade Me Property from time to time, but I note those services do not extend to advice on pricing and offers. All insight and opinion expressed here are without any reference to any knowledge or insight I have gained through my work at Trade Me Property.