Trademe's Price Change is a Good Thing

Trademe today announced a major change to the structure of pricing for real estate agents. The largest real estate web site in NZ is changing to a charging regime based on the individual listing rather than the office. To date real estate offices have been charged an office fee, capped at $1,150 and they can list as many properties as they like. From 1 November each real estate agency will be charged $183 per listing.

I am sure it is a coincidence but hilarious that "Kevin" is dressed as a marauding pirate too!

The hint of this change had already caused angst in the traditional real estate industry and the announcement today will no doubt cause wails of dismay and accusations of pillage.

This is a price increase and a substantial revenue increment for TradeMe - 100,000 listings per year is more than $15m of revenue to them.

You are not going to hear wails and dismay from us however. This change is a good thing. Here’s why.

The industry will pass this cost onto consumers which will hopefully drive different and beneficial behaviours.

Some agencies already pass it on and have been arbitraging the office fee - in other words they pay the fee of $1,150 and then charge owners or their agents a fee for listing on Trademe that means they are actually making a profit out of it.

But most importantly this assists the industry in educating consumers on the importance of marketing and advertising spend. If you are serious about selling your home you are going to invest money in some advertising. The priority for your advertising is very simple - Trademe and professional photos - a combined $500 or so that every owner should (must) spend if they are serious.

I hope we see some prioritisation away from the focus on print advertising from agents as a result. Things like the Property Press are really just brand advertising vehicles for agents - indeed if you were relying on the Property Press for information in parts of Auckland you’d never buy a property - the good ones are sold before the magazine is even published with the lead time required!

A fixed cost is becoming a variable cost. As any accountant will tell you get your costs aligned with your revenue and make them variable with revenue if possible.  Now we can debate this because its a fee up front and there is no guarantee of revenue down the track - but given prices were going up anyway it is better to make the cost variable.

A further unbundling of costs makes it even harder for traditional agents to justify a $20,000+ commission. We think that is a good thing of course!

Trademe Property is your classic online marketplace success story. Agents gave content to Trademe that drove its audience, which agents now have to pay more to access. By now passing that onto consumers it becomes their decision as to whether Trademe is valuable or not. And after all it is the homeowner that is the boss…

How do you think the industry will and should react?