Veggies and real estate could be on the menu

Veggies and real estate could be on the menu

.I have this strange fascination post Global Financial Crisis (GFC) in Australia as to where our businesses are headed – as to what will live and what will die (every business owners’ concern). One can rest assured that the dominant players will be all over the emerging online markets and will be closely scrutinising technology markets for clues to survival.

Having said that I see two major players emerging – Woolworths and Coles. Is big business getting two aggressive? Australia presently has two million small businesses registered – employing approximately five million.”In the past two years, the food and liquor discounting between Coles and Woolworths has never been as fierce or the cries from suppliers louder. Last year Coles estimated there had been price deflation of 2 percent a year since the start of 2009, and matching competitor price cuts, which has saved consumers more than $2 billion a year.”

Just look at the Coles and Woolworths move into the liquor industry and service stations. Since the 1980’s -“From in excess of 22,000 service stations to less than 6,000 now, has the reduction in numbers and the reduction in competition done anything for the motorist, who certainly is not paying less for fuel, let alone the independent who is no longer in business?”

So let me make a prediction – I can see Coles and Woolworths entering the Australian property portal industry currently controlled by Real Estate and Domain. Their portals would be free to the property advertisers with the consumer’s eyeballs being mesmerised with shopper dockets, cheaper alcohol offerings and cheaper petrol prices. Previously only the mortgage markets have dominated third – party advertising on property portals.

Homes (for sale or rent) = lifestyle = household expenditure = savings. Australia is one of the only markets worldwide where property portals charge home owners to advertise their homes online – I see this changing.

ShellcoveRd

BUY PRINT

RBA more likely to move up than down – but not soon which is now being evidenced given the competition by lenders to grow their loan books by taking on the Big Four. CUA cuts three year – fixed rate to 5.1% and sticks boot into big bank when CUA Australia’s largest customer – owned lender, cut its three – year fixed rate from 5.25% to 5.1% (effective today.) Even more confusing RBA flags further scope for rate cuts so what we have are conflicting schools of thought although I still stand by my earlier prediction that the cash rate won’t be going south of 3.00 percent anytime soon.

16-03-2013 10-00-43 AM

Prematurely (based on previous years) the number of houses in Mosman dropped below 100 this week – actually all the housing data in Mosman, Cremorne and Neutral Bay is looking weak. Idle real estate agents possibly unlikely to see a return to busier days: RBA – “At least by comparison with most of the previous decade,” Christopher Kent, the bank assistant governor (economy).

15-03-2013 3-22-32 PM

Source: Domain Property Monitors

MOSMAN – 2088

• Number of houses on the market this time 2012 – 130
• Number of houses on the market last week – 108
.Number of houses on the market this week – 99
• Number of apartments on the market this time 2012 –108
• Number of apartments on the market last week – 78
.Number of apartments on the market this week – 73

CREMORNE – 2090

• Number of houses on the market this time 2012 – 16
• Number of houses on the market last week – 15
.Number of houses on the market this week – 20
• Number of apartments on the market this time 2012 – 27
• Number of apartments on the market last week – 12
.Number of apartments on the market this week – 20

NEUTRAL BAY – 2089

• Number of houses on the market this time 2012 – 21
• Number of houses on the market last week – 12
.Number of houses on the market this week – 9
• Number of apartments on the market this time 2012 – 57
• Number of apartments on the market last week – 41
.Number of apartments on the market this week – 38

For this week’s sales in Cremorne real estate, Cremorne Point real estate, Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Neutral Bay real estate, Cammeray real estate.
Click Here

For this week’s open for inspections.
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Sydney rental market tightens to 1.9% vacancy rate with warning of “dire” economic consequences REINSW president Christian Payne commented – “The market will continue to tighten due to a lack of supply caused by the Government’s failure to provide appropriate incentives to invest in the property market. Sydney housing dream on track more than 100,000 extra homes will be built in Sydney as part of a radical overhaul to create affordable housing near public transport links.” To put this into greater perspective we really need to see this figure increased ten – fold. At least this is a start which we have not seen for decades with Sydney suburbs earmarked for high – rise blocks.

The RBA is trying to create a housing and consumption led recovery for life after the mining boom. The Federal Government is somewhat fixated with its Asian Century White Paper neglecting home grown issues like encouraging a housing led renovation boom which is a huge financial driver for our economy. If the past week is anything to go by all attention is focused on seeking re – election with party infighting. All of which have absolutely nothing to do with our economy.

Business since the GFC is all about seeking and exploring new profit streams with a stronger than ever concentration on entering online markets in search for the new “rivers of gold.” Watch for Woolworths and Coles to start rolling out online models with real estate being the perfect fit.

That’s food for thought?

Cheers ^__^

14 Responses to “Veggies and real estate could be on the menu”

  • steve says:

    Interesting thoughts Robert. These two majors are pretty scary in terms of their buying power and almost no intervention from any governing agency’s.

    Your suggestions are probably not far off the mark. These two companies already buy key words in search, and in many instances do not have the individual products to backup & support the key words. But none the less have succeeded in driving traffic to their websites. If they get enough hits on the key word sample, they then go about finding the product mix to satisfy the key word search. A sample method used to identify spectacles as an area of potential. You can only hope they show no interest in the area of your topic this week. Take care Steve

  • Steve

    I believe the main reason as to why they have not shown an interest previously is simply because they have not thought of it.

    It is a perfect fit for them to drive their respective brands and products. Not to forget that they could reduce their respective advertising outlays considerably.

    I’m sure we will hear plenty more of this 🙂

    Cheers

  • Ryan O'Grady says:

    I love the idea Robert, they already have the outlets and spend massive money on marketing. Marketing and getting property seekers to the portal is the most important factor in competing with Domain and REA. Both of those companies have ties with media companies so to compete means you need big pockets. But if you’re already a brand name and have marketing on the ground as well as through other mediums such as tv, raido, print online etc then this will give you the edge needed to trump them.

  • Ryan

    It’s that easy to implement its a no – brainer for Woolworths and Coles. Of course I expect them to pay me well with royalties 🙂

  • Gordon says:

    David Purchase’s comments about the shrinking numbers of service stations may be worth another look, since there’s a bit more to it than he says.

    Most of the reduction occurred before Colesworths got into the act. The oil companies long ago decided that they would be able to control retail pricing more if they slashed the number of outlets, and they had largely completed this when the supermarkets got into the act.

    This may explain why retail fuel prices swing wildly during the weekly cycle (or whatever number of days they use) with the beaming approval of the ACCC. It’s the same fuel unloaded from the same tanker on the same invoice, but the prices can jump 10-15 cents overnight.

    It seems that, despite the legislation, the oil companies may have been able to extend their reach into the retail level through chains of ‘independent’ distributors.

  • Coles vs Woolies vs Virgin vs the rest of us…Virgin already has the trademarks and domain names ready to go

  • Gordon – another excellent critique. Yes we are taken for the mugs we are! So much for consumer protection?

    David – I was not aware of Virgin contemplating a move into the real estate markets although like Coles and Woolworths it makes great sense. The property portal market will be inundated with new players where this time around they will get it right given these corporations already have umpteen existing brands. It’s all about eyeballs 🙂

  • Darren says:

    Some interesting posts here Robert……and the comments were an extra bonus….I love reading about different subjects that I’ve never thought about…so thanks

  • Greg Vincent says:

    As REA Group profits keep growing other majors will look to grab a piece of the action. Packer tried years ago with MyHome but failed, whilst consumers are currently used to using realestate.com.au and domain.com.au. Registering for property alerts to receive 4 cents a litre saving on fuel would OR savings on flights would build their real estate subscriber database to incredible numbers within weeks/months if done the right way (especially once they tap into their existing consumer database)!

    Looks like groceries & fuel discounts may soon become property inclusions! 🙂

  • Very interesting idea, Robert. All large corporates have strategy/M&A teams crunching scenarios like this every day of the week. But to discern the path to market, follow the ‘pain’. That is, who’s feeling the pain of REA & Domain – it ain’t consumers, it’s agents. So to reach their target (consumer eyeballs) under the scenario you predict, Coles/Woolies would have to pull a massive B2B play with the real estate industry for little or no revenue, & significant costs. The only way I could see this working is if supermarkets themselves got into the agency franchise game: vertical integration down the supply channel just like they’ve done with ‘home brands’. Imagine ‘Coles Real Estate’, offering agents NIL listing fees on their new portal, subsidised local marketing & cross promotion/integration with the local Coles store, cheap franchise fees & a lower cut of your rev. Now THAT’S a model that could fly, because it taps into a new revenue stream at the source – agent commission. Potentially great for agents (in the short term), but very, very bad for large franchise networks such as Ray White & LJ Hooker.

  • Robbie Mac says:

    Truly fascinating, and I really don’t know what the outcome will be if Colesworth get into property ads. What I DO know is this:
    Generally speaking, in our major B2C industries, where large capex and complex service delivery is necessary, we tend to have a “Two and a Half” company market. Example one: supermarkets. The big obvious two, plus a lightweight or two (IGA, Aldi) making up a small portion of the balance. Example two: Airlines. We have never really had three profitable domestic airlines at the same time, and when we have two, they make good money, so the sweet spot, the point of equilibrium, is somewhere in the middle. The banks are an exception, but that is an artifice supported by the politicians – I have no doubt that without the four pillars we would have a similar arrangement there too. All because we have ~23m people in a land the size of the mainland USA, which has close to 300m people. Simple maths – to make things work, we either have minimal choice, higher prices, or a combination.
    What I ALSO know is that the two players currently in the real estate portal game have very different family trees, notwithstanding their current marriages. Domain is born out of Fairfax, and is really the only remaining offspring with the “Rivers of Gold” in its veins. REA is the classic disrupter, taking on the establishment with a better business model, and largely winning. Interesting to note that in round numbers, the market caps of Seek, REA and Carsales, each of which represents the modern form of the traditional three main streams from the “Rivers of Gold”, are roughly worth now what Fairfax was worth before these disruptors appeared. As to Fairfax, it is quickly disappearing, with a fair chance that when it is finally broken up and put to death, one of the few parts worth anything will be Domain, although that value will depend heavily on timing. The lesson from this: incumbents generally are unable to be disrupters, let alone be able to react to a disruptor and take them on. If Colesworth decide to disrupt property portals, they will need a major change in mindset, and to run their new businesses with a new culture, which could well be harder than they realise. Yes, they have stirred the pot in milk, and to an extent fuel, but I don’t see those as disruptions – they are more about channel strategy and getting footfall into their real estate, both of which I would call core to their businesses.

    Could they do it? Yes? Could they do it successfully? Not so sure. Will they do it? No idea. If they DO do it, one way or another, it will end up in the management text books, either as an a example of success or failure. Now we must just wait and see.

  • Robbie

    One point I would draw to your attention.

    With the examples you have mentioned only REA and Domain have doubled there subscription rates over the past twelve months. Which is why both will struggle to survive once genuine competition arrives.

  • Robbie Mac says:

    So by this you mean you think the disruptors will become the disrupted?

  • Disrupted then dissolved!

    For example the leading Chinese property portal is http://list.juwai.com/

    They charge $55.00 per month for up to 100 properties as against REA and Domain who charge $1,700.00 per month for unlimited properties.

    A Rewards based property portal Coles/Woolworths/Virgin would charge no where near this – Australia is the most expensive property portal country in the world.

    So it would be fair to say that this model will change in time as the new players enter the markets and take on the REA’s and Domain’s. It will happen.

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