Last week the Dutch Financial Times published an article about Funda.nl. Funda is a Dutch housing platform that brings together supply and demand for real estate. An unsolicited bid from an American investor has put pressure on the website. Shareholders demand a more technological advanced website, whilst the brokers are afraid that further development of the website will cost them their jobs. Funda.nl is about to disrupt its own industry.
Has the real estate industry became a newly vulnerable market? According to theory an industry must meet three conditions to be newly vulnerable. First, the industry should be newly easy to enter. The new generation of consumers can shop anywhere and anytime, why wait for a broker when you can go online and compare the houses yourself? The internet has reduced the cost of entering: an online platform makes brokers unnecessary and pushes them out of the market. Second, the market should be attractive to attack. This is certainly the case for the real estate industry. Brokers earn a commission when they sell a house, cut out the middleman and you can reap the benefits. Third, the market is difficult to defend. The real estate industry is a very fragmented market. The competitive advantage of a traditional brokers was the local knowledge resulting in a certain pricing. However, with the rise of the internet, the market became more transparent: consumers can go online and compare housing prices, Google maps makes it easy to look at the neighbourhood and even crime rates can be compared with aggregated data. Disruptors that make use of technology e.g. Internet of Things can easily aggregate all these data points and will not be constraint by local boundaries.
It seems that the real estate industry can be classified as a newly vulnerable market. Even if Funda.nl does not make a technological leap, the real estate industry will eventually be disrupted by newcomers.
