Retail shift in legal services
It is only a matter of time before we see a big shift in retail legal services.
The news that price comparison website Moneysupermarket.com is wandering into the legal services market, like a gunslinger strolling into town, comes at a very interesting time. Interesting for whom, though, is another matter.
When we spoke to a couple of bulk conveyancers about the story – Barnetts and Hammondsdirect – they both seemed sanguine about the move. This felt counter-intuitive at first: surely they would be excited to hear about a company that could add to their automated business development processes? But once we had spoken to professors Susskind and Mayson, a reason for their ambivalence became apparent – it is both an opportunity and a threat.
Achilleas Hatjiosif, business development director at Hammondsdirect, says the move is a natural extension of the market and not a threat to his firm. ‘Price comparison and lead referral are not new,’ he says. ‘If you monitor the firms giving the lowest prices you will see these vary from month to month. Possibly some conveyancing firms use these lead-referral businesses to soak up their excess capacity in leaner months. Other firms may view this type of customer acquisition as a mainstay of some of their volume. In this respect, there are definitely advantages for small and large firms alike.’
But, he says: ‘The price competition element is accentuated through the easy availability and comparison of pricing information for the consumer. The internet makes small, local firms as readily available and accessible to consumers as any other. So even though price will be a driver to the consumers’ choice, price comparison sites will create a more even playing field for the whole industry, allowing smaller firms the same level of exposure to the consumer.’ This is basic internet business thinking, but it is still relatively new to the business of law.
The business of ‘infomediaries’ – information intermediaries – is to be better than the companies they provide work to at getting in front of potential customers. And, as Professor Susskind says: ‘What’s fascinating is that it’s a major intermediary that’s seeing value in the legal market. I don’t think [lawyers] realise this stuff is in play – they book their plane tickets online, but they don’t think people will look for lawyers that way.’
When we asked Simon Williams at Moneysupermarket why the company had picked conveyancing, wills and personal injury (PI), for example, he said that these had been identified as the most commoditisable areas. Moneysupermarket also chose them, he says, because it has had demand for them, especially from PI firms. ‘We don’t just pluck things out of the air – a lot of analysis has gone into choosing these areas.’
So when Professor Mayson echoes Susskind’s point that this is all about commoditisation, the picture becomes brutally clear: law firms should seriously consider an increasing swathe of products and areas as ‘retail’ products – because companies outside legal, such as price comparison websites, surely will.
‘The real thrust of the Legal Services Act was about extending consumer choice and improving service,’ he says. ‘It seems to me, therefore, that the “consumer” or “retail” legal services are most likely to be targeted and affected by new entrants to the market, and by new ways of getting to market or service delivery.
‘The retail legal services are residential conveyancing, wills, personal injury and employment, so it’s no surprise that these should be targeted. It can only be a matter of time before similar approaches are taken to retail legal services.’
Banking on it
The writing, as they say, is on the wall. Admittedly, legal business is not directly comparable with, say, car hire, or insurance or banking products. They are all, however, service industry offerings, and insurance and banking have been rocked by the internet consumer’s behaviour, and more recently by online price comparison services. If the combined impact of those on legal is anything like the impact on banking, says Rik Turner, a senior financial services technology analyst with Datamonitor, a big shake-up awaits.
‘Banks assumed that once they had you they were going to keep you,’ he says. ‘Most people, just out of inertia, would not take the time to go round to other banks. Equally, people would not hit the phones – I suspect this was also true for insurance.’ Price comparison sites, he says, tend to commoditise and the challenge becomes: how do you stand out?
‘Even in the banks, there are suggestions that 98% of people who go into branches are there to service a transaction, not to buy something, so there’s not much opportunity to up-sell,’ he explains, ‘and one more opportunity to lose business is not welcome.’ Retail banking, in this respect, is very like ‘retail’ legal – traditionally locked in, purchased on recommendation, retained by buyers out of habit and inertia. But not for long.
‘These phenomena represent loss of differentiation, loss of the inertially driven business of long-standing relationships and removal from their comfort zone,’ says Turner. That means better value for consumers and also increased price pressures, and ‘the necessity to learn how to compete in a world they haven’t had to compete in before’.
In other words, wake up – the big fish are in the pool.
