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TODAY'S OTHER NEWS

Purplebricks shares sink and Emoov dies: game over for online agencies?

Has the bell finally tolled for online agencies? Emoov’s collapse and an investor revolt over crowdfunding have left a large question mark over the long-term viability of such agencies, especially in a housing market hit by modest turnover and economic uncertainty.

Purplebricks’ trading figures revealed this week may have been stronger than expected but the City wasn't impressed - the agency's share price fell by a massive 15 per cent at one point yesterday: how long can it absorb big losses and huge marketing spend, even if listings continue coming in?

Estate Agent Today has asked its panel to consider these issues and more about the future of online agencies. The panel consists of many of the sharpest and most incisive minds in the industry - we thank them for their contribution and hope you’ll continue the debate in our comments section beneath the story.

Ian Wilson, chief executive officer of The Property Franchise Group:

Purplebricks has proven that the public has an appetite to take a risk and do a bit of the work themselves in order to save money on a property sale. Auto-trader did it for private car sellers years ago. But most of us still trade our second-hand cars through dealerships, for convenience and to avoid the risk of not receiving the proceeds of sale. 

Purplebricks shares sink and Emoov dies: game over for online agencies?How many of the public are prepared to take the risk? The car industry model suggests around 10% are risktakers. That means 100,000 house sale transactions per annum are available to online agents operating a pre-paid fixed fee model.

You can see why Rightmove has little interest in swivelling its model toward private sellers.

At £1,000 per case, the revenue from mopping up all of the online market demand (let’s face it, if anyone could do it, Rightmove could) is around £100m. 

It makes more money servicing 100% of the market by selling advertising space to its current mix of traditional and online players. So, is online agency a busted flush? I don’t think so, because the model that will work is no sale, no fee, just without the high street presence.


Ben Poynter, chief executive officer of Yopa, the low fixed-fee estate agents:

We expect the online sector to continue to grow market share in 2019 and beyond. We’ve seen phenomenal growth from Yopa and Purplebricks in just a few years compared to other agents who have been around for decades, proving there is significant demand for what we offer.

Will we collectively hit double digits next year? Perhaps, but if we don’t, we won’t be far off.

Purplebricks shares sink and Emoov dies: game over for online agencies?We don’t think a single online agency will become a portal. Buyers want to find all the properties in their area of interest in one place, not just those from one estate agent. No single agent will get enough market share to have all the stock across the country.  

Pure online models have failed to scale to any significant size so far. Customers want local agents to advise them and that's the key to success for Yopa and Purplebricks.

Sellers have different needs and want advisers to satisfy those. There will never be one estate agency to service the whole market, there will be big and small, those focused on the high-end and those at the lower end, those focused on specific locations and those with different price points.


Mike DelPrete, a US-based PropTech expert:

The recent activity in the online agency space, along with the growing evidence over the past few years, points to a few key insights.

Purplebricks shares sink and Emoov dies: game over for online agencies?First, the model is only financially viable at scale. Purplebricks is the only company to have reached that scale. The companies that are fighting for second, third, and fourth place are money-losing endeavours.

With a model designed around efficiency, it's not possible to operate in a smaller, regional basis (unlike traditional estate agents).

Second, it's clear that overall growth in market share is slowing, which should be no surprise. This is why Purplebricks is exploring adjacent revenue streams. Real estate is a highly fragmented business; there's no reason to expect online agents to buck that trend.

Richard Rawlings, agency trainer, marketing consultant, and co-founder of AgentMasterclass and The Lead Hub:

Online estate agency has matured and most sellers are now aware of the ‘DIY’ option. Nevertheless, uptake has been lower than expected in a world where self-controlled platforms tend to prevail –Uber, Airbnb, Deliveroo. 

Purplebricks shares sink and Emoov dies: game over for online agencies?Note, however, that it’s primarily the convenience of these services that appeals, as well as risk reduction, not necessarily price.

British agency fees are relatively insignificant, so the apparent saving of using an online agency has been insufficient to offset the risk of both non-results-based payment and not having a professional handling your sale.

The City’s expectation was that online agency was the way forward and traditional agents’ days were limited. But, as this has not turned out to be the case, the appetite to invest in online agency has faltered, reminding us of the dotcom boom 20 years ago that valued potential, not reality and resulted in the consequent bust.


Sam Mitchell, chief executive officer of online estate agents Housesimple.com:

The online sector will continue to grow as long as we remain focused on ‘why’ we exist. Too many competitors have stopped disrupting and morphed into traditional agents, without offices, that take money up front. 

We believe passionately that the pay-up-front model is constraining growth in the sector, which is why we only offer no sale, no fee.

Purplebricks shares sink and Emoov dies: game over for online agencies?It’s very sad to see what’s happened to Emoov. Their problems lay with the proposition, which didn’t give consumers a reason to use them. What was their USP? They were more expensive than Purplebricks on a pay up front basis, and twice the cost of Housesimple on a no sale, no fee basis.

It’s difficult to see Purplebricks challenging the portals with just 5% market share. The network effect that Rightmove has is almost impossible to break.

All the buyers go there, so all the agents go there, so all the buyers go there...

The largest agent in this country is an online agent that didn't exist five years ago. The traditional market has reacted by reducing fees, and that may have helped slow their demise. 

But there will be an inevitable tipping point as the online agents become normalised and the traditional agents price themselves out of business.


Jeremy Leaf, north London estate agent and a former RICS residential chairman: 

Sellers are more likely to try to save money by instructing online agents when the market is active. Many mistakenly believe high street agents do not work hard for their commission, especially when demand considerably exceeds supply for certain properties. 

A recent report revealed that 50% of sellers withdraw within three months, which would cost them nothing if listed with a traditional agent. Otherwise, they would have paid for a very expensive listing service.

Purplebricks shares sink and Emoov dies: game over for online agencies?I was surprised that Emoov has gone into administration. It generated plenty of support from investors for a time but lacked sufficient marketing resources to build brand awareness and compete with Purplebricks. 

If the market remains fairly subdued at the start of 2019, I do not expect online agents’ share of transaction volumes to increase. 

I anticipate Purplebricks will continue to pose a similar threat to high-street agents in 2019 if its marketing continues at the same levels. I don’t envisage it becoming a new Rightmove or vice versa, although further blurring of the lines between the two is inevitable.

I expect more agents to offer a no-frills ‘lower cost up-front model’ in the hope that a large proportion will switch to the traditional service soon after.


Mark Readings, founder of online estate agent House Network:

For the past two years, the property market has been on a steady downward spiral. Even with overall decline in the industry, there have been two areas of growth, regional markets and online estate agents.

As traditional local estate agencies have come under pressure, the online sector has expanded by demonstrating strong consumer engagement. This growth will increase as homeowners, trying to sell in this challenging period, look for the most efficient, relevant and accessible mechanism for doing so. 

Purplebricks shares sink and Emoov dies: game over for online agencies?The question as to whether or not Purplebricks retains its market dominance is unknown. The online model works very well with the right efficiencies, pricing, and diversification. By simply duplicating a similar marketing approach to the likes of Purplebricks, it leaves a business exposed to huge cash burns without sustainability.

Online agencies should not be about cutting corners on customer service and using technology to force sellers to action certain tasks themselves.

An online service that is far more aligned with the traditional values but uses technology to enhance the user experience is in my opinion the right model. 

Education of the online market is at a consumer tipping point. The forward-thinking traditional agents will co-exist with different types of business models, including hubs without high street offices. Pricing is key and we firmly believe the price difference between all models will become smaller and homeowners will be choosing an agent based on service delivery and user experience.


Iain White, industry consultant, trainer and former Countrywide director:

It will be harder for online agents to grow next year, partially because savvy sellers turn to in-depth experts to get a great outcome when the market slows up. Secondly, investment and spend by onliners will slow and, as we already know, they effectively buy market share through marketing and not necessarily results.

Purplebricks shares sink and Emoov dies: game over for online agencies?The smart agents will be aware online is here to stay and will grow market share long-term. There is space for both models to co-exist, but only the best will thrive.

Purplebricks dominate the online space but are not the overall leader in many individual markets. They are still in a place where marketing spend dictates their growth, so if they keep spending, they will grow market share.

There could possibly be a blurring of the lines between portals and online agents. Some would argue this was always the mainstay of Purplebricks’ strategy and, in many ways, it makes sense. I don’t expect this to be an immediate outcome but would certainly suggest it’s lurking in the background somewhere.

The majority of clients still prefer the outcome delivered by a traditional service. This becomes more and more the case the tighter the market becomes. Not everyone wants cheap, most people want effective and I wholeheartedly believe traditional agents are much more effective.


Poll: What will online agents' market share be in 2019?

PLACE YOUR VOTE BELOW

  • icon

    The entire online sector is proof of how many people, even in the industry, don’t fully understand what movers need when selling their homes. Hence 92%+ of all home movers continue to choose conventional, full service agents.

    The combined investment and marketing spend of all the online attempts is staggering, and after 5 years their total market share is feeble, considering the effort. Other tech disrupters in other industries arrive with a bang and turn everything upside down almost instantly. 20% year on year growth (PB figures yesterday) is considered flatlining in startup growth terms.

    With consumers still choosing the high street more than 90% of the time, I’m amazed we’re even still debating this!

    Rob  Davies

    But surely you have to consider the future. Are millennials/Generation Y/whatever you want to call them using the high street in the same way as their parents? I'd say that's an emphatic no. This generation shops, banks, dates, books holidays and works online. The one after it - Generation X - are even more tech-savvy and even less likely to use the high street.

    The high street is having huge struggles - that's been abundantly clear for a number of years now, but has particularly come to a head this year with major retailers scaling back, restructuring, going into administration or going out of business altogether. Bank branches are disappearing and so, increasingly, are agents. The agency sector has largely bucked the trend of the dying high street, but there are just simply too many agencies and not enough instructions to go around. Brexit is only going to make this worse. We can see at the moment that people are being put off by the political uncertainty.

    Do you still think people will use high street agents in the same way 20 years down the line, even 10? You'd be a brave man to bet on that.

    That's not to say the online model is the alternative - I have serious reservations about all the main players and the smaller ones, too. I don't think they've got it right one bit. They've had a bit of an open goal in some senses, with the rising influence of the internet, but none have really showed they are in it for the long haul.

    But hubs, agents offering online and traditional packages (as certain Countrywide brands have) and serviced offices in shopping centres or other areas with large footfall could be the future. The high street agent will survive, in some shape or form - as the travel agent just about is - but I'd be surprised if it was still as dominant 20 or 30 years from now.

    I just think the younger generation will change all that, given their expectation that everything will be available for them at a click of a button.

     
  • Fake Agent

    It's certainly a troubling time for the onliners. I can only see Purplebricks and YOPA, who have a huge amount of investment and backing behind them, being major players in the future. Purplebricks seem to have unlimited funds and have pierced the national consciousness in a way Tepilo, Emoov and HouseSimple have never managed.

    People know who they are, people see their adverts on TV, people see their boards across the country and their billboards on the Underground. Emoov, despite its TV campaigns and the rollout of the Emoovment posters on the National Rail network, never achieved that same level of public recognition. And I don't think Mr Quirk's bullish public persona helped when the money ran out and he went touting around for investment.

    It was a company which tried to go way too big too soon. It seemed to be going along OK, albeit operating at a loss, before the disastrous merger with Tepilo. Who was carrying out due diligence on that deal, by the way? A mess, in every way. Crowdcube, Quirk and Tepilo's backers all have questions to answer. But Quirk should have had cast-iron assurances that the money was coming in. He seemed to be acting more in hope than expectation.

    There's still a place for the online model, but I think PB and YOPA will continue to hoover up the majority of that share. And, as has been the case for a number of years now, more agencies will be moving into the hybrid space and opening off the high street serviced hubs.

    We can see - from the number of agencies going bust of late - that the market is over-saturated. It's one industry that has seen phenomenal growth since the global financial crisis, but it had to reach a ceiling eventually. I think that has now been reached.

    The number of agents will return to a more sensible, manageable level.

  • icon

    Agree

  • icon

    If online agents survive well enough, for long enough the coming generation most likely will swing to online tech property agents....everything online to them!!
    But still whilst a new generation arrives, still older generations are there.
    Logic would say always room for both. Is it which agents of all types survive?
    No change there then!

  • icon

    There is definitely a place for both online and high street agents.
    For example look at betting shops and online gambling or another example uber and black cabs.
    Stuart Forsdike
    Partner @ PCS Legal

  • icon

    Online agents are not going away. Like kitchens - there will always be people who buy a flatpack DIY kitchen and there will always be people who want made-to-measure! Using a service like love2move which allows traditional online agents to offer an online portal for buyers looking for a low-cost DIY option (with a safety net and no hidden costs) but also maintain their traditional service. The way forward is clear and honest choice for your clients.

  • icon

    Local, online, save hundreds if not thousands in fees, great service, own boss, no high street office!

    It really is that simple.....but of course I forgot you need a high street office to sell a property!...lol

  • icon

    The bigger picture here is why does PURPLE BRICKS STILL not release their completion data. This is something if I still worked in the industry would be discussing with potential vendors. Who wants to pay out 1500.00 or so and have no guarantee of a sale. You don't go into a car showroom and pay 1500.00 towards a car if you don't know you will get the finance or the car is sold to someone else. Educating the seller should be the main priority and then the online sector will shrink even more. Doorsteps is upfront 99.00 and this gets you on all the portals. We all know Rightmove is the power house and they are not changing their model so we will see. Many London clients want to speak to their agents and pop in for a discussion when they need to. The same person that lists the house for sale recommends a great local solicitor and the work begins. I cant believe that sellers are told they must use a crappy panel solicitor who operates with rooms filled of unqualified admin staff. No wonder PURPLE BRICKS don't publish their completions. If the public had access to this information
    at least then the public can make an informed decision when they find out only a certain percentage of sellers actually sold. Thomas Cook have over 600 sites around the country and still expanding. Interesting thought when looking at online propositions....

    Andrew  Estate Agent

    The Purple Bricks data is on their website, scroll down to investor on the bottom of the front page and find the twentyci report it shows their conversion rate. It talks about 81% conversion but then you look at the graphs a few pages on and you see that exchanges are not 81% or anywhere near.

    Hope that helps.

     
  • icon

    Wouldn't it be good if a former P/B client, who later sold through a High Street agent was willing to pour milk over their head. It ought to go viral.

    Andrew  Estate Agent

    I think that is a brilliant idea … surely there must be plenty?

     
  • icon

    Jonathan as much as I disagree with PB model down to service etc...I am sure there are cases where people have used high street not sold and gone on to use PB and sold

  • Michael Riley

    Mike DelPrete, Iain White, Richard Rawlings make this worth a reading. Thank you.

  • Andrew  Estate Agent

    I think Purple Bricks and other pay upfront online agencies are going to come under increasing scrutiny as many vendors appear to be paying upfront and receiving nothing in return, and the figures appear to be very large.

    If you look very closely at this independent analysis commissioned by Purple Bricks by the data experts twentyci which cover the financial year 2017 to 2018, available online on the Purple Bricks website under investors on the title page, there seems to be some contradictory claims.

    In the twentyci report, and I quote 'Purple Bricks were looking for a reliable, respected and independent data source to establish answers to a set of questions about their performance in the financial year 17/18′

    And Purple Bricks are …

    ‘No1 at selling houses: 81% of listings sold within 12 months’

    Then there is a helpful graph in the same report which shows an annual picture of Purple Bricks results, it shows 64,000 new instructions, 48,000 properties sold subject to contract and it shows 38,000 properties exchanged.

    Now the ratio of exchanges to new instructions 64,000 to exchanges 38,000 is 59%, so Purple Bricks are not selling 81% of the instructions.

    But the worrying thing is, if the company gets 59% of vendors exchanged, it fails to get 41% sold or exchanged but still charges them on average £1,100 as an upfront non refundable fee, which is 41% of 64,000 vendors at £1,100 or 28.86M of fee for nothing.

    Readers of this are going to say the figures are wrong and skewed etc, but twentyci also did a similar report on Emoov and Tepilo, post the recent failure of these two online companies.

    And the WHICH organization recently had sight of this twentyci report and said that the conversion rate of the online pay upfront company was 53% of instructions to sold subject to contract, if you then discount the 53% by 30% the usual industry fall off for cancelled sales you get to an exchange rate of around 37%.
    This is available on the WHICH site online. In this piece by WHICH, it is stated that the

    ‘Major online estate agent Emoov, which also owns Tepilo, has gone into administration, potentially leaving thousands of home-sellers out of pocket by as much as £2,995. James Cowper Kreston, the firm appointed to act as administrators for Emoov, says the company currently has 5,000 properties listed for sale or sold subject to contract.
    Of this total, around 80% have paid upfront for the service and are at risk of losing money from the collapse.’

    Also, WHICH states,

    ‘Exclusive data provided to us by TwentyCi shows that over the past 365 days, Emoov had approximately 8,000 new instructions. The firm accounted for approximately 0.5% of the estate agency market in 2018.

    Around 53% of new instructions received by Emoov typically went on to be ‘sold subject to contract’ and the average price of a property listing was £375,000. Tepilo’s figures are rolled into this data as its activity is merged with Emoov.

    Now for a very long time I have been saying that online pay upfront agents should be telling potential clients the true conversion rate of their service, and I wrote a recent article using data from Rightmove on – Tuesday November 13 – (prior to the collapse of Emoov and Tepilo).

    As it roughly gives a market snapshot of the then six major online brands (two under the ownership of Emoov). These were the figures from Rightmove.

    Doorsteps – 2,054 properties listed, 1,321 for sale, 733 under offer not exchanged, 28% conversion of listed to sold subject to contract.

    Yopa – 5,501 properties listed, 3,539 for sale, 1,962 under offer not exchanged, 35% conversion rate.

    Purplebricks – 37,531 properties listed, 21,142 for sale, 16,389 under offer, 43% conversion rate.

    Emoov – 2,504 properties listed, 1,696 for sale, 808 under offer, 32% conversion rate.

    Tepilo (owned by Emoov) – 1,740 properties listed, 1,162 for sale, 587 under offer, 33% conversion rate.

    HouseSimple – 1,140 properties listed, 763 for sale, 341 under offer, 30% conversion rate.

    You will notice that Emoov and Tepilo, had a conversion rate around 32%, which if you take the 53% figure being instructions converted to sold subject to contract as in the twentyci report, and then say the normal fall through rate for the property industry of 30% between sold subject to contract and exchanged was slightly higher for these two brands, say a 35% fall through rate you get to the 32% exchange rate, reflected in the Rightmove figures which would mean 68% of Emoov/Tepilo vendors mostly paid upfront for nothing.




















  • icon

    analyse all you want-if PB had stuck to Uk it would have been a different story

  • icon

    Greed.
    Come on.
    PB will kill themselves off.
    How about this.
    We all close our high Street branches.
    Pay off our hard working staff and work as LPE,S.
    Don't think so.
    We are tried and tested.
    We change with the times.
    We do what we need to do to run our businesses.
    Forget all this hype of PB.
    Keep focused on what you do best.
    Sell houses at top price for your Clients.

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