The shock immediate closure of Hatched, the online agency heavily invested in by Connells, has raised question marks over the online sector’s future.
Hatched was acquired by Connells Group in 2015 to be run as an entirely separate enterprise to its core high street business. Since then, it has received a programme of investment including new premises and the doubling of its staff.
Some observers say the closure represents a possible turning point for online but Purplebricks - in a statement to Estate Agent Today last evening - suggested it was business as usual irrespective of the Connells Group decision.
“Purplebricks has in the last four years built a sustainable and profitable UK business based on a new, fairer, more transparent model which has saved our customers over £108m in commission payments in 2017 alone. We are successful because we get results for our customers, with recent data showing that we sell more houses and complete on properties more quickly than any of the other top 10 brands” a Purplebricks spokesman told EAT.
“Our ongoing investment in technology and people continues to win over more customers, driving further market share growth. Purplebricks is proof that the right people and quality execution has been key to why we are the most successful estate agent in the UK in such a short time” he continued.
EAT also asked Emoov, Yopa and easyProperty for comments, but all declined.
However, one senior figure from a leading online agency did say - off the record - that the Connells decision was a sign of a shake-out within online; he insisted the closure was merely a sign that the sector was consolidating.
Another online executive told EAT that Connells had not spent extensively on marketing Hatched - regarded by many as key if an online agency is to win business and become a recognised brand.
Yesterday David Plumtree, Connells Group agency chief executive, said: “We have thoroughly tested the hybrid model and have reached the conclusion that it does not produce a viable economic result ... with the cost of customer acquisition being one of the main barriers to being able to deliver a profitable return. There is much talk of ‘disruption’ from hybrid estate agents, but from our experience we have found it significantly lacking when compared with the level of customer service, support and expertise that our high street operations provide. Ultimately, an upfront fee obligation – payable irrespective of whether a property sells or not – is not the right solution for the customer.”
Online as a sector has had mixed fortunes in recent months.
The market leader, by far, remains Purplebricks but its share price has dropped. Over a two year period it remains over 60 per cent up on the stock market but shorter-term share performance has been weak - over the course of the past 12 months, Purplebricks’ share price has dropped over 40 per cent and over the past week it has dipped around 15 per cent.
Meanwhile Emoov remains buoyant following its recent £100m merger - effectively a takeover - of Sarah Beeny’s Tepilo agency and online lettings platform Urban. However, there has been no further news on any possible floating on the stock market, which chief executive Russell Quirk says remains an option for the future.
Yopa, which calls itself the second largest hybrid agency when measured by listings, received another £20m investment over the summer. Savills - an existing investor in Yopa - pumped in further cash, alongside three other firms including DMG Ventures, the corporate venture arm of Daily Mail and General Trust, and LSL Property Services.
LSL, in a statement to shareholders earlier this year, reported that its net bank debt rose 45 per cent to £46m thanks partly to £20m invested in Yopa.
Meanwhile for some time Jon Cooke, chief executive of eProp Services - the parent firm behind easyProperty - has insisted that within a short time there would be only two or three major online operators surviving after a period of consolidation, and that his agency would be one of them.