Purplebricks has addressed its critics on house sales by pledging to return vendors’ upfront fees if the agency fails to find a buyer.
Chief executive Vic Darvey says: "We are excited to be announcing the conclusion of our pricing review this morning, following a successful trial in the North West.
“The [company] has responded to a changing market and we are delighted to offer customers an option of reimbursement of their upfront fee payment if they do not sell their home. This illustrates our commitment to giving customers the best service at the best price and we are very excited about the growth opportunity this new initiative will drive over the next few years.”
In a trading statement this morning, Darvey said he was launching “Purplebricks 2.0” after achieving “the right management team, right strategy and right technology to continue to grow the business.”
He continued: "With a simplified proposition and our new pricing structure in place, I am confident that Purplebricks is well placed to gain market share and to accelerate revenue growth and drive progress towards our medium-term targets.”
In a lengthy explanation to justify the new pricing strategy, circulated to shareholders, the agency says that its long consumer research about the new pricing showed that many people still saw Purplebricks as just “a DIY alternative to the high street”.
What’s more, the research showed consumers felt that without physical branch offices, the agency lacked local expertise.
Darvey tells investors in the agency: “So, what does this mean for Purplebricks? In order to achieve growth, our future pricing and proposition must:
- Ensure that there is a clear sense of accountability beyond the initial listing;
- Drive overall consideration by educating the seller on the full service that Purplebricks offers and the results it achieves versus the high-street;
- Simplify our offering to allow ease of comparison versus the simple ‘one-size-fits-all’ approach taken by the high street;
- Promote and emphasise local expertise and the role of the local property expert in facilitating the end-to-end process.”
The agency says its current outside-London £999 including VAT flat upfront fee remains a critical price point, but adds that it came to the 'money back' proposition after two six-week trials in the north of England this spring and early summer.
The tests apparently indicated that a money back guarantee was highly persuasive at getting conversions from interested parties to actually customers - an 18 per cent improvement in conversion rates.
And Darvey adds: "There is appetite from customers to tailor their own propositions with added ancillary products such as 3D tours, premium listings, energy certificates and home reports."
The agency also used the statement to report on its past financial year.
It says instructions rose 14 per cent to 58,043, up from 50,948 12 months earlier. Market share by volume fell to 4.67 per cent from 5.1 per cent.
Average revenue per instruction increased seven per cent to £1,501 and total fee income rose 22 per cent from £71.4m to £87.1m.
Adjusted EBITDA of £12.0m (FY20: £2.9m) was recorded, up 314 per cent; the agency had already announced the return of £1m secured from the Coronavirus Job Retention Scheme.
An operating profit of £8.2m, including £4.3m from non-trading items, is well up on last year's loss of £5.7m.
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they'll be giving a fair chunk back then when then market returns to normal...
So 'No Sale - No Fee'
Who would have thought that the conversion rate would improve if you promised to return up-front money? You really needed market research for that.
It will be interesting to see the conditions. Didn't sell because the vendor changed their minds, because the reasonable offer made was 'too low'....
Yes, something like, have to have been on the market a year, had at least 150 viewings, reduced their asking price by 25%, and not rejected any offers.
It’s always difficult taking properties ‘off’ Purplebricks vendors as they have to admit that they’ve made a terrible mistake and it’s cost them £1,000 plus. People don’t like to look like fools. However if they can get their money back.....game on!
Pity sellers will have to wait 10 months to qualify and that's only if PB don't put up a fight
If you index in the 15M trousered cash for not selling property, (yes they refunded a tiny amount but about 15M will be the true amount of fee paid out with no completion) that makes for not a 6M gross profit, but a minus 9M cash burn rate.
And cashback – there is no cashback – having marketed over 18,000 properties over 30 years here is what I know about residential sales in the UK. 95% of properties marketed, will get a proceedable offer 10% below the price – eg, 500k, that is an offer of 450K most agents could get that offer in 20 seconds, it then voids the refund.
So the cash back concept is deeply flawed.
If in lockdown a digital, people lite - supposed tech heavy agent can not move forward - after the 19th with people back in branches I think their Covid advantage ends, I sense a new person in to bat at the top maybe sometime soon, what they really need is some joined up strategy, a plan and a person who can execute it. Not a dogs breakfast. They actually do have some significant value but the assets are all plumbed in - in the wrong order. Always up for a call to give some consultancy guidance.
Is it alright making patently unsupportable claims like 'Promote and emphasise local expertise and the role of the local property expert in facilitating the end-to-end process.' and 'Drive overall consideration by educating the seller on the full service that Purple bricks offers and the results it achieves versus the high-street' and 'Simplify our offering to allow ease of comparison versus the simple ‘one-size-fits-all’ approach taken by the high street'. Is estate agency unique in being able to make false claims?
No - its called marketing, every company exaggerates their offering these days it seems.
PB need to qualify the 'if the property doesn't sell' clause - what if the property sells through another agent, which is not uncommon?
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