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OTHER FEATURES

Purplebricks 1, Old-style online agencies 0

Forgive the footballing headline – perhaps inevitable now that Euro 2016 has started – but several decisions and statements across the industry in recent weeks have made me realise just how clever Purplebricks has been in its business model and its marketing.

It’s at least a goal up on its online rivals - whether it's deserved or not.

Now I’m not blind to the fact that it has yet to turn a profit, nor to the shortcomings that many traditional agents report that Purplebricks’ representatives show on the ground.

But even so, I would contend that this agency in its short life has set the mood music for recent changes across the agency industry as a whole.

The element that has been most influential has been its use of ‘Local Property Experts’.

Firstly, having LPEs has meant that from inception Purplebricks could, with justification, call itself a hybrid agency rather than an online one. This means that while it has made a lot of marketing play of its budget fees, it has simultaneously avoided some of the negative connotations that ‘online’ conjures up amongst the some members of the public. 

Secondly by hammering home the term Local Property Experts – itself easily understandable to the layperson – Purplebricks has created a kind of generic term which has been used by other players too.

For example, some media coverage of Savills’ investment in YOPA and Countrywide’s hybrid experiment with three local brands have used the very term ‘local property expert’ - or at least wording like that – as a way of explaining to the public that this is not quite an ‘online only’ exercise, and that ‘traditional’ expertise is part of the offer. 

Thirdly, even some online agencies that have previously very proudly described themselves as ‘online’ are now occasionally slipping in the term ‘hybrid’ when talking about themselves – and they do this because there is now a version of their original business model involving real people, not just keyboards.

And fourthly, you rarely hear now of ‘online-only’ agencies popping up where sellers stick dodgy images on a website with no professional guidance for a token £50. Instead, new entrants trying their hand at market disruption tend to emphasise some link with ‘physical’ agents and as a result have fees in the hundreds rather than the tens of pounds.

My guess is that this trend has been created, in no small part, by Purplebricks’ high profile marketing of this model.

Now this praise for Purplebricks is of course unfair to those who have been doing this for some time – EweMove, for example, even Tepilo, and some smaller physical agencies have offered a part-online, part-traditional services to customers. These players have been using local property experts long before Purplebricks came to our attention.

But even so, Michael and Kenny Bruce – Purplebricks’ founders – have been in the right place at the right time to make a difference to the wider industry.

I certainly believe that their demonstration that you can combine ‘real’ estate agency knowledge with much more use of digital technology has been why Savills and Countrywide have entered the field – and why there will be more to come.

So even if it turns out that Purplebricks continues not to make money (and we’ll know the latest state of play in a few days when it reports to the City) this agency has nonetheless made an impact – and a lasting one – on the industry as a whole.

It’s forced others to adopt a similar model: someone, somehow, will probably make it work.

*Editor of Estate Agent Today and Letting Agent Today, Graham can be found tweeting all things property @PropertyJourn

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    • J C
    • 10 June 2016 21:00 PM

    Graham, this is terribly sycophantic. Every 'Online' agent I know of, has always used local representatives on the ground , and almost all of them have used Estate agents whether hired or contracted. Those that haven't have used a combination of agents, DEA's and photographers. The reality though is that MOST have had 'LPE's' for a very long time (Housenetwork, Hatched for over a decade), and it's not just that Purblepricks have been cleverer in their marketing because these OEA's have always shouted about their local (sometimes employed) agents, it's more the fact that PB have actually had the money to do some FULL ON marketing. The Online sector has been starved of investment for a very long time. Just because PB are the first to get some real investment doesn't mean they have invented this concept. They have taken an existing idea and piled money behind it, the only genius is in just how fast they got in and out before anyone knew what hit them...and that my friend, was all thanks to Mr Woodford...

  • Glenn Ackroyd

    J C - You make some very valid points.

    Our model has always been centred on having a very local property expert - Other players have had people on the ground covering very wide geographic areas leading to traditional agents questioning how 'local' they are. And we operate a 'No sale, no fee model'.

    Purple Bricks have been excellent in 2 things;
    1) Bringing on investors and outspending the rest. This is the core reason for their market share and usurping the longer established players. This has come at a cost and to date they've lost millions as a result.
    2) Pivoting their model to bring on board commission only non-employed Local Property Experts (98% of their LPE's). This has allowed them to scale and offer ever increasingly localised foot soldiers.

    The recent Jeffries investor report is a very interesting read. It questions whether LPE's can earn enough from their up front sign on free of around £250. It also questioned whether a model based on sign ups, as opposed to completions was aligned with the consumer interest.

    This I think goes to the heart of whether pay up front hybrid models will continue to gain market share.

    Eyal Mallinger, formerly of Countrywide, said last month at Proptech that his research suggested only around 50% of listings complete. Jeffries could only find evidence of 5% of Purple Bricks homes selling in an average time of 5 months. The 5% figure cannot be correct and I suspect registration lags at Land Registry will have distorted this number considerably.

    These issues will determine the success of the model. If customers know that at best they're 50% likely to lose their money, the appeal of 'low cost' will wain, because people don't like to gamble when selling their homes.

    So it will be interesting to see if the next City release has any mention of completion rates.

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    Biggest load of tosh I've ever read....... You could send a baboon round to do a take on at £850.00 plus Vat for a half million pound house and it would get the instruction, "Local Property Experts" don't make me laugh........... what sort of business plan is that ! So here's the PB strategy...... tear up the traditional business model, drive down fees for all agents with the hope that you'll close us all down and then PB rule the roost and quadruple their fees ! Deluded. It's never going to happen. PB investors must be getting pretty squeaky.........no returns coming your way anytime soon ladies and gents.

    Terence Dicks

    I am sorry Ian, I thought they already did.

     
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