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Purple smoke and mirrors

Purplebricks’ advertising is very negative and critical of the competition. They talk about 'commisery', trying to make potential sellers feel ripped off by conventional agents who charge commission. 

They claim to provide a better, more effective service for a fixed fee, no refunds offered for non-performance but a claimed 90% success rate - not a bad gamble on the face of it. 

Many agents are so horrified by Purplebricks’ claim that they sell 90% of the properties they list that they can't address the issue calmly. Instead, perhaps naturally, they resort to insults and unsubstantiated allegations of exaggeration and downright misinformation. 

Now while Purplebricks may well be exaggerating their performance a bit, and if they are, they won't be the first ones, can anyone hear the name Foxtons echoing in the breeze? It is also perfectly conceivable that they may be selling a larger proportion of their stock than the vast majority of high street agents.

I know this sounds like a sacrilegious concept but only if your eyes are tight shut and you are closed to the logic of the situation. Most estate agents believe they do a great job, they have high street offices, highly trained staff, local area knowledge and a great relationship with the community. So, it’s little wonder they baulk at the idea of an online upstart selling a larger proportion of their instructions by simply advertising on Rightmove and Zoopla.

However, if you dig a bit deeper into market dynamics you will understand how this is not only possible but dare I say inevitable at this stage in their development, especially given current market conditions. To explain why and to highlight that this does not mean they are more effective than a traditional high street agent requires a basic understanding of statistics, game theory, actuarial science and of course alchemy. 

Ok, not really. But it does help to give an example from the insurance industry. If you are an insurance company you would rather sell your products to people who aren't looking to buy them, than to people who are because the people who are actively looking are statistically more likely to make a claim. 

This phenomenon is called 'taking a chance against the company'. So, if for example you sell sickness and accident cover, you are going to be suspicious of someone who approaches you wanting to buy because the chances are they are already sick.

As we know, Purplebricks only has a small percentage of the market and most of their customers have come from high profile advertising. You can be sure that these sellers are 'taking a chance against estate agents' in that they are already more likely to sell than most other sellers because they are motivated and they have properties they think (know) will sell easily. 

This group of people is self-limiting and will never represent the main market, as Purplebricks grows, for the moment anyway, their sales percentage will inevitably drop as they attract in sellers with less realistic expectations and less attractive properties. 

Of course with a fixed fee paid upfront, Purplebricks has no incentive to spend money on advertising to the vast market that exists beyond the portals, or in adopting new strategies for properties that don't sell. 

Even if they do wake up and smell their own BS all that will happen is they will morph into conventional agents, just wait and see…

I have one more observation which if you are a high street agent you may wish to make in the home with potential sellers who are thinking about Purplebricks as an option. Show them the last 10 Purplebricks sales, assuming they have that many, and in particular focus on the achieved sales price. I bet you will find that on a like-for-like basis the prices achieved are significantly lower than similar properties sold through local high street agents. 

I know an agent who was talking to a vendor who, in his view, nearly cost herself £40,000 by using Purplebricks - a lot more than any fee saved! Perhaps we as an industry should do a meta-analysis of all Purplebricks sales and see what it reveals? I have a feeling the misery will be in the sale price and not the commission.

The conclusion you can draw from this analysis is that high street agents have nothing much to fear from online agents offering to sell with no commission. 

Yes, their proposition will appeal to some people and for the right people it will even appear to work. 

But, as the proposition gets more popular it's downfall is assured and even those who do sell using this method, do so at their great cost and that's the purple smoke and mirrors exposed for what it really is.

*Simon Shinerock is Chairman of Choices Estate Agents. For more information on Simon, see his blog or his LinkedIn profile.

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    >But, as the proposition gets more popular it's downfall is assured and even those who do sell using this method, do so at their great cost and that's the purple smoke and mirrors exposed for what it really is.

    Sounds like wishful thinking. Even if it is all smoke and mirrors how is it going to get exposed?

    To be able to claim PurpleBricks are achieving a lower price for properties then that property needs to be easy to value. I can't really see homeowners allowing PurpleBricks to sell their properties cheaply if it's obvious what the value is and I can't really see PurpleBricks undervaluing properties that are easy to value. I can't even see PurpleBricks listing many properties that haven't been valued by other agents.

    With a £14m marketing budget anything that's thrown at them comes back in trumps. Our expert says this and their expert says that and they get some more free advertising. How much of this criticism actually reaches the public anyway? Yet PB carry out a 1000 owner survey and it makes the Daily Express.

    It's very interesting reading the thoughts of Estate Agents but in the end there are a lot of properties that are suitable to be sold by owners via online agents. Then there will always be properties that aren't really suitable but do get listed. I've even seen £50K properties marketed by PurpleBricks. I'm not sure what those owners were thinking.

  • Matt Faizey

    So, we start the article talking of others slagging off PB and then you drop in 'wake up and smell their own BS'

    You crux your entire piece around unsubstantiated claims of lower sale figures and the absurd suggestion that the only clientele PB can attract are those who are daring enough to 'take a chance'.

    For an article that started so promisingly towards a neutral position it didn't take long to veer off.

    I have every sympathy with 'traditional agents'. What is happening must me completely unnerving, unsettling and downright scary as hell.

    The landscape didn't just change. Many of you must feel like you woke up on a different planet.

    PB / HS / Tep etc etc aint going away. They are not going to fail. The public have done the maths.

    Your market changed and will remain so. The age old 'adapt or die' is where you need to be.

    The constant bemusement, bafflement and bitching is time and energy wasted however.

    There are many avenues for your model to change, become popular and be a viable (and more expensive) alternative. Until energy is focused elsewhere - like listening to your customers and what annoys them about you all - traditional E-agency will continue to die.

    Stop this whining though.
    It's wasting time.

    Simon shinerock

    Actually my observations are based on experience both of human nature and actual real life experience of no commission estate agency as a Seekers franchisee in the 80s. I think I have been pretty objective really, I have said PB will grow but their sales ratio will fall as they do, perfectly reasonable. I also stand by my motivated seller observation and the whole idea of self selection. Your criticism seems to be mainly based on an emotional reaction to my tone not on the facts of my argument. As it happens I am biased against PB not just because they represent competition but because I think their approach is negative and has already been proven to be inefficient in a different time in a different form. Agents need incentive to do a good job and mist vendors lack the required skills, selling your house for less than it's worth or not selling at all can have life changing consequences and it's not really a good DIY endeavour

     
  • Russell Quirk

    It is true that the customers of online agents are more likely to sell and that is as likely to be due to the targeted nature of online agency's proposition and their motivation to sell as to the fact that, ironically, they have paid in advance and therefore have 'skin in the game' and are bound not to be a 'tyre kicker' as some speculative sellers turn out to be, having listed, withdrawn and wasted a high street agent's money. And which is then passed on to successful 'no sale-no fee' sellers to subsidise.

    Such a model seems as 'unfair' on the consumer as the charge that is made in reverse of online agents' upfront charging model.

    'I know an agent who was talking to a vendor who, in his view, nearly cost herself £40,000 by using Purplebricks - a lot more than any fee saved!' The danger in fishing around for such random examples, relied upon as a defence to the change happening in our industry and as protection to justify higher and higher fees, is that traditional agency players may actually begin to believe that there is such a difference in the performance of an online agent versus themselves.

    Such anecdotal aspersions are merely whimsical and convenient. A crutch. And with an absence of any data to stand such spurious claims up.

    To suggest that sellers sleep-walk into accepting lower offers via online agents is hugely insulting to the customers' intelligence. It also conveniently disregards the infinite comparable information available to us all via the internet. Frankly, of the thousands of homes that I have personally valued in my career I can think of none where the owner had not researched pricing themselves or where they had already decided on a price having had half a dozen agents round and, often, plumped for the highest price of all those quoted in order to 'see what happens'.

    No. To decry the online approach as being sub-standard simply does not hold any weight. Especially when you consider that many online agents advertise a 99% of asking price achievement where Hometrack states that the the UK traditional agent average is just 97%.

    It might just be, mightn't it, that high street agents are no better or worse on such performance than online agents and vice versa? Perhaps an agent is an agent is an agent? I wager that's what the public think, anyhow.

    Which leaves the other differentiators of fee and, importantly, customer service. The latter which, in general, the typical online agent excels at.

    So perhaps the message here is not to fight the new guys. But to learn from them and to focus on making estate agency better for the consumer rather than merely looking at what is 'best', most profitable, or 'fair' for incumbent industry participants themselves? Yet that is all I seem to hear.

    Ultimately, what the consumer wants will ensure the winning approach. And to attempt to pull the wool over their eyes on the basis of 'pay more and you'll get more' is an outdated commercial philosophy that evaporated the second that Amazon; Expedia; eBay; South West Air; Spotify; et al took their first dollar.



    Simon shinerock

    Hmm, methinks you have (accidentally on purpose) missed the main point(S) I'm making which are firstly that PB customers are a self selecting group of motivated sellers more likely to sell than the general population of sellers. Secondly, that a fixed up front fee is flawed because of the lack of incentive to sell. These observations are agnostic about online or high st and in a previous article I confessed to having been a Seekers Franchisee, an earlier high st based incarnation of the failed up front fee model. When I started Choices it was on the basis of the formula commitment +Incentive = effectiveness, in other words an upfront fee to deter the time wasters plus a reduced commission on sale to reward the serious seller and to relieve the need for them to subsidise the cost of marketing withdrawn properties. I agree with your point about customer service but again this is neutral regarding online and high st. Online principally depends on reaching a small piece of a big market, right now some players have introduced some interesting features and automation which will be adopted by the high st. Once the dust has settled the best agents will be the winners and your point about an agent is an agent misses the entire point of what it means to be an agent

     
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