Purplebricks is disintegrating before our very eyes. Listings are down 23% year on year and revenue is shot to bits. Good people are resigning in droves. Others are being fired. Duff communications on the enforced change from self-employed to employed seem standard.
Add in a poorer commission package for its agents, a seeming cultural void, a pending legal action against them that could be worth tens of millions of pounds in reparations plus a share price in freefall, resulting in a market cap of about 10% of that of three years ago. A bag of crisps is now more expensive than a PurpleBricks share and, I’d say, far fresher and tastier currently.
Still, it could be worse I suppose… at least they’re not YOPA, the ridiculously named brand that sounds more micro-biotic yoghurt than estate agent.
This all feels a bit Countrywide, doesn’t it? From popular new kid, in City terms at least, to village idiot struggling to maintain any semblance of credibility at all.
As with all these situations, the fish rots from the head. So, what does a battered and bruised CEO do in such circumstances where he is surely a dead man walking – in tenure terms at least?
The obvious answer to that is to resign. Vic Darvey has little to lose in walking the plank from his Solihull office to the car park given that any personal bonus possibility is but a disappearing reality and his share options’ value are unlikely ever to be realisable now.
He will resign, I’m sure. But I reckon he will hold on in the wheelhouse for a bit whilst the orchestra plays on the deck and the board work out who will replace him as ‘Iceberg Avoider in Chief’.
Meantime, what to do about a business that has been dragged through a hedge backwards and has the scratches to show for it?
Actually, Purplebricks has a lot going for it. It is a household brand name and is the biggest single brand in UK estate agency by volume, albeit of listings. It has (or had) some fabulous people working for it and it’s built some pretty nifty bespoke CRM type tech that suits remote working and a branchless footprint. So, all good there.
What it lacks, apart from leadership, is a proposition that works commercially and sustainably. Online estate agency does not stack up from a unit economics perspective – we all realise that now. I certainly realised that back in 2018 as the vultures swooped on Emoov and, despite trying to pivot the model to no avail, the numbers just didn’t stack up in the end. Low fees and escalating customer acquisition costs collide. Who knew!?
So, to the business model. It’s the model itself that Purplebricks must change – to one that charges a full fee. Yes, a full fee. This, actually, was the pivot that I tried to persuade the Emoov board to make – but they refused.
You see, online estate agencies have much to shout about. Brand, volume of listings and sales and therefore data, culture (most have this but not all) and technology.
But, they just don’t charge enough.
If they did and they turned their proposition into one that was about service and results and transparency and 24/7 accessibility – they’d be winners in this space.
So this is what Purplebricks must do…. change to a percentage fee model, on completion, no sale-no-fee because that’s what the customer wants and likes – 95% of them do in any case and that’s proven by the lack of traction that online agents have had in market share terms over recent years. Less than 8% of home sellers have ever used an online estate agency in any year since they first darkened the door of high street agents in 2004.
This is the solution to Purplebricks’ woes however, it’s not as easy as merely changing their model overnight and waving a wand. They need the leadership and the team and the knowledge and experience to do such and that frankly doesn’t exist within the Solihull Massive now. Vic Darvey and friends do not have the first clue about this business, especially when times get tough. You need experienced sailors steering ships – not the guy that used to work out how much it costs to stock the galley cupboards.
Change the pricing proposition. Change the people at the top. Or I suspect that otherwise, what was once a £1billion business will end up obsolete and possibly even dead.
Will the Purplebricks board learn lessons from Countrywide, Emoov and other such examples? Probably not. And so grab your popcorn and watch this play out like the slow motion car crash that it is otherwise destined to become.
Russell Quirk is co-founder at ProperPR, the property PR specialist.
Comments (32)
Rusty, if they become a full fee, full service, no sale no fee agent, the only thing the public knows them for (being cheap, not their 24/7 service) will be gone, and they’d still die. It’s not the (obviously flawed) business model that bothers me. (Yopa, Strike etc, harmless) It’s the permanent damage they did to the industry, fee income, their exploited LPEs, and the countless customers whose money they took without ever delivering a sale. The Bruce brothers can try all they like to re-lacquer their tarnished image by funding a mentoring business (only they could work out a way to make themselves look good on the back of others’ voluntary work) but they will forever be, to me, nasty con-men obsessed with their own enrichment. The kind of characters who say “it’s only business, not personal” to justify their atrocious behaviour. Their founding investor, the wonga.com guy, made so much money from exploiting vulnerable people that the government had to change the law to stop it, because no one else had ever stooped so low before. His influence clearly rubbed off on Mike and Kenny.
The end is in sight.
What it lacks, apart from leadership, is a proposition that works commercially and sustainably.
No kidding, and he should know from experience and we have all being telling these on-liners your business model is never going to be sustainable. How many have gone under now? Best that PB can do is close before the receiver’s arrive at the door.
If PB were to switch to a no sale no fee pay on completion model it would create a massive hole in their income for at least three months whilst they were waiting for completions to start trickling through. Probably longer if they carried on insisting vendors use Premier Property Lawyers. Surely this wouldn’t be feasible without an injection of cash from somewhere.
Lots of good stuff in these comments. I agree with almost all of it even when it diverges.
Would be great to hear from Axel Springer – going to 26.4% ownership in 2019 which cost then 49m euros (for 14%) was at the time super risky and now looks foolish.
So far they’ve put in £125m and 49m euros – market cap as I write this is £100m.
Surely Axel has a plan? Tell me they have a plan?
Or is this just a normal error count for high risk aggressive investing???
Question? How important is a ‘brand’ when you offer a service rather than a product?
The founders always talked about getting PB to a ‘tipping point’ market share. The intent was to use the fixed fee model as one of the tools to get there as quickly as possible. Once there, the plan was to pivot to a more ‘traditional’ fee structure.
The problem… ‘Commisery’ – which they personally were not fans of, fixed the brand’s image as being a cheap one.
As more of the business was sold off to fund an over-ambitious expansion into new markets they lost control of the business and weren’t free to follow through with the original strategy.
Agree, a great business was ambushed by big time investors and derailed by marketing folks using a formulaic approach on a unique offering…
History has proven that they were wrong from the off and bailed when the share price was over valued based on what ? …. inflated by those that gained to make money while investors were being duped and poor performance. Scandalous.
Never achieved traction over 4%ish of the market. All the huffing and puffing by their supporters over the years … where are they now!
The original PB model worked and our territory got to 20% market share, I saw that sticking to the original plan at the top with the right marketing would have seen us get to over 30%. I am not a PB supporter but this happened.
“when you’re disrupting, you’re tearing down the old thing – not creating a new thing. Disruption, for the sake of disruption, is terrorism. When you’re disrupting you’re creating a mess, but somehow the business world has been duped into thinking that disruption is how you win. Disruption is largely unproductive. Because it is about fighting over scarce resources. It’s a scarcity mindset and the reality is, that only idiots fight over scarce resources. ” Christopher Lochhead.
When launched, PurpleBricks had very little that could not easily be replicated. They had no discernible message, other than we are the same but cheaper. They spent other people’s money building brand awareness for a service that they could not provide. A default dead strategy from Day One that only puts millions into undeserving pockets.
While i agree with what the very annoying Russell has put in his article about PB, he again trips himself up and contradicts himself and makes himself look like the idiot he often is. Why bring up Yopa in the same article when he is slating PB about not offering No sale no fee and suggesting they should do so when Yopa do offer no sale no fee as one of their options. They offer the up front and deferred fees like PB but also offer a fixed fee on a no sale no fee like the high st agents do, as i have a Yopa agent in my town and i know a lot of the clients that use him do go for the no sale no fee and he has a decent market share. Are Yopa not also a franchise style agent who are in control of their own business like Ewe Move and such likes, or is it that he just doesnt like their name for some reason? I also know a lot of PB agents are now just waiting for their guarantee to run out and will be leaving now they know their commission package and some have got to hit 60 valuations in a month to start earning commission so expect a mass exodus of PB agents after xmas. Another attack on the online/hybrid agents when his own company Emoove folded within 6 months of a failed merger with Sarah Beeny’s agent as he wanted to overtake Yopa and try and battle it out with PB. Look how that ended, just made Yopa and PB more stronger in their own markets i think. Anyway, rant over on this waste of a breath letch of a person.
It’s been proven that high volume lower fee is possible as an estate agency business model, it took PB to £1bn valuation.
It requires hard working entrepreneurial workers that are willing to put in the hours and build a positive local reputation. PB was still fixable up until the workers lost that feeling ‘building a business’ either by being removed from running their local business unit (thanks Vic) or being forced to be switched to employed status. The remaining workers are now unlikely to be at their desks 8am to 9pm, 6 plus days a week, like we were in the good PB years making a turnaround from here almost impossible.
The PB model can’t just boost its fees, either pay now or pay on completion, as customer volumes would be lost at an even greater rate than the 23% drop.
Success here requires the mix of great personal local service from photos to key hand over at a competitive fee that gives the client a warm feeling of receiving great value, this grows the business in that town or city by recommendation and grew PB to what it once was.
Here’s a plan, find a way to create local business units of entrepreneurial workers (maybe call them territories) and make them feel like they are on a mission that will see them succeed financially for their families over the long term (in a way that satisfies HMRC). Give them a great value, tech backed product at a price that is simple to sell to clients in big numbers. Reward great service financially so that the bumpiness that many PB clients receive is eliminated. Have leaders that inspire these workers and unify the units into the greater business. Simple.
“It’s been proven that high volume lower fee is possible as an estate agency business model, it took PB to £1bn valuation.”
No – the smoke and mirrors, the inaccuracies, the claims, bluffery and the general f***wittery (credit: Jonnie) that came with the model took PB to a £1bn “valuation”.
The reality that set in when everyone saw the Emperor’s winky brought it down to where it is today.
I got a ‘small’ territory to a £1m p.a. turnover over a number of years with thousands of satisfied customers and zero customer complaints, so whether you look at the wider PB valuations or ground level localized success that can be evidenced the low fee high volume estate agency model can work…
How much did you get when you sold the business you had built up ?
Comparatively very little, selling such a great local business for 1% of annual turnover is crazy but their was no other option at the time. If you need to work and don’t have the resources to take legal action you have to just suck it up. This tale is evidence of the unethical and misguided operation of a once great business by those running it. It still stands that we made lower fee / high volume agency work really well and it was great.
Thanks for the response.
Would you say then that the promises/assurances that were made to you at the outset, in relation to building your own business and being able to sell it, weren’t true?
The promises that were made when the business model was originated were true but then the model and the greater plan of the business changed so that those promises could not be kept.
“I got a ‘small’ territory to a £1m p.a. turnover”
Talk me through that one, please…
A few postcodes, 6 years start to finish, 15 mile radius, 7 excellent LPE’S, £1m in annual fee income, zero complaints. We learned everything needed to run a successful low fee, high volume estate agency over the long term until one day someone decided there were ‘too many territory owners’ and wiped out the great business we had built-up. Still know all the elements to make this business work if anyone at PB wants to chat, maybe that’s what PB should do next…probably won’t though.
“£1m in annual fee income”
GROSS fee income – or nett of VAT?
Fee income to your territory – or gross figure paid to PB?
Read more about the how, where and what in the book, re-publishing in the new year…
Nah… I’ll wait for the film. It’ll have a better ending.
There’s always been an arrogance that runs deep through the management… I’m not sure they have the ability to evolve.
The business is also not sustainable because you can’t have that many disgruntled customers loathing your company, its ethics and a lot of the ground floor worker bees.
Just my 2c’s.
“Listings are down 23% year on year”
Oh, dear, Mr Quirk. Statistics never were your strong point. Now you fall into the same trap as others of reading something ambiguous and taking the intended, somewhat misleading, meaning rather than looking under the bonnet for the correct information.
Now I know that you have stated you don’t read comments – but on the off-chance that the person who does your reading for you sees this, please can you let The Quirkster know that I’ve corrected that little error for him as follows…
“Listings are down almost 38% year on year.”
The amended statistic is based upon this little, seemingly unchecked, nugget:
“we expect to report a reduction in instructions for the six-month period to c. 22,000 (H1 2021: 35,387).” (data source: Purplebricks Trading Statement 2020 11 04; PropertyIndustryEye; TheNeg; EAT; the list goes on…)
Feel free to do the maths. (I’d strongly suggest however that you don’t leave it to the usual guy who comes up with your stats – his abacus seems to be faulty.)
Always a pleasure… never a chore.
Hi Russell, It’s nice to know you are coming round to my way of thinking!
You must have seen my post on one of the rare PB articles on PIE a short while back on the what I thought the way forward for PB should be.
The bottom line was that their USP was being cheap and knocking everyone else. Sadly, many vendors discovered PB were quite expensive as many properties never sold. As for lettings – just look at the Purplebricks customer services twitter feed. It’s a classic case of over promising and under delivering. Few businesses succeed by rubbishing others rather than being good.
60,000 vendors a year plus that is the MVP the next generation online agent needs to focus on, TAM may be 1.2M (In a normal market) completions a year, but that 60,000 could be 100,000, if you built a tech heavy and purposeful UX solution.
It would cost 300M, but then PB has gone through that amount and more, a shame it was not spent of a full digital transformation of the whole process, instead it took out the humans and replaced them and the processes with the thinnest veneer of a digital solution.
Amazon is a multi-trillion-dollar business, it sells things quickly, it has a 99% ranking in SEO and so is everywhere, its back-office functionality is beyond most other companies hence its dominance.
The real answer is to get some bright minds to re-plumb how agency is done and what tools would be used to transact property, if no legacy system existed, bearing in mind the present level of tech, and the channels people use to do business. Having met over 500 tech and fintech founders, I can assure you that they do not look at an existing system and say let’s replicate that digitally. No they say, I have a huge cupboard full of tech, utilising what I have in that cupboard how can I solve this problem, in a way that nurtures the end user, creating UX. Often they cut out whole sectors and bypass old ways of doing things, duplicated processes, gatekeepers, building in oversight and efficiencies.
There thinking is you need a strategy to be number one, to get there quickly, add enormous value to customers, offer new business-value propositions, drive significant efficiencies and profit across your company. And digital transformation has changed the rules.
And by digital, I mean the super-fast, and frictionless way new insurgent agile companies who operate more efficiently, connect, people, products, services, devices, service chains and physical objects together. Rewriting the normal business strategies of achieving success.
That is why a banking App like Revolut is now valued with a large market cap than the Natwest Banking Group, one is a real bank the other is ‘useful software’ that is scaling the world doing bank like things but in a way, clients want, fast cheaply and cleverly. The big push at present in the shared economy is we want Fast, Frictionless, Service – provide it and you have a Unicorn, fail to deliver and you live in a fairy-tale world where other types of Unicorns reside.
If anyone is out there and they want to transform their dinosaur business into a digitally relevant one, hit me up, it is free advice to start. And that includes Axel Springer.
Amazon is a multi-trillion-dollar business, it sells things quickly, it has a 99% ranking in SEO and so is everywhere, its back-office functionality is beyond most other companies hence its dominance.
What in the world has that business model got to do with estate agency. Comparing chalk with cheese.
The real answer is to get some bright minds to re-plumb how agency is done.
Well I certainly know one direction I wouldn’t go to. It’s a people business, period. As for replacing them with Tech, laughable.
Where’s the disclaimer that states clearly that Russell’s PR firm is acting for Contractors for Justice (C4J) – the pending legal action.
Coming from another author fine……coming from Russell in his current role……
A recruitment drive for C4J – Jump on before Purplebricks run out of cash.
‘Keep winning buddy’ is the phrase I see posted a lot by pointless sales directors….the irony is too much
Ha Ha, a wed morning pick me up…..
Word on the street,
CPO promoted to COO (why on earth you would do that as its just another Alison platt) and why has it been so quiet…….. be careful Vic D what goes round comes round.
Valuers Guarantees run out in November (put your hands in your pockets Vic D or risk losing more of your only asset)
DSDs pretending all is ok with pointless leadership meeting (an area manager called me too say he is so embarrassed by the brown nosing)
Share Price is frightening and I am sure the board will have made its decisions
CFO run like the wind once he realised the ship can not pivot
The worst of it all is the narrative from the leaders is trust the process…….. simply not good enough.
PB will return to its best again but not with that leadership team. bring back? Verona F – Paul V – Richard O – Allan W – Lee W…….. and many more.