Purplebricks will go down in history as the biggest flop in estate agency, after agreeing to sell to rival Strike for just a pound (and even that was too much, in my opinion).
If this online model has failed with its multi millions of pounds of investment over the past decade, I can’t see it working any time soon. The fact that an agency with an equally flawed business model has chosen to buy Purplebricks comes as no surprise. It’s surely an astute move to ensure that no-one else gets their hands on the Purplebricks brand.
But at what cost? Paying off the debts? Paying for the staff – for whom I have great sympathy right now, considering the uncertainty they’re facing. What are the other liabilities they’re taking on? The legal action from their former self-employed staff? Their lettings compliance issues?
Strike backer Charles Dunstone needs really deep pockets, and I estimate he would need at least £20m-£30m to pick up the pieces following Purplebricks’ fire sale. But then what? A focus on tech? But we all know that you need good people backed by tech in order to thrive in this industry.
So where did it all go wrong? Quite simply, the low-cost model does not work. How do I know? I was one of the first people to try it with iSold back in 2010. Many others have tried and failed, including House Network, Tepilo, Emoov (later purchased by Mashroom), Hatched – which Connells said was not a commercially viable model, and Doorsteps. How long before Yopa follows suit?
Why doesn’t it work? Quite simply, because it’s a costly business. Paying for marketing, through Google Ads and expensive TV ads to maintain brand awareness, runs into multi millions for brands that want to reach into all corners of the UK.
Moreover, the gatekeeper to the online market is Rightmove, and if you can’t afford their extortionate fees, which continue to rise, you’ll never get through the gate.
Add to this rising staff costs, energy and fuel bills and inflation right across every element of the supply chain, legislation that is challenging, and a 40% downturn in transactions across the housing market, and you have a recipe for disaster. Even if you’re not paying for branch costs, you still need to add sufficient margin in order to make a profit, rather than relying on the goodwill of investors.
This notion that our industry could be ‘disrupted’ in the same way as Uber or Deliveroo, focusing on cheapness when you’re selling people’s most expensive asset, is just nonsense. It’s all about trust. How can you trust something that doesn’t provide a quality service?
Plus add in to the equation the lack of estate agency knowledge at the top of Purplebricks and you could see the car crash happening in slow motion, it was just a question of when and how hard the impact would be.
How I’d like to be a fly on the wall of Axel Springer’s offices right now, having invested around £178m since April 2018, eventually become the largest shareholder with 27% of the shares. They must be ruing the day they got involved.
Strike will be looking to pull something out of the bag, but what, precisely? Unless the war with Ukraine ends tomorrow, energy and fuel prices right themselves, no-one demands pay rises and the economy bounces back, there is no immediate end in sight to the bottomless money pit that comes with running an estate agency business.
We saw that Purplebricks had very left in the bank, I suspect they were one month from going under, at the end. Pouring more millions in isn’t going to solve the problems that exist.
My prediction is that the ‘new Purplebricks’ will go the same way as the old. Another brick in the wall, yes, but on crumbling foundations.
Paul Smith is chief executive officer of Spicerhaart
The tech is exactly the same as it was in 2020 when they made a load of tech staff redundant. Literally nothing on the front end of the site has changed since. It’s still a different site when your are signed into your account compared to when your signed out(bet you didn’t notice that). The backend is all botched together code not suitable for anything of high volume. Suggesting Purplebricks was sold for the tech is like a car manufacturer investing millions in Diesel tech when everyone is going electric. It’s old, outdated and better options available.
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Three certainties in life:
1) Death
2) Taxes
3) A smug estate agent sticking the boot in when a competitor is failing telling everyone ‘I told you so’
It makes me embarrassed to be in this industry sometimes when everyone focusses on the demise of the industry disruptor like they never had you on your toes or you haven’t changed the way you operate in reaction to their presence in the market. I’m sure this mockery happens in many other industries, but doing it so publicly and with such a self-assured smug tone is really poor (the photo for this article says it all).
Like hell does Mr Smith ‘have great sympathy’ for all the staff facing redundancies right now; if he did, he wouldn’t be twisting the knife by posting an article like this for his own self-gratification and self-promotion.
Congratulations Mr Smith on your non-news worthy article. Must be a slow news day. You stay classy, estate agency……
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I think I have only come up against Purplebricks twice in a valuation that I am aware of. Any business going under is sad because of the lives it effects.
In my opinion Agents have a right to be smug in this case, as Purplebricks with their parodies literally mocked us.
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I don’t recall anywhere in their marketing tor the Bruce brothers, Lee Wainwright, Vic Darvey or Helena Marston publicly mocking the high street and laughing at their loss of market share or for their competitors making redundancies or estate agencies folding altogether?
Regardless, you enjoy the moment at the expense of the livelihoods of many.
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Where have you been hiding, a bit late joining the party? The Bruce’s regularly mocked the high street at the start with media interviews and the TV campaign which from ‘Commissary’ became their nemesis, ‘Conmissary’ in certain quarters. The list is long and some of thier shennanigans was a black mark on the indusrty inttegrity!
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I am not sure how you arrived at that comment from mine. Purplebricks has not effected my business at all, I mentioned it is sad for the staff.
Woodentop has supported my comment; “Commissary”
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Along with any number of so called ‘Tech’ businesses PB was finally doomed when they finally had to accept that their staff were never self employed and that just like the rest of us PAYE, holiday pay, sick pay and NI are a fact of life when you run a business. How they were ever allowed to get away with it for so long is beyond me.
I well remember some dim Tory minister visiting their head office a few years ago and proclaiming that they were part off the new revolution. How they must have laughed when she left.
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Pay peanuts, get monkeys.
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You would have thought Mr Smug would be focused on his own business right now. Spicerhaart staff turnover is apparently massive right now. And its the good ones who are leaving by all accounts….
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