There has been much euphoria from traditional Estate Agents regarding Purplebricks’ share price tanking on the day of its results (-9%) recently. However, over-buying – then over-selling – by investors shouldn’t mask the actual numbers; Purplebricks will take over £84m out of full service agents’ pockets last financial year.
At their “monetisation per instruction” rate of £1,140 that’s nearly 75,000 homes that they’ll list ahead of anyone else. Some will come back on the market and be battled for by other agents. This will most likely be at a discounted rate to secure and harder (and costlier) to sell because it’s already been on the market.
And Purplebricks will already have taken its cut, with the next agent effectively subsidising their competitor.
Research published in the same week by Property Industry Eye shows that agents are starting to become more confident that Purplebricks and co are peaking. That is a view unsupported by the data – and it’s one that I believe is inherently dangerous to the industry at large.
Agents putting their heads down and assuming that this will all go away, as a tough market comes, are deluding themselves. Purplebricks have a massive marketing budget and team, huge staff resources to call upon that are maybe 50 times the size of the average agency. They are not going to let an economic cycle slow them down. You stand in their way and they must – and will – deploy tactics to prise some clients from you.
Their attack ads will switch to affordability of fees when a vendor’s wallet is so much lighter already. In tough and insecure times, people who have choices about whether to move home or not tend to stay put. It will be distressed sales that drive the market and those people are going to look for what is perceived to be the cheapest, quickest option. That’s where Purplebricks’ huge marketing punch is going to be targeted. And that will leave few discretionary sellers for everyone else to share.
Make no mistake – it is now that Purplebricks is most dangerous because it is now that it has established itself in the market. Its competitor eMoov has already moved into “no sale no fee” territory – ask yourselves, “What is stopping Purplebricks doing the same?”
Absolutely nothing. And they will do whatever it takes to thrive in whatever market conditions they face.
Their success in your area, however, is not inevitable. You need to get organised, get a coherent message out there around real value and give vendors a genuine and grown-up choice between upfront and success-only payment models. Always, always, always place the benefits to the vendor at the front-and-centre of what you do. “Only pay when you sell,” “FREE marketing of your property on Rightmove until it sells,” and other ways to describe your service in punchy, value-based terms are what is going to win in hardened times.
If the public knew what full service meant – better service, more likely to get higher price achieved, on their side to get the deal completed – very few would use any other method. Your responsibility in 2018 is to make sure that they know you stand for this.
And to make sure that Purplebricks’ share price continues to fall.