Purplebricks, the online estate agent, was in the headlines last week for all the wrong reasons: shares nose-dived by 40%, revenue forecasts came in short of £35m and management resigned. But could this all have been avoided with the help of Big Data? The REalyst investigates.
Read Time: 5 Minutes
The eighties and nineties saw the rise and domination of the high-street estate agent with little or no competition. Then, in the late nineties, a little tech company called Rightmove burst onto the scene and grabbed the property market with both hands.
They became the de facto place for people to search for homes in the UK, and agents had to pay them to advertise stock or risk losing business altogether. Fast forward to 2012 and the rise of the PropTech scene that birthed online-only platforms designed to disrupt the market once again.
The following years saw a plethora of online estate agents tempt vendors and landlords to their platform with much lower fees than high-street competitors, which they were able to do thanks to low overheads. Some did reasonably well, while others quickly fell by the wayside.
But there was one that stood out head and shoulders above the rest. Purplebricks managed to gain serious traction with excellent marketing that was able to build brand awareness. Since its launch, the company have amassed £93.7 million in revenue.
With such impressive figures, recent news of their shares falling by 40% comes as a shock to many. As does their initial revenue forecasts falling short by around £35m. But how did the online estate and letting agents find themselves in this situation? And was there any way to avoid such a scenario?
Founded in 2014, Purplebricks was the first company to provide an alternative to the traditional high street model. They offer vendors a fixed fee of £1,399 in London and £800 outside of the capital, rather than the traditional percentage model championed by high-street agents.
Estate agents working for Purplebricks, or ‘Local Areas Experts’ as they are also known, earn £200 per viewing plus a bonus of £50 once a sale is complete. They also receive viewing fees of £399 in London and £300 in other areas of the UK.
Competitive pricing, along with some clever advertising, saw them rocket into the public sphere. They were the first online agent that made the high-street model stand up and take notice. In fact, many agents shifted their strategy and went on the offensive, taking aim at companies like Purplebricks in a bid to keep customers on side.
With success comes expansion, which is why it was no surprise to see Purplebricks launch in overseas markets. In 2016, they announced plans to operate in the Australian market and did so again in 2017 with the news of a US launch.
However, expanding into these new markets added extra strain, with both ventures currently not performing to expected levels. Michael Bruce, Founder and Chief Executive, said that the company was in a “good position to take advantage of growth potential in the UK, US and Australia”, but also admitted that “everything had not entirely gone to plan”. The plot thickened.
Purplebricks also states a downturn in the UK property market as one of the reasons for their current predicament. Uncertainty around Brexit has undoubtedly impacted the UK housing scene: house prices only grew by 0.1% in the 12 months to January 2019.
Many people are taking an increasingly cautious approach and are waiting to see what happens with the UK’s impending divorce from the EU before they make a concrete decision about their next move. Purplebricks is not the only company to feel the impact left by Brexit: many high-street agents – including Countrywide – are also feeling the strain.
Could Purplebricks’ issues have been avoided? The use of data may have helped them to get a better understanding of overseas markets, not to mention the current status of property in the UK.
It might be hard to predict the future of the UK property market with absolute certainty, but looking at past trends can give some indication to what the future may hold – even with the Brexit cloud. With a business model that profits from providing ‘post-sale’ support, it is no wonder Purplebricks’ revenue suffered in the wake of last quarter’s market. As illustrated in our Quarterly Reports, with volumes of properties sales transactions beginning to fall across the UK and the number of days on the market increasing exponentially for properties on the market, Purplebricks has taken the brunt of the fluctuations. The data from last quarter then becomes a powerful tool for managing such risks and planning for droughts in good time.
There is no doubt that Purplebricks has changed the game in the UK and, with time, they may do the same in US and Australia. But there are still clearly lessons to be learnt before they gain a stronghold on the property market.
And data is the key to unlocking its potential. If only PurpleBricks had signed up to a free 14 day trial of the REalyse platform!
© Treex 2020