Michael Bruce, CEO and Founder of online estate agent Purplebricks, didn’t hold back when asked what he thinks of the role of traditional high street agencies. He also reiterated that his firm would be profitable by its third anniversary, just five months away.
DMZ takes a closer look at his controversial comments, including what impact Purplebricks and other online agencies are having on the broader market.
Bruce founded Purplebricks alongside his brother Kenny after selling their Midlands based estate agent Burchell Edwards to Connells in 2011 for an undisclosed sum.
After a successful IPO last year, raising £25 million through their listing on the junior AIM market, Bruce now claims Purplebricks are the third largest agency in the UK and describes their spectacular growth as “a huge achievement”.
When asked about the reaction of high street agents to emergence of Purplebricks, he said “first of all they dismiss you as having no relevance, no importance – that’s the first cycle, denial. After that they ridicule, and after that, and it took a while, but then they seek to address the scenario.”
Bruce went on to blast the relevance of traditional agents, “virtually nobody goes into a high street agent’s office, and haven’t done since Rightmove and Zoopla came into existence. They’re nothing but a high street presence, a face for their brand.”
When asked why a buyer or seller would choose Purplebricks over a more established and recognized brand, he replied “say you’re searching for similar property online, up comes us, up comes Foxtons, if you click Foxtons, you’ve just spent £20,000 – it’s a no-brainer.”
Purplebricks aren’t the only non-traditional agency making waves in the market.
Sarah Beeny’s Tepilo recently opened a new headquarters in central London after doubling its turnover, established agent Savills backed online upstart YOPA, Connell’s bought Hatched.co.uk and Emoov completed a £2.6 Million crowdfunding campaign – over double the expected uptake. As for high profile investors, Purplebricks can boast Superstar Fund Manager Neil Woodford as a key backer.
DMZ can see a clear evolution in the estate agency market, but disagree on the irrelevance of offices, not only for marketing purposes but for closing deals.
Take a Saturday stroll past Foxtons on Lavender Hill or Chestertons on Upper Street and you can see the continued popularity of high street offices in London. Older buyers could still be more comfortable dealing ‘in office’ rather than online. The Bank of Mum & Dad allegedly financed 25% of UK mortgages this year, the figure rising to a huge 50% in London, proving that the baby-boomer market are a key demographic for agents.
City analysts forecast that online operators could capture 25-50% of the market by 2025, however a business model that relies on paying upfront to list may need its mettle tested during a real market slump. There is also the ‘challenger problem’, buyers and sellers are instinctively more inclined to pick an agency they have used before and are familiar with than take a risk on a new company and a new process entirely.
DealMakerz has seen traditional agents like Countrywide incorporating hybrid options to their sales offering. Embracing the hybrid model could take the sting out of online-only agents tail, but potentially cannibalize their core business. So where do agents go from here? As always, DMZ will keep you updated.