Online agency Purplebricks is not likely to prove itself to be a genuine disruptor as its business model is not revolutionary enough, says an investment expert writing for an influential financial blog.
Roland Head adds that there is currently not enough information to know whether the firm will hit its growth targets. Indeed, that in the near term the outlook for the firm’s stock seems to be worsening. He explains the reason for this downgrade in fortunes is that the group’s international expansion has been ramped up and so profits from the UK business are being swallowed up by operations overseas.
In comparing Purplebricks with global disruptor Amazon for The Motley Fool blog, Head explains: “Purplebricks’ business model seems more like evolution than revolution to me. Its sales and property listings still depend on a small army of estate agents (630 in the UK). The only difference I can see is that they don’t have offices.
“Although the firm’s fixed-fee model is different to a traditional commission rate, I believe mainstream agents will be able to adapt their pricing to become more competitive if they need to.
“Purplebricks may well cause estate agents’ profit margins to fall. But I don’t think it’s a truly disruptive business. For this reason, I view the shares as expensive and risky.”
Head certainly poses an interesting point, all too often overlooked by those actually in the property business: If the principle selling point of a business is that it is cheaper can it really be said to be different enough to change anything?