The Slow And Painful Death Of Countrywide

Once the darling of the UK estate agent market, Countrywide has suffered a torrid few years, with a series of profit warnings, an all-time share price low and no permanent CEO.

It’s a sorry state of affairs for the company, which after its founding in 1986 had impressed the market with its rapid expansion and high-profile acquisitions.

The questions on everyone’s lips are: Has Countrywide hit rock bottom or are even further share price declines on the cards? And, will the company be consigned to the history books or can it achieve what would be one of the biggest turnarounds among UK plc?

These are some of the questions I sought to answer in my conversations with former Countrywide employees and property market experts.

Addressing its past mistakes

If there’s any prospect of Countrywide returning to its former glory, it needs to confront the enormous mistakes it has made over the years.

A catalogue of errors has resulted in the share price plummeting by 87% from a high of 686.5p in March 2014 to just 87.3p today.

I spoke to Countrywide founder Harry Hill, who was with the agency for 23 years, and its chairman from 2006 to 2009, to find out what happened to the company he successfully built up during his tenure.


“An aggressive break-up still appears, to me at least, to be a possibility” – Harry Hill, founder and former Chairman of Countrywide


Hill said that while he hasn’t been close enough to Countrywide recently to know exactly why the business has performed so poorly, it has been suggested that the recently-departed chief executive Alison Platt decided “almost certainly incorrectly that house agency is simply another form of retail, and replaced seasoned property professionals with management with retail backgrounds”.

He added: “Some, or most, of those (very highly paid) people appear to have also moved on to pastures new, and the non-executive chair (who has no property experience of any consequence) has taken an executive role until a new CEO is recruited.

“City reaction has been very muted and most people close to the company appear to think that recruiting a high calibre person will be difficult, and any recovery process will probably be slow and difficult.”

In a stark warning to shareholders, Hill stated: “An aggressive break-up still appears, to me at least, to be a possibility.”

Countrywide my be broken up, according to one of it’s founders. Source: Wikimedia

The rise of online competitors

As with all high street agents, a huge part of Countrywide’s woes have been attributed to the ongoing rise of online rivals like Purplebricks.

Countrywide attempted to meet this online competition head-on by launching its own digital offering in May 2016, alongside the closure of 200 branches. But after introducing the new proposition across half of its network, the company revealed last November that it has “paused” the roll-out while it evaluates its results.

In January, the agent released a dire trading statement, saying it expects full year income to drop by 9% in 2017, with profits down 22%.

Peter Long, who was named chief executive when Platt departed a week after the profit warning, blamed the drop on the cooling property market and changes in the organisation that “caused disruption and a negative impact in terms of our ability to sell homes”.

Long’s statement shows the online strategy clearly hasn’t worked.

Why did the digital offering fail?

I spoke to Eddie Holmes, who co-heads PropTech Consult, a firm that aims to help property companies understand and overcome the challenges brought by digital transformation.

Holmes blamed the failure of Countrywide’s online business on the fact that it was simply an add-on to its existing traditional high street brands, rather being launched as a new company. Using the existing brands hasn’t enabled Countrywide to reach new customers; instead, it has resulted in it cannibalising its existing customer base by selling them a cheaper service.


“It’s hard for consumers to understand what the business actually does”


Holmes explained: “Countrywide’s high street branches have traditionally maintained a 2% fee, making them one of the most expensive on the high street, whereas the digital offering was a low fee proposition. It’s very difficult to effectively communicate to consumers about the two services. With one service you have to do things yourself, but ultimately the end result is the same – which is selling your house. It’s hard for consumers to understand what the business actually does.

“Internally, it’s not helping to create a healthy dynamic within the team. If you‘re working within a high street branch and you’re incentivised to sell properties for a fee of £3,000, why would you sell a service that costs £1,000 and earns you a lower fee?”

Doomed from the start

Holmes, who has written an analysis on Countrywide’s digital offering in conjunction with Mike DelPrete, a thought leader in real estate technology, told me that the online launch was “doomed from the start”.

He stated: “It was just a lead generating exercise rather than an attempt to transform the business. It wasn’t a true digital solution and it wasn’t introduced into the right cultural environment to ensure it would succeed.

“It would have been better to have launched a whole new consumer-facing brand, and then internally operated it as separate company so that there was no tension among the staff.”

Holmes added that Countrywide could also have considered acquiring an online player, like Connells did when it bought Hatched in November 2015.

“Connells has run Hatched as an independent subsidiary so it doesn’t cross over with their existing brand. It also creates competition between the two business units. From Connell’s point of view, they’ve got a foot in both camps.”

In Holmes and DelPrete’s analysis they give another example – Australia’s second business real estate group, LJ Hooker, which announced last March it would launch its own DIY real estate disruptor Settl.

Unlike Countrywide, LJ Hooker chose to introduce its online offering as a distinct “fighter brand” designed to combat low-price competitors while protecting the organisation’s premium-price offering. To the customer’s eye, there is no connection with the existing LJ Hooker brand or the premium values associated with it.

Interestingly, after press fanfare prior to the fighter brands launch, LJ Hooker decided after only 3 months to axe Settl. No credible reason was provided for the demise, but one agent said there was strong internal hostility towards the new brand.

Countrywide brand Bairstow Eves now provides traditional and online options for consumers. Source: Baristoweves.co.uk

The outlook is not good

If the investment bankers are correct – and they most often are – the prospects for Countrywide are not looking good. Analysts at Berenberg said at the end of last year that the shares are “uninvestable” unless the group manages to come up with clear growth initiatives that address the digital threat and increased competition.

Berenburg added: “Tracking the performance of the first three brands that trialled Countrywide’s ‘flexi-service’ digital offering, we find it has not driven an increase in sale listings.

“We see issues with the structure, framing, marketing and execution of its digital strategy which highlights the services customers do not receive.

“We suspect therefore that it competes more with Countrywide’s existing businesses than with Purplebricks as it is supposed to. We take the pause of the rollout as confirmation of these fears.”

Current chairman Peter Long admitted in January that the group had “lost focus” in both sales and lettings – not ideal if your core business is selling and letting properties.

It also doesn’t help that the group is operating in extremely tough macro-economic conditions. Credit rating agency Fitch has warned that the UK market will be among the weakest in the world this year.

The market is also slowing because of affordability constraints. Housing costs have more than doubled in the past 60 years to almost a fifth of household incomes.

Is there hope on the horizon?

It’s going to be difficult for Countrywide to engineer a turnaround, but the market hasn’t given up on it just yet.

James Dearsley, founder of The Digital Marketing Bureau, told me that Countrywide needs some serious help and that it must not look back.

He said the agency should realise it has brilliant assets in its people, but recognise the fact it has a huge brand and office problem.


“They need to realise they have a brand problem and one that has focused on their breadth of high street locations for too long”


Dearsley added: “They need to refocus their efforts on their people and understand the benefits they bring, whilst driving an innovation-oriented mindset at the heart of the entire organisation, rather than just among a select few.

“They need to realise they have a brand problem and one that has focused on their breadth of high street locations for too long. It isn’t about offices and a variety of brands, but about the people that are within the organisation and helping them to evolve as the market evolves around them.”

There are signs that Countrywide has recognised its mistakes and is trying to move on. Holmes said the agency has “cleaned out its wardrobe of cultural dinosaurs who don’t believe in technology” and has started thinking about innovation.

“The natural next step would be to appoint a safe pair of hands for the CEO role, but they need to ensure they have a strong technology mandate and team around them that can help plan for the future and come up with a better strategy,” he said.

All will be revealed

The market certainly has a lot of good ideas to give Countrywide a much-needed boost, but is the agency prepared to take any of these ideas on board? It’s a question that could be answered in the coming weeks.

Countrywide said in January that it had begun to take a range of actions over the last quarter that “we believe can restore the business back to profitable growth”. It also said the firm’s key priority will be to implement changes to enable its core sales and lettings businesses to start delivering once again.

They’re vague statements that hugely play down the problems facing the business. They suggest that, as of yet, Countrywide isn’t clear how to rectify its errors and that it seriously needs a helping hand and some fresh, entrepreneurial blood.

The agency has promised to reveal more details on its new strategy in its results on 8 March – a document that will be heavily scrutinised by everyone with an interest in the fast-changing property market.

We can be certain of one thing – if Countrywide doesn’t address its mistakes and introduce a far-reaching strategy that transforms the business, a break-up of the UK’s largest estate agency will be inevitable.


DealMakerz contacted Countrywide during the creation of this article, but they declined to comment.