Will All Agents Soon Be Hybrid?

We ask both sides of the digital fence what the future may look like

Just a few years ago many traditional estate agents would have brushed off their online counterparts as a joke.

Even the best-known online agents struggled to sell more homes than a busy city centre branch and most consumers viewed them as an interesting but niche part of the property sales and lettings industry.

A Purple patch

And then came the game changer. Purplebricks launched in 2012 and, after initially struggling to gain traction, streaked ahead of the existing online operators such as Emoov and Tepilo.

“While not many in the industry praise Purplebricks for its approach and the way it does many things, the fundamental reason it’s done so well is because there was clearly a gap in the market that many traditional agents weren’t filling,” says Nick Neill of Ewemove.

Purplebricks’ differentiation from the competition initially was to offer ‘local property experts’ who eschew branches and work from home. This gave birth to the concept of the ‘hybrid’ agent rather than the purely online one. It’s a model most of its competitors have since taken on board, including Ewemove: “Our more personal and technology-led approach enables our franchisees to ultimately go out and do what they do best – be with customers,” says CEO Nick Neill.

What is a hybrid agency?

The consensus among many in the industry is that ‘hybrid’ is misleading particularly as many of these companies increasingly offer similar fee structures to traditional agents. The only different in the future, therefore, is likely to be whether an estate agent has high street offices or not – so perhaps ‘branched’ and ‘unbranched’ may soon enter the property lexicon.

Six years on from Purplebricks’ launch and it claims to hold 74% of the online/hybrid property sales market, while according to US tech analyst Mike DelPrete it has 4.5% of the overall property market, making it the largest of the hybrids by a long way. It has gained such an apparently sure footing through an aggressive and (most recently) a £11.4 million marketing campaign, the tone of which its competitors have copied.

Consumers have been mercilessly bombarded via saturation advertising with the simple message that Purplebricks offers the same service as a traditional agent for a much lower fixed fee.

This claim has triggered several ticking offs from the Advertising Standards Authority. It asked Purplebricks to ensure the company was clearer in it adverts that this fee does not include viewings and must be paid up-front.

And much to the fury of traditional agents, more recently Purplebricks went for the jugular with its ‘commerisery’ campaign, which has tarred the idea of traditional agents’ commission with the brush of poor value for money compared to Purplebricks’ low-fee structure.

All this has got under the skin of many independent high street agents, and even more so after the large corporates invested in or bought many of Purplebricks’ competitors including Connells with Hatched, LSL and Savills with Yopa and The Property Franchise Group with Ewemove.

Hybrid agents growing at a rapid pace

But what’s really keeping many traditional estate agents awake at night is the knotty issue of how much market share the hybrids will eventually take from them. Research firm TwentyCI recently said its data showed hybrids hold 8% of the sales market, a figure that has grown by 13% over the past year, achieving just under 16,000 sales a quarter.

Many traditional agents were quick to point out that this left them with 92% of the market, and that the collapse of the high street model that many people had predicted was a long way off. Four years ago Bob Scarff, who at the time was chairman of Countrywide, said that hybrids would eventually take between 20% and 25% of the sales market, a prediction he sticks to today.

Many of the experts talked to by DealMakerz believed that the ‘pay up front’ model cannot survive alone and needs to be offered alongside a ‘no sale, no fee’ one

Scarff, who now runs sales lead generation consultancy Callwell, says the rate at which hybrids have been taking market share has slowed recently, tempered by the realisation among consumers that the up-front fee model adopted by Purplebricks may appear affordable, but often isn’t.

“It’s only cheap if you sell your house and if you don’t then it’s far from cheap,” he says.

Ultimately, many of the experts talked to by DealMakerz believed that the ‘pay up front’ model cannot survive alone and needs to be offered alongside a ‘no sale, no fee’ one.

Scarff says: “Yopa now have this option and it’s the way the market’s going and within the next 18 months to two years, Purplebricks will have a no sale, no fee option too.” And HouseSimple has just launched an online ad that criticises ‘other online agents’ who charge upfront fees while trumpeting its ‘no sale, no fee’ model.

Scarff also says that the slowing sales market means more vendors than normal are reluctant to be speculative and pay their fee upfront, as Purplebricks requires, when “they’re not that sure they’re going to sell,” he says.

And William Carrington, Chairman of data firm Lonres, agrees: “As far as I can see there is no reason why an online offering would be any more immune than a traditional agent to the vagaries of a diminishing market”.

“High street agents simply aren’t moving at a rate that’s sufficient or fast enough to meet their customers’ changing demands”

But Nick Neill is more bullish. He says: “While I would love to see the high street continuing to thrive, provide jobs to people and help local residents with their selling or buying journey, the market is changing, and high street agents simply aren’t moving at a rate that’s sufficient or fast enough to meet their customers’ changing demands”.

High end property owners ignoring hybrids

The market is changing fastest in the areas of the country with the lowest house prices, the TwentyCI research shows. Year-on-year growth in online agents’ market share is lowest in Greater London (+23%) and the South East (+16%) and highest in Yorkshire and the Humber – traditionally the region with the lowest house prices in the UK (+51%) although inner London is also seeing hybrid agents grab more share.

But these figures are all based on growth off a low base, and William Carrington says that the threat posed by Purplebricks in Prime Central London is minimal at “just under 1% of market share”.

The hybrids are touchy about this sort of assertion that they don’t appeal to posh folk with expensive houses.
Nick Neil says what his customers care about – no matter what their background or price range – is getting the best value for their property and quick completions.

“Our standard and only offer is a premium service, regardless of the house value. We work with customers selling houses across the full market range, irrespective of whether it’s a £50,000 property or a £5,000,000 one,” he says.

Bob Scarff agrees: “Imagine if you will a no sale, no fee agent with no branches and good tech and a good upmarket brand’s backing, then I can see people selling £2-3 million houses being attracted to that.

“It won’t reach a quarter of that market because they’ve got to offer expertise and fight snobbery, but it could reach 5% of the top end of the market.” But one lesson learned painfully by several estate agents as they’ve attempted to fend off Purplebricks is that agents can’t mix a hybrid and a traditional model within the same branch.

Countrywide most famously tried this in early 2017, a move that ultimately led to the departure of its CEO Alison Platt a year later when it’s hybrid offering flopped. Also, earlier this summer Howard Cundey in East Sussex came to grief when it tried a similar move.

“I said some time ago that Countrywide’s hybrid offering would confuse the public and that’s exactly how it turned out.” – Bob Scarff, ex-Chairman, Countrywide

“Clearly, trying to do two completely different propositions with a brand is like trying to push water uphill,” says Scarff.

“I said some time ago that [Countrywide’s hybrid offering] would confuse the public and it would confuse the staff and that’s exactly how it turned out.”

Nick Neil makes a comparison with hotels, pointing out that companies in that sector always separate out their different offerings, rather than putting both budget and premium rooms in the same hotel.

“Both [kinds of hotel room] have a place in the market but they are clearly separate in their product offer and how they deliver that product to the consumers who buy it. Clarity is key,” he says.

Branches could close en masse

One unintended effect of the growth of hybrids will be to accelerate the closing of branches across the UK, according to Sohail Rashid, CEO of sales progression tool ViewMyChain.com. He believes there could be a shake-out of up to a quarter of all branches over the next three to five years driven by a combination of agents going bust and the remainder changing the way customers are served, whether they are hybrid or not.

“I think that what we will see is better branch networks – by which I mean agents will exit more from the high street but have more cost effective out-of-town offices instead, or ‘hubs’ containing two or three branches,” he says.

“We’re not seeing that happen yet, but we know that’s on the agenda for a lot agents. And that’s an opportunity for proptech, because we can help agents who want to ‘re-skin’ in this way.”

Russell Quirk of Emoov takes the same view, believing that the “absolute utopia” is an industry with some branches that allow companies to have a regional presence but not be a slave to those overheads as the high street is currently, with “different fee choices via different brands,” he says.

This change will also open the door for hybrids to get to grips with lettings, the other half of the industry they’ve largely left alone until now.

Upad has yet to reach significant scale and Purplebricks doesn’t talk about lettings much, partly because it requires a lot more time and effort to rent out a property than it does to sell one, and hard-press LPEs tend to chase the sales commission first.

Quirk says his company’s merger with two other hybrid agents which included early pioneer Urban will be a game changer for the lettings industry and will kick off the same revolution for rented properties as Purplebricks has done for sales. This, for many agents already worrying about the looming tenant fees ban, may again prove to be a joke they should not brush off so easily.

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