Maybe real estate agents aren’t ready to be disrupted? Or is it just where the market is at?
I’ve been following the PurpleBricks story with some interest.
Basically, PurpleBricks wants to disrupt the real estate agent business. So far it’s done pretty well in the UK, but its foray into Australia isn’t faring too well, at least according to the Australian Financial Review:
(with the disclaimer that bad news could always be about PurpleBricks failing to grease the palm of their media suppliers – I’m always open to that idea.) Anyway:
“Broke” real estate agents are quitting British disrupter Purplebricks in droves as the fixed-fee agency’s low-margin, high-turnover business struggles to achieve enough sales amid a slowing Australian housing market.
Research by The Australian Financial Review found at least 27 agents had quit Purplebricks Australia since March with overall agent numbers now down to 88 from 105 reported by the company in October when it filed its British interim results.
Purplebricks territory owners (franchisees) and agents, who spoke to the Financial Review, said they were struggling to make a living and were preparing exit paths after the $100,000 to $180,000-a-year salaries they were told they could earn failed to materialise.
… Internal sales documents obtained by The Australian Financial Review covering the first two weeks of June highlighted underperformance by its NSW agents.
The documents indicated that 27 NSW Purplebricks agents secured a combined 26 listings.
… Agents who earn $1000 per instruction – with the remaining near $5000 of the upfront fee going to Purplebricks – require a high volume of listings to make a living.
I don’t think PurpleBricks is the disruptor it paints itself out to be. It’s not fundamentally changing the business model. Rather, it’s simply restructuring the back end – leaving the front-end – the real estate agent – in place.
And that structuring seems to be selling itself on sort of economies of scale (a large RE company with no physical offices), and apparently using its muscle to squeeze real estate agents on their cut.
It’s not all that disruptive. It’s not Uber.
And just like real estate agents, it’s a volumes business. Success depends more on the number of properties you sell rather than the price you get for them. And being flat-fee, then it all depends on volume.
It’s just that right now, market conditions are making it tough for volumes businesses. There’s a lot of doubt in the market, buyers are cautious, and vendors are preferring to hold.
And so sales volumes are now tracking below their ten-year average:
The sleepiness of the market is showing up in New Home Sales as well, with a pronounced downturn continuing:
So with volumes approaching some of the lowest levels in years, this is a crappy time to be trying to launch a volumes business, no matter how disruptive you are.
That, and ‘PurpleBricks’ as a name sucks. It makes you think of toy lego or something (the only purple brick I think I’ve ever seen), and that opens you up for existing agents to attack you on your professionalism, which they’ve done.
That, and I’ve pronounced it BurplePricks on at least three separate occasions.
And so for now, looks like your real estate agent is safe.
I still think the market is ripe for disruption.
But it won’t be today.