Purplebricks is set to be the first online agent to launch on the stock market, and has no branches.
But before launching their business, the Bruce brothers considered running it alongside a traditional high street model.
In an interview with EYE yesterday, Michael Bruce revealed that having considered the idea, they dismissed it as impossible.
He said: “It would have been a question of credibility. You would have had employees competing against each other for the same instruction and offering different prices, and all from the same company – it would have been an enormous difficulty.”
Bruce said that the chief executives of large traditional firms such as Countrywide and LSL would be faced with exactly the same challenge if they want to have an online offering.
He said: “The only thing they can do is to build a tech-based alternative to their own models, but for every pound you put into building that alternative, you damage your existing business.”
Purplebricks is set to start trading on the AIM stock market on December 17 with a likely market capitalisation of £240.3m.
A year ago, the company was worth £7m.
Bruce said the leap in value was a reflection of confidence in the company’s growth.
He said: “We have invested in building our teams, marketing and technology. We launched in April 2014 in just one area, the Meridian region, before taking a view to accelerate growth. Between February and July this year, we expanded to cover the whole country, culminating in a launch in Scotland just a few weeks ago.
“We have also built a lettings operation, and we will be launching a new app in January. So we are still very much in growth mode.”
A document released yesterday in connection with the forthcoming flotation says that Purplebricks’s revenue in September was ten times greater than the previous year.
But has Purplebricks yet made a profit?
Bruce said that he was unable to discuss financials under stock market listing rules but said that with such heavy investment in the firm’s development and growth, “we did not expect to be making enormous sums of money” at the moment.
Asked about the Treasury’s new paper, which specifically cites online-only estate agents, Bruce said: “I find it very encouraging that online agents should be openly promoted by the Chancellor.”
Do traditional estate agents have a future?
Bruce – who with his brother Kenny ran high street chain Burchell Edwards until selling it to Connells – said: “Ultimately, it will be the consumer who decides. I do think that some traditional models will become more boutique.” He also forecasts a growth in hybrid models.
He said that Purplebricks had not been affected by a shortage of stock: “We have not seen it, reflecting our growth mode.”
Bruce also said that Purplebricks is selling houses – and more quickly than its online rivals.
He said: “When we go on a valuation, we rarely come up against other online agents. Instead, we come up against high street agents, but unlike them, we don’t get any churn of customers.”
According to yesterday’s document, Purplebricks has the fourth highest number of fee-paying customers of any estate agent in the UK, and has 60% market share among online agents. It currently has around 4,300 properties for sale, over twice that of the next largest online agency.
It charges an average of £1,080 per sale and currently has a network of 165 local property experts, who are paid a fixed fee per instruction plus commission for the sale of other products – for example, an EPC, Rightmove premium listing, or accompanied viewings. A total of 55 local property experts have engaged sub-licensees in their business.
Bruce said: “The business model is disruptive and has allowed us to establish Purplebricks as a nationwide agency at a lower investment than a traditional agency, with a more flexible cost structure which supports the sustainability of our pricing strategy.
“The IPO will represent a major milestone in the rapid development of Purplebricks, which is already the fourth largest estate agency in the UK based on a monthly run rate of the company’s transaction numbers.”
A beneficiary of the flotation will be fund manager Neil Woodford, who has a 28.7% stake in the company, which will be worth around £73m. He first invested in the company in August 2014, buying a 30% stake. He reportedly invested further this summer when the firm was valued at £100m.
Michael Bruce
Comments (43)
Well they would say that, wouldn’t they. They couldn’t run a high street estate agents, that’s true. Just love the ‘Phoenix brothers’
http://www.derbytelegraph.co.uk/Accountants-tight-lipped-estate-agent-debts/story-11636893-detail/story.html
All very nice, Ivy Gate are going to the US of A and are feeling very positive about it all, Purplebricks are worth more than the rest of us put together, Emmov’s illustrious leader is as moist around his zipper as always regardless of the subject and we have a nice bit of commentary from a variety of snot ball working from their bedroom online only types who think that because they don’t have a high street shop they are therefore similar to the above lot in some way.
Poor souls. Let’s assume PB or one of them does dominate the online world, could be easyproperty, PB, who knows could be Connells or Countrywide, point is you have to do it big style and being a shouty plonker preaching to us here won’t cut it.
Ill have a punt at a prediction, I’ve never been right on stuff like this but by 2020 there will be an online EA equivalent to Amazon and the full service lot / the rest of us, the ‘Amazon’ winner will be the one that can rinse through millions of quid of other people’s money the best……you can hold me to that too.
Jonnie
The traditional high streets agencies can dismiss PB, but things are changing and if you don’t accept it at some point, you’ll regret it.
PB has over 4000 listings, Express Estate Agency has over 4000 listings, Emoove has over 1800 listings……………..whats my point? These are in 95% + of the time, sole agency listings, ie – NOT with trad EA. This is just some of the big boys, combined OEA even higher.
Wake up people, the tides turning and whether or not you believe, PB is about to set a precedent that will change EA forever.
Ok so I do this crazy thing where I use my words to say exactly what I mean and dude, £240m is awesome. That’s like enough Rizla for life. Jeez that Bert & Ernie tv act sure knows how to read an audience. Or catfish. Come on, £240m and they nickel & dime us on the profits. You have to figure if PB needs to misrepresent its position to get in on the conversation then maybe the conversation’s not worth having.
I guess taking your clothes to the river and beating them with a rock ain’t cool anymore so yes, maybe we need to try another version of ourselves (sad face emoji). I can dig that dude but what’s with the rush to puree agency. Sweet baby J*sus I’d rather ****** a purse in the parking lot than go online right now and there’s no scenario where that happens and I make money. That ship sailed, hit an iceberg and then somehow caught fire. I’m peachy though. Have to be when you remember the high street articulates agency. Online only allows the broadest brush.
The calculator with the slidey bars at the bottom of their home page shows you how much you can allegedly save by using their services compared to a “traditional” agent.
For comparison purposes it (correctly) includes VAT within their quoted fee, but assumes the traditional agents quoted fee excludes VAT and automatically adds 20% onto the calculated figure (e.g. according to their site an agent quoting a fee of 2% to sell a £100,000 property would charge £2,400).
Hard to see how this can’t be construed as misleading. Can anyone be bothered to report it to the ASA?
According to their website they have someone who is a “local property expert” for the East Midlands.
A slightly odd definition of the word “local” methinks.
Didnt you know ‘loca’l meant someone who can go online for comparables and lives in the same country…and the govt. want these pirates to succeed!!
Not sure why everybody is dismissing this, i think it is rather daft and foolish.
I am no fan of online / hybrid but this really should be a wake up call.
PB are floating with a ridiculous figure but they will achieve it, the corporates are buying up online alternatives or talking about it. Other onliners are raising millions in investment almost daily. The government has come out in support of the online model and basically given it an endorsement.
You can kid yourselves this will go away but it wont.
You need to be promoting FULL SERVICE agency to the public, you need to reword your websites, add it to your newspaper / magazine adverts, add it to your sales details, add it to your PPC adverts, social media, talk about it in-depth on your valuations and to people registering on the phone and in the office.
Make no mistake this is a war and they are silently claiming land built on lies on why to use them.
So many of you are putting up stickers in your window re OTM but this is not enough, you need to take the fight to them.
At the moment we have the numbers, and the market share. we can stifle this if we all take it seriously. Hoping the public will see through this and burying heads in the sand will not make it go away.
Talk to Chris Wood at PDQ and find out what the special forces are doing in the background.
Chris is a straight talking honest agent who is doing exactly what you are suggesting.
Thanks Robert,
But to be honest not looking for cosy chats, i just want the industry to wake up and take the fight on before its too late.
The sad thing is i see it coming it coming so clearly. We bury our heads in the sand, and wonder why in 5 years time we have a 50/50 industry left and fees have eroded away to just 0.5%
0.5% ? really ? Charge what your worth, if you are worth more than the clients are prepared to pay change your job.
This is the problem PP, i am not charging 0.5% now but in the future we may all need to. Do you still get 2.5% sole agencies? I use to 20 years ago, impossible now!
If more Budget agents enter the industry and it becomes the “Norm” you will have to drop your fee.
completly agree…property paddy answer is completly annoying to the point you are making.
i expect he sat in all the onthemarket meetings saying how much he cared,,,then stayed with Rightmove…old guard deserve to go bust…
Not sure if PP is a OTM member or not, but yes is rather annoying as its another example of agents burying heads in the sand. I am sure PP is a good local agent and does deserve his 1.5% fee or whatever he is getting at the moment. But if budget becomes the norm he may well still charge 1.5% but will find the numbers he sells diminishes.
I do not want to turn this into an OTM debate as we have enough of them, but would it not be fantastic if the AM part of OTM actually took this fight on? – They already have a core membership base, why not set out local meetings and coordinate a plan of attack?
I am not talking about stickers, but meeting to identify why High Street agents are better and how best to get that message across. I know i would look to join AM if possible and then maybe look to increase membership to OTM if things went well.
I can’t make you out Smile, you want action and someone to lead the industry out of the hole our trade bodies have allowed us to fall into and when offered the chance to discuss matters that obviously concern you with someone capable of fulfilling the role someone who has the support of others you describe the opportunity as a cosy chat.
You want the industry to wake up but want a lie in yourself? I’m not the bloke to lead anyone anywhere Chris Wood is.
If Chris genuinely has a viable alternative there is an arena here he can lay out ideas. No offence Robert but I see the comments re portal juggling which yes is a nuisance but I fail to see highlighting it makes any difference. I mean this with the greatest respect but some things spoken about are idealistic and not pushed through as hard or forceful as can be. Talking in riddles, talking around issues gets you so far. But is all a little school boyish. As much as I dislike the likes of Russell Quirk, Robert Ellis, Bruce Brothers and even Simon Shinerock at times at least they are forceful and to the point and make there point. People may or may not agree with them but you know where they sit and direction they are going.
Here is the problem, #portaljuggling “Sorry Robert that is a learned process we can’t cover that story because..”
“Sorry, yes we can see that some thing seems a little coincidental a bit odd it is blah blah blah.
“Do the Directors know about this?”
” why would they we have processes to detect this”
“But the process has failed!”
“Robert be careful, watch yourself these people have very aggressive legal teams that will tie you up in knots if you..”
The trouble with being honest and having integrity, it is a lonely and isolated place. Enjoy you lay in!
Robert,
It is no way an attack on you by the way.
I think many agents have integrity and are honest.
Maybe this news outlet is not the place to discuss it if you and other are having these issues.
But there in lies the rub, you need money to get your message out or good old fashion knocking on doors.
I am sure could pick up a phone to Chris or even yourself but what would it achieve at this stage? i am sure a delightful half an hour spent discussing the market but what then?
If Chirs, you or any other have a viable organisation that can promote full service agency i am all ears, but i do not have the appetite or time / money to start one or be involved in starting one. When one is ready i would be more than happy to look at it as NAEA and alike in my opinion are not fit for purpose.
I am voicing my opinions on here within the rules, hoping other agents listen and make small but meaningful changes to their business / our industry. They can take them on board or ignore, up to them.
Hopefully you and others will see i make sense and if they are business owners or deal directly with the public they will make changes. If not so be it!
You won’t offend me even if you were to try. I am here of my own free will and reap the rewards of my posts and opinions.
We are not looking to you to be involved in anything other than being made of a collusion where both trade press sites are wary of litigation even though there is clear evidence of wrong doing.
Firstly Mr Bless You. I didn’t attend onthemuddle because I have a wee history in web development and I knew their website would take at least 12 months before they got any real traction, so no point waisting my money there.
Secondly I may be annoying but it is true, unless you are a registered charity you will charge what you are worth (or at the very least what the industry norm is willing to pay) and if it isn’t enough….Get out!
FULL SERVICE agents…i like that….this is what this website should be doing..giving us ideas… not making us get the purpleshits!!!
5***** Agency
Office
Trained staff
Local Office
Accompanied Viewings
No Sale No fee –
woops who has the 5th star?
oh yes
National Websites…who screw you over and charge you 12k per year…
7 Million a year ago…… and circa 250 Million now?
Wow….. that’s just amazing???!!
Truly amazing??!
Unbelievable?!!
Let’s just close the High Street, Town Centre, City, Regional, National businesses, in fact forget it all….. close the UK and lets just have uk.com …….surely that is the only way to go when we see this spectacular purple example of growth?!
Wake me up when this online farce has exploded and the shares in hankies have exploded as a result! …….as always, winners & losers!
Here’s my prediction, after they float and the numbers are under more scrutiny they’ll have to cut back on advertising and because they have the odd board up all over the u.k. the enquiries will start to decrease and board numbers will drop……#triedtogolargetoosoon
They (PB) could get loads of boards up when they get their money from the poor (to be) investors. They’re called BILL BOARDS, cos that’s all they’ll gona have till the money runs out.
tbf they arent doing that well for how much t.v. they are doing.. cant give it away for some reason..maybe people know trustpilot is ******** as well
The boy who cried wolf. The thing that will seal PB fate will be one or all of the big groups acquiring part or whole of a sustainable technology enabled agency proposition and rolling it out in a staff friendly manner a la John Lewis
108 take-ons a year to earn an average wage or 8 each working week to earn the dangled carrot £100k.
The average branch will average about 100 listings each year off the back all the local networking, staff connections, local reputation, physical presence of office and boards, previous clients, referrals and recommendations.
I really would like to know how anyone who understands the dynamics of selling property thinks any rep can hope to use price to outperform everything a branch agency has going for it.
Anyone that good would set up in business on their own, as 1 person I know has, and earn over £250,000 in commission by doing the job properly not cheaply.
Sounds like Mr Woodford knows how to put a darn good fund raising vehicle together having only diluted by 1.3%
Will he be exiting at the norm VC 5 years
Wouldn’t expect a profit from such an early stage startup who have clearly invested extremely heavily in some very smart marketing indeed.
Very interesting to see the explanation of the conflict between bricks and mortar and online – they seem to be the first people to come out publicly on this particularly thorny (but very very real) channel conflict.
I wish PB well. Online is the way forward for sure especially when combined with having an high street presence. Hybrid Estate Agents offer best of both.
REALLY?
Then why does your entire register of properties For Sale AND To Let appear to total THREE?
And why are you displaying the OnTheMarket logo when you do not advertise on the site?
Same goes for Zoopla, for that matter?
Answers, on a postcard, please…
Funny! There have been a few other dot com bubbles over the years. Perhaps it should be called purple bubbles, bricks are solid…
But has Purplebricks yet made a profit?
Bruce said that he was unable to discuss financials under stock market listing rules
Hmm…
We can talk about our fees, number of listings, our position in terms of online agents – ie everything –
But we can’t talk about profit 🙂
Surely you remember that by May 2016 Purplebricks will be bring in £25,000,000 profit, in just 6 months time there will be £25 million sat there.The reason he isn’t mentioning it is because it’s vulgar to boast about such things.
I’ve been having a little firkle with the numbers for a couple of weeks, an extension of the #portaljuggling investigation; A junior negotiator in a independent agency covering a single post code would earn at least minimum wage with the boss hopefully doing a little bit better. The reps on 50% commission of take on volume earn £89 pcm for my local post code [which supports 3 branch agencies and cross over occasionals for 4 or 5 other agents] that isn’t £89 each that is £89 shared between 4 of them.
I don’t care who invests in Purplebricks , how much money anyone makes out of the deal, I think about the poor 5od5 who are really funding the golden harvest, those people promised £8000 a month as listers who as presumably not employees aren’t entitled to minimum wage and are sat there 6 weeks between take-ons for a given postcode area.
Optimhome came to Britain a few years ago from a strong base in Europe, with COAR so closely mirroring that model see if you can find an Optimhome rep pulling in £100k
Actually Optimhome business plan was hybrid not online exclusively they worked on the assumption that they could offer the same level of service as a high street agency on a no sale no fee basis but only charge 1/2 the normal agency fee.
Frederique the chairman thought UK estate agents charged an average of 2% he wasn’t too pleased when he was informed by yours truly that this wasn’t the case.
I think there was a business model that optihome could have succeeded with but it didn’t fit with the rest of their European strategy.
C’est la vie as they say in Putney !!!
I stand corrected on the fine detail Paddy but did I gather from their brief invasion they were self employed area reps?
sorry for the tardy reply.
They were to pay optihome monthly for all their marketing, and other “head office” support including sales progression.
in return optihome would give them back 90% of all the commission (obviously they would take their monthly subscription out of the commission too)
I don’t think they said £100K but you could if you wanted to by listing and selling almost as many as a high street agency but at half the fee.
The subscription was about £350 p/m but don’t quote me as it was a bit vague on rightmove and other marketing costs at the time.
great point but can you seriously get a maximium word count on your posts for these essays,,iam a busy person
I was initially scared of purpleshits but now i see that there is only room for 1 online pirate at a time.
Express agents charging 2% for a picture of Ian Botham was the last one.
I guess good always beats evil…even though the media is swallowing this garbage about traditional agents being the bad guy for paying staff a decent wage and having an office paying rates….yeah,,really evil.
so I should spread the number of words over more small posts that don’t say anything?,, iwill try,,
I was replying to Glenn, using language appropriate to him, I actually gave you no consideration at all, forgive me!