‘Only two to three online players will be left and we’ll be one of them’ – says easyProperty boss

As the market for online and hybrid agents evolves there will only be two to three major players left standing.

That’s the prediction from easyProperty boss Jon Cooke, who said he expects his firm to be one of them.

Cooke was expanding on comments he made at the NAEA Propertymark conference in London on Wednesday.

The easyProperty chief executive questioned whether some of his online competitors (who he did not name) could continue to afford the “astronomical” amounts of money they are spending to acquire new customers.

Commenting further to EYE yesterday, he said: “Property Industry Eye itself did a very good article saying £250m has been spent to gain 6% market share and the continuing growth of the online sector very much revolves around some of our competitors’ continuing marketing spend above the line, which creates a cost per acquisition which must challenge the future funding opportunities I would think.

“We are talking about existing players. I don’t think there will be any additional players coming in.

“Is it [their market share] going to end up being 6% or 10% or 20%?

“I think they very much depends on some deep pockets of one or two of our more mainstream competitors and I am not sure that they are going to continue to be able to draw down these funds but obviously that is my opinion.

“There will be two or three players as it washes out, and we will be one of them because we work with local estate agents.

“We have a very cost-effective licence that the agent buys for our technology and the brand and we support our licensees in a hyper-local strategy.”

He added that easyProperty’s own cost per acquisition was lower than its rivals, thanks to this “hyper-local” strategy, which he claimed sees 87% of leads coming in digitally and via the local, independent agents it works with.

At the conference, Cooke also asserted that a lower cost hybrid model reflected a change in consumers’ behaviour and the fact that they wanted to “transact on their own terms”.

He said: “What the change in the last few years has done is that it has empowered the consumer and there is more transparency about what is on offer.

“They are able to make a choice.

“At our price point for easyProperty you are pretty aware that you are going to have to do some of the work yourself – let’s be frank about it.

But responding to his comments, Martyn Baum, group residential manager of Arnold Keys in Norfolk, said: “I am not sure they do realise that.

“I have people come into my branches who are selling their property who don’t understand that there isn’t going to be any sales progression [with online agents] added into the service that they pay for.

“Unfortunately we end up stepping in to do that for them.”

* Separately, easyProperty is offering its service for free in Rugby, writes Marc Shoffman.

The offer started yesterday and will finish at the end of this month.

It includes easyProperty Rugby’s sales service, normally charged at £595, which includes Rightmove marketing, a For Sale board, professional photography, a viewing arrangement service, offer negotiation and sales progression.

Adam Day, head of operations at easyProperty, said: “This is all part of our hyper-local marketing strategy that is being delivered through our licensee network.

“All of our licensees have the flexibility to offer our sales service at a discount if they choose too.

“When traditional agents launch into a new area they will often offer their service for free to quickly establish themselves in that area – easyProperty Rugby is quite simply taking a similar approach offering our £595 sales service to vendors for free for the month of March.”

 

Revealed: The hundreds of millions poured into online and hybrid agents

Ten of the UK’s top online/hybrid agents have raised nearly £250m between them since they were launched.

Nearly 40% of that figure is accounted for by Purplebricks alone.

EYE looked into the funding of 14 of the biggest names in the sector to see how much financial backing they have received since their respective launches.

While it isn’t possible to be completely accurate, every effort has been made to get as close as possible to the most likely figure.

In some cases, well-known names have been entirely self-funded, whereas others have received huge levels of backing from investors.

The list, in order of the amount of financial backing received, is as follows:

1) Purplebricks: £97m
Purplebricks raised £22m ahead of its IPO 2015, £25m at its IPO, and a further £50m through an issue of new shares in 2017.

A spokesman for Purplebricks said: “As at October 31, Purplebricks reported £64.4m and no debt, following cash reducing £6.9m in the half – which broadly matches US start-up losses. So all in all the company has raised £97m for a business which is today valued at £1.1bn.”

2) Yopa: £58.6m
Yopa won the backing of Grosvenor Hill Ventures, the investment arm of Savills, when it was just six months old, with £16m in funding. It raised £15m from investors including Daily Mail and General Trust (DMGT) and Grosvenor Hill Ventures in May 2017. That was followed by another £27.6m in September 2017, of which £20m was from LSL Property Services and a further £7.6m was from DMGT (the Daily Mail).

3) HouseSimple: £33m
HouseSimple, launched in 2015 by Alex and Sophie Gosling, raised £13m in a funding round led by Carphone Warehouse founder Sir Charles Dunstone and his business partner Roger Taylor via Toscafund Asset Management and Freston Ventures. That was followed in December 2017 by another £20m investment.

4) easyProperty: £27m
EasyProperty started with a £1.4m round of crowdfunding in 2014, followed by a £9.75m share placement in September 2014. A third round of funding in 2015 saw it raise another £16m from Toscafund prior to its merger with GPEA.

5) Emoov: £16m
Emoov has raised £16m over four rounds of funding, including £1.95m in 2014, £1.5m in January 2015, £2.6m in October 2015, £50,000 in December 2016 and £9m in August 2017 from venture capitalists.

6) EweMove: £9m
EweMove was self-funded by its founders until Property Franchise bought it for £15m of which £8m was upfront and £7m deferred subsequently re-negotiated to a total of £9m, which has now been fully paid up.

7) House Network: £5m
House Network, founded in 2004 by current CEO Mark Readings, grew organically and received only low levels of funding until a 2017 cash injection of £5m from private investors. It aims to break even within two years.

8) Settled: £2.4m
Settled has raised £2.4m, including around £150,000 in seed funding in November 2014, followed by £1m in July 2016 and then another £1.2m in June 2017 from venture capitalists Connect Ventures and Piton Capital.

9) Sellmyhome: £1m
Sellmyhome has raised £1m.

Director Will Clark said: “MyHomeGroup – (SellMyHome & RentMyHome) is privately owned and has grown revenues in excess of 200% year on year over the last three years.

“We are focused on building a brand known for premium customer service and benefit greatly from our natural brand recognition.

“To date we have received around £1m investment and the business has yet to receive external funding.”

10) Doorsteps.co.uk: £507,000
Akshay Ruparelia, who founded Doorsteps last year while still at school, initially raised £7,000 from family followed by £500,000 on crowdfunding platform Crowdcube last summer. The largest private investor in that round was Julian Mylchreest, a senior managing director of Bank of America Merrill Lynch.

Taken together, the ten agencies above have raised £249.5m between them.

EYE contacted four further agencies.

Springbok could not be reached for comment.

Express Estate Agency claims to be self-funded but has not provided further details.

Tepilo, which is owned by Northern & Shell, would not comment on its funding and few details are publicly available.

Hatched, owned by Connells, also declined to comment.

The Property Franchise Group backs franchisees to make more acquisitions

The Property Franchise Group (TPFG), which owns brands including Martin & Co and EweMove, is to help its franchisees hunt for more acquisitions this year.

The firm said it assisted its franchisees in acquiring 2,012 managed properties last year and aims to surpass this figure in 2018.

Chief executive Ian Wilson said: “We are off to a flying start with three portfolio acquisitions completed already, all of them are goodwill deals which ‘bolt on’ tenanted managed portfolio to existing businesses, and improve bottom line profits.”

Whitegates in Halifax bolted on a managed portfolio, while Martin & Co Southend completed on the acquisition of Fox Estate Agents in Rochford, Essex.

CJ Hole in Cheltenham completed on the acquisition of Rent Cheltenham on February 2, adding 63 managed properties

Meanwhile, TPFG franchisee Tony Linberg, who acquired Global Estates of Southchurch in Southend last year, aims to grow the 700 properties he manages to 1,000 through a mixture of organic growth and acquisitions, Wilson said.

Sharon Titchmarsh, of brokers Watson Stanley, acting as acquisition consultant for TPFG, said: “These latest transactions are strong evidence that the sales market for managed lettings portfolios is active, and showcases the appetite that the group’s franchisees have to agree further deals.

“We are continuing to assist the Group with acquiring further businesses as there is funding available to the franchisees to be able to do this.”

Other brands in the TPFG stable include Ellis & Co and Parkers.

Separately, Chris Webb, formerly of Countrywide, has joined EweMove to take on the role of performance director, in support of its franchisees.

His role will be to help EweMove’s franchisees, of which there are more than 100, to grow their businesses, as well as to help set up and develop new additions to the network.

Webb said: “What especially drew me to the brand was its effectiveness in bringing together the very best aspects of traditional and online estate agency.

“Having come from a very traditional background, I’m looking forward to further establishing EweMove as a serious alternative, and the go-to estate agency.”

Most onliners now offering ‘no sale, no fee’ as industry shifts

Eleven of the top 15 hybrid/online agents now charge on a ‘no sale, no fee’ basis, or offer an option to do so, begging the question as to whether overwhelming market leader Purplebricks will follow.

Yopa – backed by Savills and LSL – yesterday became the latest online agent to offer such a ‘no sale, no fee’ option.

It now offers a flat rate fee of either £1,495 or £2,695 depending on where clients live as a ‘no sale, no fee’ option.

That’s more than its traditional fee structure, which costs either £839 or £1,399, with the option to pay upfront or through a ten-month payment plan.

It is backing up the change with two new national TV ads and national radio ads.

The move means that of the top 15 hybrid/online estate agencies by listings (as ranked by a mystery league table published last year), the only firms believed not to offer a ‘no sale, no fee’ option are Purplebricks, Tepilo and Doorsteps.

Eleven other brands in the list all offer some sort of ‘no sale, no fee’ option, or in the case of easyProperty, it charges £295 upfront and a completion fee of £595.

It is not known how a 12th firm, Excel Estate Agency, charges its clients and EYE has been unable to reach the business at the time of writing.

In order of the ranking of the top online/hybrid estate agencies in the UK by number of available properties in December, EYE has attempted to establish what fee options these businesses offer:

1) Purplebricks: a flat fee of £849 or £1,199 in London and surrounding areas. No ‘no sale, no fee’ option available.

2) Express Estate Agency: charges on a ‘no sale, no fee’ basis with a typical fee of 1-1.5%.

3) Yopa: flat fee of £839 or £1,399, or a ‘no sale, no fee’ option of £1,495 or £2,695, depending on location.

4) HouseSimple: standard flat fee of £695, or £1,495 on a ‘no sale, no fee’ basis, payable on completion.

5) EasyProperty.com: recently dropped deferred payments and now charges £295 upfront and £595 on completion, as of January 2018.

6) Emoov.co.uk: standard flat fee of £795 upfront, or £1,495 ‘no sale, no fee’ option, payable on completion.

7) Tepilo: fixed fee from £645 (for the Essential package, £895 for the Classic package, or £1,295 for the Premium package). No ‘no sale, no fee’ option available.

8) Springbok Properties: offers a ‘no sale, no fee’ package “guaranteed”. EYE has contacted Springbok for further details.

9)  Doorsteps.co.uk: three fee options at £99 inc VAT, £199 inc VAT, £499 inc VAT. It does not offer a ‘no sale, no fee’ option.

10) EweMove: operates on a ‘no sale, no fee’ basis. EYE has asked for further details on typical fees.

11) House Network: a flat fee of £795 with no VAT or extras, or a £1495 ‘no sale, no fee’ option.

12) Hatched.co.uk: upfront flat fee of £495, or a payment deferred option of £895. Offers a traditional ‘no sale, no fee package’. EYE has requested further details.

13) Open House Estate Agents: managing director Alex Morrison explained that agents are free to choose their charging structure but that around 80% charge on a ‘no sale, no fee’ basis, with a typical fee of 0.75%.

14) Excel Estate Agency: EYE contacted Excel Estate Agency but no-one was immediately available and there are few details of its charging structure available.

15) Settled: charges a flat fee of £2,200 on a ‘no sale, no fee’ basis.

The question now is whether Purplebricks will move to a ‘no sale, no fee’ model. Analysts do not seem to think so.

One sector insider told us: “Their model is very much ‘list it’ rather than ‘sell it’. I don’t think it would stack up commercially for them to not be paid for months on a high proportion of listings and to have to add hundreds of sales progressors to ensure they got the ‘no sale, no fee’ deals completed.

“My understanding is they don’t even check chains or buyer finances and so they’re way behind the curve on this.

“As far as I understand it, they have just 40 ‘post-sale consultants’ overseeing 15,000 sales. Adding ‘no sale, no fee’ would dilute their upfront proposition.”

A spokesman for Purplebricks said: “Should our customers tell us they would like the choice to pay higher fees for the same quality service and that they don’t mind subsidizing those who don’t sell then consideration will always be given to meeting our customers needs.

“At the moment thousands every month tell us they prefer a fair, fixed fee.”

Online agent EweMove’s losses are reversed, says Property Franchise Group

The losses that its online agent EweMove made in the first half of its financial year have been “substantially reversed”.

That’s according to a trading update from its parent company The Property Franchise Group (TPFG) for the year to December 31, 2017, issued yesterday ahead of its full-year results on April 10, 2018.

TPFG, which also owns the Martin & Co, CJ Hole, Ellis & Co, Parkers and Whitegates brands, said its revenue increased by 23% to £10.2m during the year, while its network of offices expanded to 403 (made up of 283 traditional brands and 120 EweMove) up from 377 in 2016.

EweMove recruited 31 new franchisees during the 2017, with another six franchisees for its more traditional brands.

Despite the prospect of the introduction of a tenant fees ban in spring 2019, TPFG said it was still eyeing expansion in the private rented sector and did not expect there to be any adverse impact on trading for the financial year to December 31, 2018.

TPFG remains heavily weighted towards lettings, which accounts for 70% of management service fees (against 74% in 2016).

Nonetheless, chief executive Ian Wilson said that 2017 was a tougher year of trading than 2016, particularly for sales in London.

He added: “Our network continues to grow, with our traditional brands having performed very well, and benefitted from website improvements applied using insights gained from EweMove.

“These improvements generated 17,000 new business leads for franchisees from pay-per-click campaigns, with website lead volumes increasing between 200% and 550% year-on-year in Q4 17.

“The trading losses incurred at our EweMove subsidiary in H1 17 were substantially reversed in H2 17 trading, during which period EweMove traded profitably.

“Franchisee recruitment continues to be an area of focus at EweMove, particularly the number of experienced estate agents being recruited.

“The new managing director at EweMove, having joined in June 2017, has made a very positive impact, turning around profitability and supporting the business development of existing franchisees.”

EweMove, bought for £9m in September 2016, lost £300,000 on revenues of just £900,000 in the first half of 2017, while the two founders left in June of that year.

Nick Neill, the York franchisee, was subsequently appointed managing director.

Exodus from EweMove revealed after franchisees ‘feel sold down the river’

An exodus of franchisees from EweMove has been revealed.

Ian Wilson, CEO of the Property Franchise Group which acquired the business last year, told EYE that around 20 have either left the network or are in the process of leaving.

He said: “When we bought the business, they felt they had been sold down the river.

“They believed EweMove stood for everything that was not corporate, and they did not like it that the founders should have sold out to a plc, while pocketing millions.”

EweMove, bought for £9m last September, lost £300,000 on revenues of just £900,000 in the first half of this year, while the two founders left in June.

It is now forecast by broker James Fletcher at Cenkos that the loss will be cut to £100,000 on revenues of £1.8m in the second half of this year.

Is this in line with Wilson’s own expectations when he bought EweMove? “We had expected it to grow faster, and the churn has certainly been more than we expected.”

He said that because of the disillusionment, it had been important to try and recruit a new managing director ‘from the flock’.

Wilson said that Nick Neill, the York franchisee, had been the best performing ‘shepherd’. He had also stood up to exacting selection procedures at a time when Wilson was also recruiting managing directors for Martin & Co and Xperience.

Wilson said: “We had 120 candidates for the three roles, and I did 26 back-to-back interviews over four days.

“The applicants included four ex-directors of Countrywide, and others so high profile that they said they could not be seen coming into the London hotel where I did most of the interviews because they did not want to be recognised.”

An immediate goal is to reverse the exodus from EweMove – which Wilson said had had the benefit of leaving the best-performing franchisees.

Wilson said: “One of the glaring problems has been a total lack of support for new franchisees. That is totally unacceptable. We are implementing programmes of training, which will include going back to existing sheep and doing refresher training.”

He said that previous owners David Laycock and Glenn Ackroyd had burned through £200,000 in about four months on a recruitment drive – but this had not yielded results. Wilson said he felt this was because the pair had not really wanted to depart from their original vision of recruiting people from a non-agency background.

Traditionally, Wilson said, the mix of franchisees has been 95:5 in favour of people with no agency experience. He wants to get this to 50:50 as soon as possible, and eventually to 25:75.

There will, be says, be a major recruitment campaign “which will fish where the agents are”.

He added: “We are also aware of a churn of Local Property Experts from Purplebricks. We are specifically targeting them, using social media with messages such as ‘We’re sorry it didn’t work out’, and asking them to consider us.”

Wilson said: “It has become very difficult to sell a high street franchise, and easier to sell an online or hybrid.

“However, one of the problems in today’s market is the length of time it takes to sell houses, which means that for a new franchisee, it is likely to be six months before they start generating revenue.

“We are therefore paying new EweMove franchisees on listings, at £250 each.”

Wilson believes that in terms of listings, the online/hybrid sector has 7% market share: “It is less clear when it comes to sales because of lack of data, but we think it is about 6-7%.”

He believes the future landscape will pan out to two big players, plus a main ‘challenger’ and then a tail.

He also believes the big two could be Purplebricks and EweMove, but adds: “The real disruptor will be the online agent that offers a refund if they don’t sell your house.

“That will be the game changer.

“EweMove of course don’t need to do it, because it operates on a no sale, no fee basis.”

Does he regret buying EweMove? No.

Will he change its name? No.

Was his due diligence at fault? “No. We were aware of problems.

“For example, Glenn and David dealt with under-performance by cutting the amount of money that the franchisee had to pay.

“We deal with under-performance by turning it around into performance.”