UK estate agents are on the frontline of global disruption in the sector, according to an extensive new report.
US-based proptech expert Mike DelPrete has published a 200-slide analysis of emerging models in the sector and said that while “nothing is guaranteed” he expects Purplebricks to emerge as a winner against other online agents. His conclusion is, however, unlikely to cause any surprise.
In his report, he highlighted the phenomenal growth of Purplebricks’ share price (+350% since late 2015), as compared to incumbent Countrywide, which saw a drop of 71% over the same period.
He told EYE: “In my opinion, the UK market is at the forefront of industry disruption, especially in the traditional estate agency space.
“The rise of online agencies like Purplebricks and the impact on traditional players is unlike anything I’ve seen in any other markets.”
He said: “The odds are in its favour.
“It has a strong leadership position, growing brand recognition, and the most traction at scale, giving it better economies of scale.”
In his report, he pointed to analysis of listings on Zoopla that showed Purplebricks had more than 16,000 last month, as opposed to Yopa with around 3,000, and its other online rivals including Emoov, Housesimple, Tepilo, easyProperty, Doorsteps and Settled with fewer than 2,000.
He added: “This dynamic is unsurprising due to the lack of product differentiation and network effects [a phenomenon whereby a product or service gains additional value as more people use it].”
He also pointed to the amount of money Purplebricks has raised as compared to its rivals and commented that while it doesn’t guarantee success, it does help.
EYE reported last month that ten of the top online/hybrid agents have raised nearly £250m between them since launch, with Purplebricks accounting for £97m of that figure, and Yopa a further £58.6m.
Singling out Purplebricks for further analysis, he said the business was “scaling well”, relying on figures from its annual report that show its revenues have more than doubled between 2016 and 2017 with only a small increase in marketing spend.
Purplebricks’ full-year revenue shot up 132% from £18.6m in 2016 to £43.2m last year.
Over the same period, its marketing costs rose from £12.9m to £14.4m, according to its annual reports.
Meanwhile, DelPrete has calculated that its marketing return on investment (based on revenue per £1 spent) will be at a multiple of 4x in the first half of this year, up from 2.8x in the first half of 2017.
He also referred to Yopa, Tepilo, HouseSimple and Emoov as “runner-up” UK online agencies.
When it came to the US market, he named Opendoor, which buys houses from consumers and then flips them, as one of the biggest disruptors.
Drawing conclusions from his research, DelPrete urged agents to explain their customer proposition clearly and concisely and to have one clear call to action (typically offering a valuation).
He said: “Less is more. Keep it simple. Don’t confuse users by offering too many options.”
He also predicted that in five years’ time the industry will look similar but with more consumer choice.
While online agents are expected to grow their share of the market, he added: “Agents aren’t going anywhere.”
“There is a strong correlation between keeping people involved in the process and traction.
“In other words, tech-only solutions have limited traction.”
You can view the full report here.