Purplebricks facing a struggle in key American market, says analyst

Purplebricks is struggling in Phoenix, USA, where it launched in June, it has been claimed.

Commentator Mike DelPrete says that Phoenix was the ‘sweet spot’ for Purplebricks because while Southern California and New York are expensive markets, the Purplebricks proposition resonates with mid-market customers.

DelPrete says: “Phoenix is that market.”

However, he says that traction there has been modest. In five months, he claims there have been 75 listings and 26 sales.

He also claims that Purplebricks is struggling to recruit and retain brokers in Phoenix.

DelPrete says: “If we assume a broker is paid $1,000 of the $3,600 listing fee, that’s a very low effective annual pay package.

“I still believe Phoenix is the right market for Purplebricks . . . This – not more expensive markets – is the sweet spot for the fixed fee proposition.”

DelPrete goes on to say that the US real estate market is undergoing significant change, with new players rapidly growing market share at the expense of traditional firms.

DelPrete notes that Phoenix is only one out of several markets in the US where Purplebricks launched some 14 months ago.

But he says that in its first eight months, Purplebricks had 582 total listings nationally: “If Purplebricks wants to make a dent in the US, these numbers need to be in the hundreds and thousands.”

He concludes: “Purplebricks’ success in the US market is not assured. Raising a lot of money doesn’t guarantee success.”

Purplebricks launched in America, in California, in September 2017, and has rolled out to other regions since.

Purplebricks is due to announce interim results next week.

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12 Comments

  1. Property Poke In The Eye

    Another company which will make no money.

    Investors will not know what hit them like Emoov.

     

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  2. Property Ear

    Share price down to 165.90 at close of play yesterday. The writing is on the wall. The only way is down. Trashy TV advertisements used to show cake on faces – egg on faces soon now!

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    1. JVSOZ

      It’s plain to see that PB will only survive if they pull out of USA, Canada and Australia immediately, and concentrate on the UK.

      But they won’t, so Kenny and Michael might have a few racehorses, a football club and an Aston Martin for sale soon.

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      1. Bless You

        Would have thought they have hit all personal life targets now. I reckon Woodford has got them on a string. With their business ethics they would have done a runner by now if had the chance.

        Watchdog was probably enough for them. Bless them both.

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  3. agency negotiation

    Default Dead on arrival in USA.

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  4. smile please

    Emoov should act as a warning to investors and sellers.

    This model is flawed.

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  5. MarkJ

    I’m more than happy if they continue their expansion abroad under the circumstances….best thing for a uk estate agent. If they continue to make losses abroad it will be an interesting combination if there is any major downturn in the UK market in 2019.

    The business they bought in Canada   duproprio.com  is interesting as it appears to be a For Sale By Owner type site with staff doing the initial photos/listing only ….unless I missed something.

    In the future I can see the FSBO model coexisting with the agent model (not sure in what ratio) in the UK … a la Autotrader

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  6. Woodentop

    Purplebricks had 582 total listings nationally. That is a dismal failure for a country the size of the USA. Two/three agents in a small town in the UK have more. Australia has shown to be a flop and the UK is borderline solvent?

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    1. Ostrich17

      Eventually the “plate-spinning” will come to a predictable end.

      As with Emoov – you cannot keep racking up losses year on year – you will eventually run out of other people’s money !

      PB will have to introduce a variation on it’s current payment model to survive – probably a marketing fee upfront with a further fee on completion?

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  7. MTOM1

    PB have destroyed the reputation of our industry.

    The sooner they go the way of Emoov the better.I wonder what the ASA will be somewhat accountable  if that actually happens after all the rallying cries from the professionals in the business on misleading advertising.

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    1. Woodentop

      How about the city analysis’s that poured praise on the idea and the brokers raking in their fee’s, while the industry kept telling them walking into trouble. With the exception of Jeffries, they were the only ones in the world supporting but then they would as it was financial beneficial to them, with not a care for the true risk for investors, let alone the public? Rediculous multi £m’s business valuations with no assests, all based on just an idea. How much are these companies worth today…… falling valuations (should be).

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  8. bob388

    Lets all start up pay up front cheap companies.

    Plumber that might finish the job just pay £850 up front. Builder that might come back only £850 up front. You never know you might get your job done, you might not. But you paid anyway.

     

    Then we can get idiots I mean investors to put there money into the businesses and we can have lots of free false advertising. Not to worry, when we run out of cash we can always get more investors.

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