It must have been a very smoky room which contained the giggling Board of Directors at Strike, when they decided earlier this year that the best idea for the future of their firm – the one they’d only just changed from being called HouseSimple to something usually associated with people refusing to do any work for anyone else – was to acquire the failed Purplebricks.
At the same meeting, no doubt to much emphatic nodding as they passed round the Pringles, these Directors also decided that they would use the brand of their acquired business – the one that had burned through £193,999,999 of investor cash to be worth precisely £1 – to pitch a product that would be ‘free’ to the customer.
Lest we, or they, forget, this business model fails. It failed for Purplebricks, when the cost was £999 per transaction and they had a £200m warchest to try and convince consumers it was a great idea. It failed for Emoov. For Teplio. For easyProperty, Hatched, Doorsteps … basically the examples are so glaring, and so frequent, that it is barely believable that supposedly brilliant businesspeople have deluded themselves into thinking they’re the ones that can make this work, finally.
Possibly straight after that meeting, without even stopping to have a snooze, Strike Chairman Charles Dunstone said in March this year; “Purplebricks has dramatically changed the industry by driving down the cost of estate agency and we aim to combine its significant brand recognition with an even more disruptive business model.”
Couple of things, Charlie old chap:
‘Estate agency’ is selling houses. Analyses at the time of Purplebricks’ IPO suggested that they were only successful in this 36% of the time. So 64% of those poor vendors that chose Purplebricks weren’t having the cost of estate agency “driven down” – they were paying rather a lot upfront for something new; a marketing product for their property, one that demonstrably did not work.
Even assuming that Purplebricks achieved a consistent 5% of the market in listings (this was its peak in 2020, when it was instructed on 51,000 properties) over its 10 year existence, then the £194m investment burned suggests that each sale required well over £1,000 more in investment subsidy +per transaction+ to complete than they were charging. As the investors started to look more quizzically at this money pit, unsurprisingly the cash started to fall away. The true “cost of estate agency” became revealed and it turned out that “driving down” the +charge+ for estate agency (emphatically NOT its “cost”) provided an epic loss-making company that went catastrophically, humiliatingly, bust.
Repeating the ruinous Purplebricks experiment without either the upfront charge or the £194m investment is, truly, a strategy to provoke sharp inhalation. Those elsewhere in the industry – those that provide a quality service which prioritises vendor value, seeking to maximise completions at the pace and price that’s right for their clients – will be holding that breath, knowing that the inevitable comedown will require them to administer damp flannels to those that got suckered into Strike’s Board’s collective fever-dream.
Everyone can only hope that this moment of clarity comes very quickly and avoids too much collateral damage. In this season of much genuine cold turkey, Dunstone and his gang could do with their figurative version being long, painful – and instructive.
Selling people’s biggest assets is a skill and, for great outcomes, costs an appropriate amount of money. £0 is not that. And, were we needing to be reminded of that (we were not), we shall see this proven once again in 2024.
Commentaires