THE FIRST ‘HYBRID’ ESTATE AGENT IN THE UK
PurpleBricks Group Plc (LON:PURP) offer excellent customer service without the high street prices.Launched in April 2014 and now the fourth biggest estate agency group in the country.
Based on annualised instructions September 2015 and management estimates of competitor numbers.
Purplebricks was conceived by brothers Michael and Kenny Bruce from their experience in running a successful traditional estate agency in the Midlands.
This presented the opportunity for the development of a new lower cost model without the need for a branch network yet retaining the local expertise and personal service that an agent offers.
From October 2011 Michael and Kenny started work on the Purplebricks Group Plc proposition full-time, putting in place the technology, infrastructure and people to build towards a successful launch, which took place in April 2014. The technology platform sits at the core of the business and was designed and built in-house to provide a more convenient, transparent and cost effective process for selling, buying and letting a property.
Purplebricks now has a substantial national footprint. From its launch along the South Coast of England in April 2014 it has expanded across the country, most recently entering London and Scotland and entered the lettings market.
As of September 2015 the Directors estimate that the Company has become the fourth largest estate agency in the UK by fee paying customers at its current run-rate of instructions.
Prior to its fundraising on AIM, the business has been funded by the Bruce brothers together with a range of investors including Paul Pindar, DN Capital and funds managed by Woodford Investment Management Ltd.
It is estimated that annual UK estate agency fees amount to over £4.4bn. Purplebricks’ strategy is to build upon its market leading hybrid proposition and increase Purplebricks’ share of the UK estate agency market for both sales and lettings.
The attainment of the strategy is based on the following key pillars of the Purplebricks offer:
Traditional estate agents charge a fee on sales typically within the range of 1 to 3% of the sale price and average at over £4,000 (inc VAT). By contrast, the average Purplebricks’ fee is £1,080 (inc VAT).
LOCAL EXPERTS, PERSONAL SERVICE
Unlike other online operators Purplebricks operates a hybrid model, with a growing number of LPEs (165 as at 18 November 2015). The LPEs have detailed knowledge of their respective areas, visit the properties and provide valuations. Once instructed the LPEs provide support, advice and assistance throughout the sales process.
24/7 CUSTOMER SERVICE
The technology enables interaction 24 hours a day. Customers can instantly know what is happening with their property, they can book valuations, arrange viewings, see feedback from viewings, offers can be made and sales can be agreed, customers can get performance reports and can contact Purplebricks 24 hours a day. Approximately 70% of Purplebricks’ customer traffic happens when traditional agents are closed.
FOCUS ON TECHNOLOGY
Purplebricks has spent over four years developing and building its technology and has a team of developers who work on new features, maintenance and security. Purplebricks intends to continue to develop its offering, introducing new versions of its platform and assessing new and improved ways of accessing and operating the process of selling, buying and letting property.
BRAND AWARENESS AND TRUST
Purplebricks aims to increase brand awareness among UK homeowners, landlords, buyers and sellers as a trusted and effective alternative to high street agents and online competitors. Customer satisfaction and referral is critical to Purplebricks’ growth and the service is rated excellent by review website Trustpilot A/S (rated 9.4) with over 3,000 reviews from customers.
THE BUSINESS MODEL
INSTRUCTIONS CONVERT QUICKLY TO CASH
Purplebricks has a competitive and transparent, flat fee pricing structure of £665 plus VAT for a sale anywhere in the UK other than certain defined London postcodes, where there is a charge of £965 plus VAT. There are additional charges if the customer wants Purplebricks to undertake the viewings on their behalf, if they require an energy performance certificate, or a Rightmove premium display. The Company’s additional sources of revenue currently comprise fees from conveyancing, mortgage referrals and insurance.
The average Purplebricks’ fee including all other sources of income is £1,080 (plus VAT).
The customer can choose to pay upfront on instruction or they can delay the payment (at no additional cost) until the earlier of the sale of the property or ten months from instruction. The deferred payment is financed by Close Brothers Financial. Purplebricks is paid by Close Brothers the next working day. If a customer wishes to defer payment, they are required to use Purplebricks conveyancing services for the sale.
LOW AND FLEXIBLE COST BASE
The cost structure of the business is different to that of a traditional estate agent. First, the hybrid model does not require an extensive, fixed cost, leased, high street estate. Secondly, the LPEs typically operate under licence (89%) with fees payable upon instruction, rather than as an employee (11%) with the ability to employ or contract sub-licencees to grow their business. The marketing budget is in alignment with the strategy of consistent presence in the media such as television, and aims not only to build awareness but also to help maintain and extend the Company’s position as the market leader in the online sector.
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