Purplebricks tried to take the market in Australia through brute force, instead of earning it, and that simple execution error here cannibalised its phenomenal UK success, one expert commentator has said.
Adam Rigby, CEO of commissionless real estate start-up Upside Realty, said that you earn market share by giving great service, getting great results for vendors and working with the best agents.
“Instead, Purplebricks was spending over $20 million a year on advertising and marketing in Australia before they had buttoned down their operation,” Mr Rigby told REB.
“So, obviously when you have some challenges with not having adapted your model to the market, and you are throwing immense volumes of marketing dollars, you are putting yourself under great pressure to see a profit.
“That is going to take some time, and that was the board’s rationale for withdrawing.”
Mr Rigby said there are some additional issues with Purplebricks’s execution in Australia.
“What we saw from the beginning is that it picked up a model that was working well for them in the UK; so well that they were the number one agency group in the UK, and just plonked it into Australia assuming that it was the same market, and that they would see the same success.”
Slow to react
Mr Rigby said that, to its credit, the Australian board acknowledged that it made some early mistakes, but added that it didn’t fix anything until October last year — and that was far too late.
“Their original agents were giving them feedback that they needed to adjust their approach in Australia, and they resisted that feedback for a very long time,” he said.
“Purplebricks had a lot of confidence because it had been very successful in the UK, but you always have to maintain some humility. You have to realise that your frontline staff, who are capable and intelligent people, are giving you some very strong feedback.”
Mr Rigby said that to continually resist, or ignore, the feedback is perilous.
“A lot of good people that were in the organisation early left because of that frustration. And Purplebricks had continued to have quite a high turnover of staff in general because of that frustration.
“That is a fundamental execution error.”
Mr Rigby also said the Purplebricks commercial model was problematic.
“As well intended as your staff might be, if their compensation has nothing to do with selling the property, it is very hard to make sure that that is the focus.
“No criticism to the staff and the agents themselves, but if the commercial model is not aligned to successfully selling property until very late in the piece, it’s hard to expect that you are going to be successful.”