Purple bricks launched in Australia August 2016 with spectacular fashion promising to disrupt the traditional method of selling real estate. They lasted just over 2.5 years before withdrawing from the Australian market announcing “Unfortunately, we have been unable to make the progress in the Australian market that we’ve wanted…” and, “With hindsight, our rate of geographic expansion was too rapid and as a result the quality of execution has suffered.”

So what can we learn from their mistakes? –

  1. Assuming the consumer is the same in all countries – They had a formula that had worked extremely well in the UK seeing them dominate their market place. This reduced a lot of services that Australian owners want when transacting something as significant in value as property i.e. centralised contract writing area in QLD.
  2. Need for more innovation – They were basically the same as a traditional selling agent however the consumer paid them regardless of if they sold the property or not. In WA, of the 405 properties they had for sale only about 34% were actually sold. Thy really needed to offer more value to the consumer and be different to disrupt.
  3. Not adapting the model – The fixed fee model does work but not as an upfront payment. Sales reps were paid for listing the home for sale and then had no interest in the sales outcome without incentive. They did change this at a later date but the damage was already done. The model also had home sellers showing their own homes to prospective buyers and negotiating their own contracts. This may work in the UK but the Australian consumer expected more.
  4. Marketing mistakes – Purple bricks reportedly spent over $20mill in marketing (which was more than the gross income they received) on brute force media. There was nothing wrong with this but unfortunately the message conveyed was that they were “Real agents” The tone of the message making fun of agents didn’t go down well with consumers and upset the real-estate bodies that also have a strong media voice to campaign against them. They also weren’t ready to back up the service with the volume of leads that this approach generated.

I believe there is a place for a low cost operators as there is always a market segment that is looking for this. The consumer that does engage a low cost model needs to be prepared to do a lot or all of the work themselves, be a strong negotiator, familiarise themselves with contract law and understand all the tools that are available to market the property to all buyers in the market place.