Purplebricks USA: One Month In

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Purplebricks, the online agent that has seen massive success while battering the incumbents in the U.K. market, launched in the U.S. about one month ago. Let’s take a deeper look at its launch, its tactics, the numbers, and its next targets.

The Model

The business model in the U.S. is similar to the U.K. and Australia (where Purplebricks also operates): Purplebricks charges a listing fee of $3,200, plus the typical compensation paid to buyer’s brokers (typically between two and three percent). Sellers must pay the fee either upfront or at closing, regardless of whether their home sells.

Purplebricks also works with homebuyers, paying a $1,000 rebate out of the buy-side commission toward closing costs.

The Customer Proposition

Pre-launch, the customer proposition for the U.S. market was the key question for me. Given that in the U.K. there are only listing agents and no buyers agents that Purplebricks needs to work with, the customer proposition is simple and straightforward: agents are bad, and Purplebricks is the alternative.

That approach would not fly in the U.S. market because it would end up alienating the industry and the important role of buyers agents in bringing prospective buyers to properties for sale.

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So, Purplebricks launched its U.S. campaign (check out the commercials) with a slightly diluted message focused on two key themes: saving money, and a simpler, faster process. Time will tell if the message resonates with consumers in the same, effective way it has worked successfully in the U.K. market.

Like in the U.K., the key to the model is spending big money to raise consumer awareness and generate leads. This spend is not simply online, but typically overweight with above-the-line campaigns on TV and radio. As you can see from the recruiting message below, Purplebricks are planning to spend nearly $2 million per month on advertising -- quite a large number for one market!

The Numbers

It’s only been one month. Every new business starts small, and each new real estate agency starts with one transaction. The numbers are small, but it’s important to set them as the foundation for future growth.

At the core of Purplebricks’ business are the local property agents, called Local Real Estate Experts in the U.S. After one month in the market, Purplebricks currently has 24 licensed agents operating in the launch market in Los Angeles, California. This compares to over 650 local property experts in the U.K., and over 100 in Australia.

After one month of operation, Purplebricks U.S. currently has 12 listings, nine of which are for sale, and three of which are pending. Of its 24 agents, nine agents have one active listing each. Sixteen agents currently have no listings.

Yes, in isolation 12 is a small number, but remember that this is a new business. Getting a new listing every 2.5 days isn’t bad for a new entrant in its first month. But let’s see how it grows from here.

Next Targets

What’s next for Purplebricks in its expansion across the U.S.? A Californian expansion, namely San Diego, Fresno, and Sacramento.

 
 

What to Watch?

Going forward, these are the key strategic areas to watch:

  • The numbers: listing volumes and number of agents. This is the ultimate metric to gauge whether the huge investment ($60 million) in U.S. expansion is paying off.

  • Customer proposition: keeping a close eye on the marketing message to consumers, to see if it's resonating or needs to adapt to the U.S. consumer.

It’s still very, very early days for Purplebricks in the U.S. market. But take them seriously: Purplebricks is a large, serious, international player with plenty of momentum and experience, with deep pockets. It may not revolutionize the real estate market overnight, but it will have an impact.