The shock immediate closure of Hatched, the online agency heavily invested in by Connells, has raised question marks over the online sector’s future.
Hatched was acquired by Connells Group in 2015 to be run as an entirely separate enterprise to its core high street business. Since then, it has received a programme of investment including new premises and the doubling of its staff.
Some observers say the closure represents a possible turning point for online but Purplebricks - in a statement to Estate Agent Today last evening - suggested it was business as usual irrespective of the Connells Group decision.
“Purplebricks has in the last four years built a sustainable and profitable UK business based on a new, fairer, more transparent model which has saved our customers over £108m in commission payments in 2017 alone. We are successful because we get results for our customers, with recent data showing that we sell more houses and complete on properties more quickly than any of the other top 10 brands” a Purplebricks spokesman told EAT.
“Our ongoing investment in technology and people continues to win over more customers, driving further market share growth. Purplebricks is proof that the right people and quality execution has been key to why we are the most successful estate agent in the UK in such a short time” he continued.
EAT also asked Emoov, Yopa and easyProperty for comments, but all declined.
However, one senior figure from a leading online agency did say - off the record - that the Connells decision was a sign of a shake-out within online; he insisted the closure was merely a sign that the sector was consolidating.
Another online executive told EAT that Connells had not spent extensively on marketing Hatched - regarded by many as key if an online agency is to win business and become a recognised brand.
Yesterday David Plumtree, Connells Group agency chief executive, said: “We have thoroughly tested the hybrid model and have reached the conclusion that it does not produce a viable economic result ... with the cost of customer acquisition being one of the main barriers to being able to deliver a profitable return. There is much talk of ‘disruption’ from hybrid estate agents, but from our experience we have found it significantly lacking when compared with the level of customer service, support and expertise that our high street operations provide. Ultimately, an upfront fee obligation – payable irrespective of whether a property sells or not – is not the right solution for the customer.”
Online as a sector has had mixed fortunes in recent months.
The market leader, by far, remains Purplebricks but its share price has dropped. Over a two year period it remains over 60 per cent up on the stock market but shorter-term share performance has been weak - over the course of the past 12 months, Purplebricks’ share price has dropped over 40 per cent and over the past week it has dipped around 15 per cent.
Meanwhile Emoov remains buoyant following its recent £100m merger - effectively a takeover - of Sarah Beeny’s Tepilo agency and online lettings platform Urban. However, there has been no further news on any possible floating on the stock market, which chief executive Russell Quirk says remains an option for the future.
Yopa, which calls itself the second largest hybrid agency when measured by listings, received another £20m investment over the summer. Savills - an existing investor in Yopa - pumped in further cash, alongside three other firms including DMG Ventures, the corporate venture arm of Daily Mail and General Trust, and LSL Property Services.
LSL, in a statement to shareholders earlier this year, reported that its net bank debt rose 45 per cent to £46m thanks partly to £20m invested in Yopa.
Meanwhile for some time Jon Cooke, chief executive of eProp Services - the parent firm behind easyProperty - has insisted that within a short time there would be only two or three major online operators surviving after a period of consolidation, and that his agency would be one of them.
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Wot, no comment from rent-a-quote Quirk!
The sunk costs just keep on sinking.
Rent-a-quote Quirk! Love it.
Harsh but accurate.
In the high street trust and good service will prevail but with margins going further south
Got to laugh. Purple Bricks transparent pricing.
Home report is double the price, if you don't use their solicitor you are charged £300, if you want viewings you are charge £300 and so on and so forth. The Ryanair of Estate Agency. Online clearly has it's place for the clients that really think they are saving a few hundred pounds in the beginning but don't realise the thousands they are losing at the end by not employing an strong / expert negotiator who's fees are typically offset by the extra money achieved. And since when was Purple bricks profitable. lol
Strange really that media dont pick up on this. If ryanair sent people on planes with no wings and then charged them an extra 100% of ticket price if they wanted a seat on the plane there would be uproar. maybe tabloid media show their lack of intelligence by not reporting this.
The amount of money being poured into these on line "experiments" is eye watering. Q-If one of the medium to large sized traditional network operators invested the amount of money these guys have in a service TV/Media based advertising campaign around no sale no fee would they not increase their market share massively ?but would they make any money ..I am not an expert but in business is there not two ways to make a profit ? the only winners here are the guys at the top.I bet no one at Board level looses their job at Connells for the complete waste of money that was Hatched -the only people who lose their jobs are the poor "foot soldiers" yet again.I feel really sorry for them all-as is life-accountability rarely hits those on the Board.
Major Tom, your absolutely right. Partly because of the outrageous levels of SDLT, there are not enough transactions happening for cheap and nasty agency in the UK. THEY ALWAYS FAIL.
The main problem for the high street is the high street. Constant moaning about the online agents. If you think online won't work why do you all spend so long talking about online. Just keep cutting fees I'm guessing the number of High street agents closing will far outnumber the number of online agents that close.
Hatched close is just a publicity stunt by Connells if they don't use the tec from hatched in High Street they are crazier than I already thought.
Eventually high street agents will pick apart the online offering (god i hate both those terms) and take the best bits of tech that are offered, a new strain of agent will enter that doesn't think in terms of online or traditional, just in terms of whats the best offering for my clients and does it help me make a living. These will thrive. Simple really.
Your right.
We are already on this
Being an ex online self employed agent in the UK and worked in the USA as a realtor I have seen the different ways we do business. I've also had talks with emoov and yopa from a recruitment perspective. First off after chatting with emoov they came across in complete disarray. I received wrong emails from them and also the other communication was very poor. Their CEO Quirk is obviously clever and he can see the writing on the wall for online and he's burning through cash in his war chest. Yopa is happy to wait in the wings and pick up the pieces but they are clones of the Purplebricks model My take is that online won't be a big player in the UK, USA or Australia. People buy Jaguar cars because they can afford them and they choose not to buy Datcha. This plays out in their other shopping habits and with who they choose to sell their home etc. For that reason I see a still huge shake up to happen in the sector in the UK but not the USA or Australia. The trouble with online in the UK is the support and ongoing contact from the local agent and post sales. From what I saw its absolutely terrible. The cases I were involved with horrible and basically the clients liked it or lumped it. If they filed a complaint they would be offered a partial refund or if they pushed it even more and often a full refund. The majority of the complaints are lack of support from the agents and post sales...like rat through an aquaduct comes to mind! Although the training is excellent at Purplebricks for example the entire focus on the two week course is the sales pitch. There is almost no emphasis on support to the client. The second week of the course is entirely learn the pitch and get them to sign on the line that is dotted.
Working with an online agent means long hours and little support and the money does not equal the effort if you want to do a good job. The agents that do well there don't mind selling and dumping and leaving HQ to try and pick up the pieces.
At the regional training sessions the focus again was the sell not support.
Clearly these online agents are focused on selling and not supporting.
Why have the online guys made an impact on the traditional? It's easy to answer that and it's advertising that's helped them make this dent in the traditionals piece of the pie. By spending many millions on TV radio and internet it's gained market share. Advertising definitely works. The big boys like countrywide have rested on their laurels. But sequence I think is a different animal and will come through this turmoil quite well as they have good senior management from what I can see. In addition I see the small mom and pop agents surviving but the multi branch and small chains will fall by the wayside.
In the USA the biggest problem Purplebricks has is that a lot of realtors don't work full time and these guys and girls make a hefty commission check from one sale. The average commission is say 5% and the realtor on average walks away with 65% of the total with the broker getting the remainder. So take a 200k sale the realtor gets 6500 when they sit down with the title clerk on closing. They sell one or two a month happy days. With Purplebricks they have to work full time for less than half that. In addition and this is looming they haven't been sued yet in the USA and they will. Michael Bruce has said some pretty brutal things about the US real estate market and he's taken on a lot of powerful people with very deep pockets.
In Australia the market is turning into a recession for housing and I see Purplebricks possibly using that excuse to withdraw from that market if it continues.
In summary this shake up is ongoing. I see online as a viable option but not huge. The bad press will turn the tide on the online sector. People will use them but people will always buy Datcha.
The traditional boys are rattled but they need to learn from this lesson.
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