PHOTO: Michael Davoren, Managing Director, RE/MAX Australia & RE/MAX New Zealand
Michael Davoren, Managing Director, RE/MAX Australia & RE/MAX New Zealand assess what the Purplebricks saga can teach us.
After two-and-a-half years of trading in Australia, the UK-based real estate start-up Purplebricks announced on 7 May this year that it was exiting the market.
There is a lesson here for the real estate industry generally, and not just in Australia. It’s a lesson in real estate modelling.
Take notice of what happens when the discount model comes to play in the market.
Despite Purplebricks’ marketing budget of well in the tens of millions of dollars, and its much-touted ‘low flat-rate listing fee’, it failed to meet its targets in Australia.
Oh, the company cited “challenging” market conditions and “some execution errors” as the reasons for the decision to shut down its Australian operations, but the bottom line was that Purplebricks got it way wrong with an upfront fixed fee, paid by the property owner whether the property sold or didn’t.