Several months ago, an article was published on Realestatebusiness.com.au titled, “Disruption is coming but it ain’t Purplebricks.” The headline and the article prompted me to respond, because U.K. fixed-fee agency Purplebricks is absolutely the type of disruption that is coming to the real estate industry.

  • Purplebricks, the U.K. fixed-fee agency, is making waves and gaining traction.
  • Disruption is going to come from a company that offers a superior experience at a superior price.
  • It's foolish to dismiss a new entrant because they don’t fit your idea of what a disruptive player looks like.

Several months ago, an article was published on Realestatebusiness.com.au titled, “Disruption is coming, but it ain’t Purplebricks.”

The sub-headline is the attention-grabbing, “The real estate industry is set for a shake-up, but if you think it’s in the form of agencies such as Purplebricks, you are mistaken.”

The headline and the article prompted me to respond, because U.K. fixed-fee agency Purplebricks is absolutely the type of disruption that is coming to the real estate industry.

To be clear, I’m writing from a neutral position. I was previously the head of strategy at Trade Me, New Zealand’s top portal. I have no ties to Purplebricks whatsoever, but I’ve spent the past nine months looking at new models around the world in real estate that are getting traction.

What disruption looks like

The author makes it sounds like disruption always comes in the same package: big, digital and transformational.

Uber is used as an example, and it’s a good one. Uber is incredibly disruptive! It has used technology — coupled with a new business model — to transform how people get from point A to point B.

But let’s not confuse a $15 cab ride with a $500,000 home sale.

These are completely different events in someone’s life, occurring at completely different frequencies and at different scales. Disruption is going to look different for each.

You can trace the concept of disruptive innovation back to Clayton Christensen’s seminal book, The Innovator’s Dilemma.

The story I remember most clearly is big disruption in the steel industry, and it’s not a big, whiz-bang, transformational change. It’s about making rebar (steel bars) cheaper than the big guys. That’s where disruption starts.

Why Purplebricks is disruptive

The Purplebricks business model offers the same service as a traditional real estate agent at a fraction of the cost (roughly a 60 percent to 70 percent savings). To support that model, they’re also changing the way the service is delivered, through a combination of “local property experts,” technology tools and online support.

While the jury is still out on the effectiveness of this model and whether it really delivers for consumers, it is incorrect to claim that a new model changing the way real estate is transacted at a fraction of the cost isn’t disruptive.

This is what disruption looks like in real estate, and this is why everyone should be paying attention.

It’s not going to be an app to sell your home. It’s not artificial intelligence, algorithms or automation. That’s not what disruptive innovation is going to look like in real estate.

Technology might be able to radically change other businesses where the transaction costs are lower and the frequency is higher, but it’s unlikely in real estate. Consumers still want a hand to hold and an expert to guide them.

Disruption is going to come from a company that offers a superior experience at a superior price. And when it comes, it will resonate with consumers and gain significant traction in the marketplace.

Purplebricks and the fixed-fee providers in the U.K. currently account for a 5 percent market share. That’s tens of thousands of transactions every year — a very big deal!

If you want evidence of disruption, just read about the UK’s largest estate agency closing 59 branches, or this choice quote, “The cuts come as online-focused rivals such as Purplebricks are building market share…”

If that isn’t disruption, I’m not sure what is.

Which brings me back to my point: Don’t dismiss a new entrant because they don’t fit your idea of what a disruptive player looks like. Even if a new model doesn’t look like Uber, it can still shake up the incumbents.

Yes, disruption is coming to real estate. And it will look a lot like Purplebricks.

Mike DelPrete is an adviser and consultant who lives in Bolton Landing and works in New York, LA, San Francisco, London and Amsterdam. Connect with him on LinkedIn.

Email Mike DelPrete

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top