Purplebricks announced on Wednesday it was shuttering its U.S. operations. The flat-fee brokerage was only live in the U.S. for less than two years, but its departure doesn’t come as a surprise to many former employees.
Purplebricks announced on Wednesday, it was shuttering all U.S. operations. It’s an inglorious end here to the U.K.-based flat-fee brokerage, which launched stateside less than two years ago to great fanfare, earning $2.6 million in its first seven months and quickly expanding to multiple markets.
Now, as the company pulls out of America (following an earlier retreat from Australia) to concentrate its focus solely on Canada and the U.K., many former employees say they saw the writing on the wall.
“I cannot say I’m surprised,” one former employee told Inman. “After working at Purplebricks from the beginning until May of 2019 I witnessed many missteps and lack of understanding of the business and U.S. market by the management team.”
The employee told Inman that they and their partner decided to leave the company in May, because they felt the writing was on the wall.
“In my opinion, there were several major missteps that led to their decision to leave the U.S.,” the former employee said. ”The most notable was shortly after opening the Los Angeles operations the management team decided to expand into other cities and states. There was a lot of concern and pushback from the agents but management never wanted to listen.”
Purplebricks itself, in announcing the closing, admitted that it expanded too quickly in the United States, in its fiscal year 2019 results. The company said the investment in the U.S. total has been £53 million or roughly $66.6 million. Initial closure costs are expected, plus an initial cut of closure costs expected to be between £4-6m or roughly $5 million to $7.5 million.
The former employee also pointed to what they called a shortsighted decision — Purplebricks deciding to launch an escrow company, when the infrastructure just wasn’t there. The former employee called that moment eye-opening to see that management would rather learn on the fly than understand how the business worked.
Another former employee told Inman that there was simply a lack of trust from the company’s U.K. management. The source said founder Michael Bruce brought in many transplants from the U.K. to run the company.
“Michael and Kenny Bruce were unwilling to listen to the U.S. team on how real estate works in the U.S.,” the former employee said. “They wanted to fit a round peg into a square hole, just like the U.K., but the way things work in the U.K. is 100 percent different than the U.S.”
The former employee also criticized the way the company spent money.
“They wanted to advertise on TV which is expensive and refused to listen to other options,” the former employee said. “It was always ‘it worked in the U.K. it will work here.’”
“They didn’t listen to the regional leaders to do more localized marketing at much lower cost,” the former employee added.
Another former employee told Inman that it was complete nepotism. U.K. management only trusted the U.K. transplans to make decisions, when they had no clue about the U.S. real estate market.
Eric Eckardt, the former CEO of Purplebricks’ U.S. outpost, echoed the sentiment of inefficient marketing spending, shared by one former employee, when discussing the shutdown with Inman. Eckardt left the company in February to pursue other opportunities, he told Inman.
“With regard to Purplebricks, there were certain ‘dynamics’ and it came down to unit economics with an inefficient marketing spend using a U.K. playbook to drive brand awareness and consideration,” Eckardt said. “The U.S. was the best-performing country based on performance [key performance indicators], but customer acquisition costs were not efficient.”
“As noted before, I’m very proud of the U.S. team’s accomplishments,” Eckardt added. “We launched and scaled operations to build a national platform, providing access to over 25 percent of the addressable market while performing at a high level.”
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