U.K.-based Purplebricks remains one of the best examples in the world of a real estate disruptor going from zero to one.
Why it matters: It’s a complex growth story revealing two key learnings that apply to all real estate tech disruptors: The adoption ceiling and reversion to the mean.
The adoption ceiling is the phenomenon where a disruptor’s market share stops growing and plateaus (also called market saturation).
- This is common across many new models but especially prevalent in real estate due to its highly fragmented, non-differentiated nature.
Purplebricks hit its adoption ceiling in 2019; there were only so many early adopters willing to try its substantially new model (pay a lower fixed fee up front instead of a commission upon sale of a home).
- The COVID-19 pandemic and the growth of similar models contributed to an erosion in new listings (called instructions) — and market share — beginning in 2020.
- Purplebricks has steadily increased its once-low fees, has adopted a “pay later” option and made its agents full-time employees — putting it much closer to the traditional estate agent model.
- Meanwhile across the industry, iBuyers have launched traditional, agent-led sales options; leading portals have bought traditional mortgage businesses; anti-MLS disruptors have started listing on the MLS; and over time Compass looks less like a tech company and more like a brokerage.
- Back in 2018, I was quoted in The Financial Times about this exact topic. Not much has changed.
The power — the gravitational pull — of the traditional real estate industry is incredibly strong.
- Over time, even the most well-funded, aggressive start-ups have a tendency to be assimilated into the traditional industry.
Mike DelPrete is a strategic adviser and global expert in real estate tech, including zavvie, an iBuyer offer aggregator. Connect with him on LinkedIn.