Online real estate agent Purplebricks was "destined to fail" in Australia and tried to "buy the market" with A$20 million ($21.3m) a year in expensive TV ads, according to a rival firm.
Adam Rigby, chief executive of fixed-fee start-up Upside Realty, has seized on news of the UK company quitting the local market to insist there is still consumer demand for the model.
The loss-making but rapidly growing Purplebricks arrived Down Under in August 2016 amid massive marketing and PR fanfare, promising to save Aussies an average of A$11,500 under its model.
But after two-and-a-half years of "increasingly challenging conditions" and "execution errors", the company on Tuesday night announced it was getting out of Australia, with founder and chief executive Michael Bruce falling on his sword.
"With hindsight, our rate of geographic expansion was too rapid, and as a result, the quality of execution has suffered," chairman Paul Pindar said, as he apologised to shareholders for disappointing performance over the last year.
A challenging market in Britain caught up to it and the company was forced to issue a revenue warning in February. Purplebricks shares fell more than 64 per cent last year and are down 9 per cent so far this year.
Rigby, who launched Upside Realty in August 2017, said he heard about problems with Purplebricks "from very early on". "We had a couple of people join us from Purplebricks early who believed in the model but were frustrated with the execution," he said.
"They tried to buy the market. They were spending more than A$20m in marketing, more than their revenue. They were trying to grow as fast as possible. If you go too fast, too hard and you're not totally buttoned down in your execution, it leads to problems, and that's what happened."
Purplebricks, according to Rigby, failed to make the most of digital marketing, instead opting for expensive TV ads that came with a lot of "wastage".
"They didn't take advantage of nurturing long-term relationships with potential vendors and buyers using digital," he said.
"People consider selling a home up to 12 months in advance. Trying to acquire customers at the point of decision-making in the sale of a home is a very expensive exercise — you're trying to get a TV ad to hit them at just the right moment."
To make matters worse, Purplebricks was "overpromising and underdelivering" on the actual experience.
He argues a key problem for Purplebricks was vendors were liable to pay the full fee whether the property sold or not, leaving no incentive for the agents to actually sell the properties — a technique that can work in a booming market but not a declining one.
The company was also "complacent" in attempting to transplant a UK model into the Australian market with no changes.
"In the UK, for example, people are happy to do their own open homes, which is a small, simple thing, but it impacts the process," Rigby said.
"When they launched, not only did they charge people regardless of whether the property sold or not, they also weren't transparent about open homes being an extra fee. A lot of things like that, just assuming — that's a common mistake with companies expanding internationally."
Purplebricks refused to listen to feedback from frontline staff, only moving to a split success model in October last year, "far too late", Rigby added.
"There's no doubt the market conditions are harder in that there's less liquidity, sales volumes are lower, but that is actually the best environment to change a market and make it more efficient," Rigby said.
"Anyone can look good in a rising tide. (The falling market) exposed their flaws more but that by itself is not reason to stop anyone being successful."
Rigby said there was "definitely consumer demand" for a fixed-fee model and "definitely inefficiencies in the current real estate environment". "In no way do I think (Purplebricks' failure) undermines the flat-fee model," he said.
Upside Realty charges a fixed fee of A$7500 for private treaty sales and A$8500 for auction, compared with the average agent fee of 2.2 per cent for a sale — A$22,000 on a A$1m Sydney home.
The company is expanding to the ACT and Brisbane this month after launching in Sydney and Melbourne. "We've listed over 650 properties and sold nearly 350. We've got 38 agents now and hope to double that by the end of the year," Rigby said.