SSE and M&S Energy announced on 5 July that their nine-year domestic supply partnership had ended, with the contract formally expiring on 28 September 2018. Here we comment on the evolution of such white label partnerships in the domestic supply market, their successes, and the recent moves we’ve seen in this sector.
The idea of white labelling energy supply is not a new one. SSE and M&S Energy operated a successful partnership for nine years before it ended, while British Gas’ white label agreement with Sainsbury’s Energy has operated since 2011. However, this method of market entry is becoming more attractive as an alternative to fully licensed supply, with 16 white label suppliers now active in the domestic market, 12 of which have entered over the last two years.
And it’s clear to see why. White labelling offers a less complex and less costly method of entering the GB supply market compared to a fully licensed route. It allows companies to offer energy supply to their existing customers/residents, without the burden of additional regulation or installation of new systems, commonly using those of their fully licensed partner. It also provides a revenue stream through payment of commissions to the recruiting entity.
And there is a growing local dimension. Of the 16 white label suppliers now offering tariffs, 10 are local councils, bringing regional change in their communities by offering lower priced local tariffs and supporting the reduction of fuel poverty for residents in their local area typically by reducing standing charges or offering best terms to smaller properties. Eight of these companies have opted to partner with Robin Hood Energy, Nottingham City Council’s supply company.
However, while there has been increasing interest in white labelling, the number of customers served by this supply group remains relatively low. Less than 4% of the domestic energy market is served by the 16 white label suppliers, reflecting their (sometimes) regional focus (particularly of the local council brands), or niche customer targeting – see Ebico, a not for profit supplier targeting low consumption customers. But by far the majority of this is accounted for by the two large supermarket chains.
It is also a market that has undergone change in recent months. In April this year, student bill splitting company Glide opted to move its customers from its supply partner Ecotricity, to Spark. On a larger scale, Ebico ended its partnership with SSE in early 2017, stating that the two companies’ strategies “no longer align”. In the most recent market move – SSE and M&S – both companies have been clear to state customer communications will be transparent, and they will outline the options available when the contract comes to an end in September.
While it’s early days following the M&S Energy announcement, we await with interest to see which way the company moves. As one of the more established white label companies, either way could be an important juncture for white label models.
Contact A.Moss@Cornwall-Insight.com for more information about this development and wider supply market trends.
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