The ups and downs of energy supply: Brand and technology can make the difference in retail energy

Three events in the last week have shown not only the contrasting fortunes in the energy supply market but also the roles of brand and technology in enabling success. The events are the credit default under electricity wholesale balancing rules of very small supplier Gen4U, the new energy supply deal between retailer M&S and Octopus and the failure announced by Ofgem just a few minutes ago of the non-domestic supplier National Gas and Power.

Gen4U struggled to grow a customer base in a domestic market characterised by many suppliers offering the same kinds of tariffs and using one of a small number of outsourced technology platforms. In such circumstances, it is hard to differentiate and avoid a race to the bottom on price to secure customers and growth. Unfortunately for Gen4U it fell into default under the electricity balancing and settlement code on 17 July with the company understood to be voluntarily winding itself up.

National Gas and Power, with around 80 customers, has ceased trading and Ofgem has appointed Hudson Energy as Supplier of Last Resort (SoLR). National Gas and Power entered the market in June 2017 with shorter contracts aimed at businesses with poor credit, a part of the market that many non-domestic suppliers generally look to avoid. The company had initially been operating under a white-label arrangement with Hudson Energy. The regulator’s press statement also explains that for the first time as far as we are aware, it appointed Hudson Energy without requesting expressions of interest from any other party. This was partly because of the pre-existing relationship and the small number of affected customers and obviously a pragmatic and sensible solution in the circumstances.  

In contrast, M&S has launched a “new strategic deal” with Octopus to “transform the energy market for thousands of customers”. This announcement came within two weeks of the company announcing the end of its white-labelling arrangement with SSE. Though that arrangement had been in place for nine years, it seemed to have been drifting for some time, especially in the wake of mis-selling allegations about SSE which came to a head in 2013.

M&S’s statement launching the new deal emphasised its transparency, quality and innovation with Jonathan Hazeldine, Head of M&S Energy citing Octopus as “the best partner to help transform and grow M&S Energy into a digital, progressive and commercially competitive arm of M&S.”

The latter point emphasises that the deal needs to be seen in a wider context than just the energy market being part of a five-year company transformation programme. That programme is increasing the flexibility, sustainability and innovation in the company and its supplier base and is seen as critical to M&S’s long-term success. The link with sustainability is driven through the company’s “Plan A” which “enables our customers to have a positive impact on wellbeing, communities and the planet through all that we do”. Innovation is evidenced through M&S’s partnership with Microsoft for using AI in the retail environment and a joint venture with Founders Factory to invest in potentially innovative and disruptive start-ups from which it can learn.

The events of the last week show that innovation in the retail space continues. High street retailers like M&S continue to evolve their models to remain on top of a challenging environment, while the failure of two suppliers in the space of a few days demonstrates that although innovation continues, it naturally does not always result in success.

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