The answer? They must adopt an entirely new mindset, setting themselves apart from larger companies and adapting to the small area of the market which is dominated not only by the big six, but large independents as well.
The big six currently hold 95 per cent of the UK’s energy customer base (according to Which?), with smaller, but still relatively large suppliers such as First Utility and Ovo Energy picking up the majority of what’s left. This gargantuan number may deter new entrants from entering the market.
However, the number of switches to a new crop of small suppliers is ever-increasing, exceeding 50 per cent for the first time in May last year. A recent survey by Ernst & Young revealed 37 per cent of consumers intending to switch would choose to move to a small supplier, compared with 24 per cent who would choose the big six.
There are multiple benefits for consumers who opt to switch, perhaps the biggest being the lower prices often offered by smaller suppliers. However, as Green Energy UK chief executive Doug Stewart highlights, price is not the only consideration when switching supplier. Consumers also base their decision on quality of service and where the energy comes from.
Recent data from Which? showed only 20 per cent of customers trust their supplier, causing more people to “turn their backs” on the big six and join independent providers. However, according to Gocompare.com research, a staggering 68 per cent of customers would not switch to smaller firms because they’ve never heard of them.
Demarcation is paramount and whether this is finding ways of building relationships with customers and gaining their trust or obtaining energy from sustainable sources, the key is they ensure it is done differently from the big six.
In a sea full of sharks, here are four small fish which are ditching the standard model of energy supply and differentiating themselves from both the big incumbents and larger independents.
Here are four of the lesser-known new entrants:
Flow Energy
As well as providing home energy, Flow Energy has developed its own micro combined heat and power boiler, prompted by a desire to see every UK household save money on their energy bills while cutting their carbon emissions.
The Flow boiler uses micro-generation technology to produce electricity as it heats the home and the company estimates that if 20 million of these boilers were installed across the UK, £4 billion would be saved on consumer bills and emissions would be slashed by 20 billion kilograms.
Tony Stiff, chief executive, Flowgroup: “Customers have more active relationships with brands now and they’re looking for more from their energy company too. They want an energy company that can provide them with great products, fantastic service and a compelling vision for the future of energy. Smaller suppliers with a creative approach, like Flow, can provide these.”
The company launched in 1998 and is already valued at £100 million, with a customer base of 30,000.
GnERGY
GnERGY is unique in that it invites current and potential customers to visit its head office and speak with someone face-to-face about the services on offer.
The company is managed by 200 former Gurkhas based in Farnham, Hampshire. When it was set up in December 2013, it had a customer base of 250, a number which doubled to 500 in its first year.
GnERGY aims to target the 80,000 Nepalese energy consumers based in the UK and claims to offer tariffs 5 per cent cheaper than the rest of the market. The three tariffs offered are a standard/variable (single or dual fuel), a fixed (dual fuel only) and super saver (dual fuel only).
Utilita
Utilita is the first energy supplier to model itself on the needs of prepayment customers.
The company was formed in 2003 with the hope of bringing innovation to the energy supply industry and addressing issues of climate change, security of supply, fuel poverty and ageing infrastructure.
In 2007 Utilita re-launched, with a partner, Secure Meters, aiming to address fuel poverty by using smart meters to reduce costs and help consumers reduce their energy consumption. It now boasts 180,000 customers and has plans to expand into Scotland.
“Independents are both stimulating and delivering change. Utilita’s smart pre-pay service is an example of this, delivering more value and a better service to those that are most in need. Several other suppliers are now following us in this direction,” said managing director Bill Bullen
Zog Energy
Zog Energy is very new to the market. Currently providing only gas, the company was established in 2013 by two entrepreneurs, Andrew Cleveland and Tony Chester, who realised how difficult it is to work out the best rate amongst the big six providers.
The supplier did not make a profit in the last year. However, it now has 2,000 customers and says it is starting with gas because it accounts for the highest proportion of a domestic customer’s annual fuel bill.
Zog offers has three tariff options: a one-year fixed, a two-year fixed and a variable.
Andrew Cleveland, director, Zog Energy: “Being an independent supplier without legacy systems, Zog Energy can react to changes with speed and without incurring the typical large cost of change.”