Brokers – threat or opportunity for water retail?

Before the opening of the water market on 1 April 2017, it was expected that energy brokers would enter the market in droves, seeking opportunities to add water to their existing energy offerings. Utility Week’s sister title Water.Retail speaks to retailer bosses to discover whether they consider these brokers a threat or an opportunity.

Ahead of market opening, participants predicted that “hundreds, if not thousands” of energy brokers would seek to capitalise on the water market, with anecdotal evidence suggesting as many as two-thirds of transactions could be intermediated.

There were concerns about the lack of regulation of these brokers, and the fact that they were entering the market “unchecked”. Grand Union Water managing director Peter Sceats insisted that, in the energy market, this has encouraged some of the most “dreadful” customer service he has ever seen. Now, 11 months on, Sceats says narrow margins in water have kept most, although not all, of energy’s “flash Harry brigade” out of the market. What’s more, Ofwat has published its approach to protecting customers through the introduction of a new voluntary code of conduct for third party intermediaries (TPIs).

The majority of water retailers consider brokers to be an opportunity and are “actively working” with these organisations in the open market. “Good brokers are good for the market,” says Water Plus chief executive Sue Amies-King. Water Choice managing director Tanya Sephton, however, warns that there is a risk retailers could lose the direct relationship with their customer and a broker could add a layer of complexity for customers. Meanwhile water2business managing director Charley Maher says the company “sees benefits in rewarding good TPIs and penalising rogue ones”.

Here’s what retailers had to say about brokers in the water market in full.

John Reynolds, chief executive, Castle Water

We are happy to work with brokers, where customers choose to use a broker to assist them in their procurement. We put agreements in place which ask brokers to commit to following all the relevant codes of practice, and we don’t work with brokers where we are unhappy with their standards. We don’t believe that the English market will sustain high levels of commission payments on sales, and our sales activity is primarily based on direct sales rather than sales via third parties. We have seen examples of both good and bad business practice from brokers.

Giuseppe Di Vita, managing director, SES Business Water

Brokers are fundamental to our industry and they have a significant part to play in the development of a competitive water market. We want to further our relationships with brokers – we see them as a crucial channel in engaging businesses in the water market. Working closely with brokers will assist us in our aim to help businesses access a better deal for their water.

Richard Stanbrook, director, Source for Business

Brokers can be considered as both. Our approach is to interact positively with all brokers to help customers get the most from their water usage. It’s important that brokers understand the market well to ensure their customers end up with the best overall solution. This could be a straight retail saving or it could be a broader package of measures which might deliver a greater benefit in cost reduction, time or improved corporate social responsibility programmes. We are committed to helping brokers achieve the best outcome for businesses.

Sue Amies-King, chief executive, Water Plus

Water Plus is actively working with brokers. We’re already dealing with all of the major brokers in the market through our broker management team and we regularly work in partnership with them to identify opportunities for their customers to save money on water bills. Undoubtedly, they will continue to be part of the fabric of the new water market in England. By being involved in water, and actively talking to their customers about the opportunities for them we’ll see higher levels of customer engagement. Good brokers are good for the market.

Charley Maher, managing director, water2business

The use of TPIs are a key opportunity for customers to engage with the water market through a forum they already use for other services such as energy. Many new entrants use TPIs to gain customers, so a bad impression such as high pressure-selling techniques could impact on competitiveness of the new water market. We see benefits in rewarding good TPIs and penalising rogue ones. Ofwat has published their approach to protecting customers through the introduction of a new voluntary code of conduct for TPIs.

Tanya Sephton, managing director, Water Choice and South East Water Choice

Brokers provide an opportunity for us to learn from their experience of other markets with regards service offering and sourcing the best deal for customers. They also offer choice for customers in terms of their route to market. However, there is a risk that retailers could lose the direct relationship with their customer and a broker could add a layer of complexity for customers. For some retailers their business model for growth may include brokers to gain customers. Each retailer will have its own strategy. Brokers provide an opportunity and we are happy to work with brokers who share our strong service-focused ethos.

Nish Dattani, managing director, First Business Water

In our view, working with energy and water consultants is a great opportunity and they form a vital link in the water industry helping to raise awareness of market opening and connecting suppliers to end customers. We have good working relationships with consultancies and work collaboratively with them, supporting and educating them to understand the market, ensuring a consistent message is translated to customers.

The value of brokers will be one of the topics discussed at Future Retail #1 on 23 March in London