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Staying ahead of the curve – insights unlock value in the new Water Retail Market

The new water retail market is open for business; on the 1 April this year it became possible for businesses in England to choose which company they would like to supply their retail water services.

The move had been in the pipeline since 2011, when the government set plans for a new competitive market outlined in the Water for Life White Paper. With a focus on improving customer service, promoting protection of the environment and increasing competition in the industry, it is one of the most significant changes the industry has faced, bringing with it a range of new challenges.

The open retail water market will work much in the same way as other utility services, with wider utility markets now also being able to offer water services.  It is believed this will deliver around £200 million of overall benefit to customers and the UK economy by separating out retail services from wholesale activities.

What does this mean?

In simple terms it means that for an additional 1.2 million eligible businesses and non household customers they now have a choice – the customers are in the driving seat.

Customers can decide who they would like to provide their water, their wastewater services, or both. They can change at any time, for any reason, without penalty, and all this can happen in less than a month.

For licensed water retailers it means they are now competing against each other and have the freedom to tailor services and packages for customers to contend in the open market. The market will provide growth opportunities for existing regional water companies, and brand new companies. Initial investment will be required to set up independent retail businesses, ensuring fair competition, and once established driving a return on investment will be a key focus.

Insights will unlock value

The open retail market is a new market; with that comes limited transactional history or operational trading knowledge. There are no clear market leaders and the market is open to competition.

The good news is willingly engaging with and understanding customers’ and stakeholders’ needs and concerns could be a key differentiator in a new competitive market and will provide those forward thinking water retail companies with a competitive edge.

Staying ahead of the curve

The ability to benchmark, track and evaluate service through customer engagement will deliver a significant return on investment for water retailers.

For over two decades, our team at Explain Market Research have been innovating, developing and delivering research programmes in the utility sector, our main objective always being to deliver actionable insights for our clients. Read our case studies for some great examples of our work in the sector.

We have developed innovative methodologies to deliver insights in a competitive market. We specialise in engaging with customers including embedding behavioural research, trust and confidence, and the engagement of vulnerable and hard to reach customers into our utility sector research projects.

Research and engagement will enable water retail businesses to get closer to their customers to identify the issues they are experiencing at any given time and co-creating to find solutions that improve their experience.

Research will also be important to understand the ideal balance between price and service to enable retailers to shape their service offering. Measuring and tracking customer experience as well as customer advocacy will allow retailers to measure performance as well as areas for service improvement, enabling continuous improvement over time and high levels of customer retention for getting it right.

Contact us at Explain Market Research today to find out more about the solutions we offer. Take a look at our accompanying infographic below.

Water Retail Market Infographic V3


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Growth stars in the region

The Sunday Times released their ‘Fast Track 100’ private companies yesterday and the most surprising aspect was that the list included so few digital businesses. Most of the companies with the biggest sales increases over the last 12 months came from more traditional sectors such as consumer goods, food and drink, leisure and business services.

The North East and Yorkshire fared well among the regions with 13 companies in the list, beating the North West (10) and the Midlands (10) and with a huge sales increase of 126%, Cawingredients, based in Leeming Bar, were the Region’s Growth Star in 13th position.

Andrew Cawthray set up Cawingredients in 2010 after having sold his previous soft drinks business, Macaw Soft drinks for £75m in 2005, which just goes to show how successful his business model is and on top of the current £44m turnover they are in the middle of huge expansion with bigger warehouse facilities, more bottling lines and another 100 jobs.

They supply Aldi UK and count several of the UK’s leading brands as their customers and Richard Harrison, their Chief Operating Officer has done a brilliant job of growing the client base along completely different lines to those of last business. Aldi in particular has seen a big increase in market share over the last two years.

Earthmill, Pure Gym and Xercise4less were at 17th, 18th and 21st in the list. Although based outside the Region, The Alchemist, part of The New World Trading Company was at number 20 and their latest outlet, The Botanist is due to open in Monument Mall next week after a £2m development and fitting out. Having had a sneak preview I can confirm it is the most exciting brand and bar/restaurant I have ever seen.

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Supporting the farming economy

I can remember times when no one knew a ‘poor’ farmer but those days have long gone and with the vagaries of EU farming policy and aggressive food sourcing of the major supermarkets there are many who struggle to make a decent living off the land.

As the Prince of Wales claimed in a recent foreword for Country Life too many of the population undervalue the farming role, especially aspects of the job taken for granted. Those in the cities and urban areas see the countryside as somewhere to enjoy a Sunday afternoon drive or a walk with the kids. The consensus is that they treasure the rural idyll but have little appreciation of the work that goes into maintaining the way the landscape looks.

In most areas farmers are the mainstay of the rural community and the thread that links the ecosystem. They maintain hedgerows and dry stone walls. They plough and furrow countless acres. They are the guardians of beautiful landscapes that form the backdrop for insects, birds, butterflies and bees. They provide jobs in areas where few exist.

Not only do we need to champion their role, we need to protect their very existence in the way we source our food. It helps but it is not enough to simply buy meat, eggs and produce locally. When faced with imported food on the supermarket shelf we need to back British even if it means spending a little more. That way we can keep more value in the rural food chain and make grocery buyers reflect that in the range of food that supermarkets stock.

Supporting the farming economy works both ways as the ecosystem becomes more sustainable and the beauty of the landscape is enhanced for locals and visitors alike. What price do we place on that? As more of the population polarises around urban areas then the more we will value escaping into the countryside for a holiday, weekend or Sunday drive. It’s worth keeping that in mind as you head to your favourite shop this weekend.

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Cav faster than Tesco

There are exceptions, like Usain Bolt and Mark Cavendish, but usually size prohibits speed and so it isn’t such a big surprise that the juggernaut that is Tesco, increasingly looks slow and unable to turn round.

I can recall, in a similar forecast 3 years ago before their market share dipped and they found a huge black hole in their profits, saying that Terry Leahy was passing a poisoned chalice to the new CE and so it has proved.

Now today, in a well reasoned argument, the boss of Waitrose states that the ‘Big Four’ supermarkets are living in the past and will continue to lose market share. Everyone else has of course been saying that for months but Mark Price is the first person who has accurately summed up the reasons why.

Aldi and Lidl are a small part of the issue but you only have to look at changes in consumer behaviour, some of it brought on by the recession, and the portfolio of shops the big four own to see there are other more fundamental reasons. Just look at the size and contents of the average shopping trolley. It is different and we eat in a different way to 10 years ago.

Big often means arrogant and for some reason big guys stop listening and watching. It happened at M&S, it is happening to the ‘Big Four’ and it will happen again unless there is a fundamental change in the way a big business like Tesco is run. Top teams become driven by sales and profit, stop listening to customers and cease to respond to what is happening on their doorstep.

The biggest problem for Tesco, apart from their inability to count, is their property portfolio and the sheer size of out of town stores will be a drag on sales per square foot for years to come unless they divide it up differently. I called into my local Tesco today and the first 15 metres of the number one aisle in the shop was merchandised from top to bottom in Halloween. If that doesn’t scare the markets into selling Tesco shares, nothing will.

The growth of Aldi and Lidl will slow down in 2015/16 but Waitrose will continue to forge ahead and expect to see real growth in community supermarkets again, even convenience stores. I could be wrong but customer insight is everything and because we are used to listening if I do get it wrong I’ll know before the outcome is terminal. There lies the problem with size, others just keep getting faster, better and passing you.