• David Tyler

Market View: April 2018

Updated: Sep 7, 2018

The non-household water market in England was opened to retail competition in April 2017. MOSL - the market operator for the sector and manager of the central registration system (CMOS) - publishes some data on activity in the market.

This is our take on that data. We tend to provide commentary only on a periodic basis, so this doesn't go into the same detail as our recent 'End of Year 1' post. The charts we show tend to be consistent, though. But if you have any suggestions on what you'd like to see, happy to listen.

The underlying data can be found here:

Retailer Mix (Customer Gains)

The charts below show how well each retailer group is doing, as a portion of all sales. 'Incumbents' include companies that bought portfolios before market opening, namely Castle Water and Business Stream. 

Note: We are now showing the comparison to the figure 3 months earlier, not just 1 month, for an improved insight. Self-supply switching is episodic by nature, so you would expect their share to reduce gradually (until other self-supply companies enter the market). New entrants have been steadily increasing their collective share by SPID but that is not reflected in the volume figures so much, suggesting that incumbents do better for larger users and corporate accounts.

Brodick Retailer Grid

The Brodick Retailer Grid plots market share against momentum (the difference between gains and losses) as a way of showing who is winning and losing, while also getting a sense of the emerging trends. It takes inspiration from Boston Consulting Group's classic market grid.

Now that the market is a year old, we apply some weighting to give slightly greater emphasis to the more recent switches. That means that from now on, it is possible for new entrants to have negative momentum if they start to lose more than they are gaining. Self-supply sites will always start out with high momentum but will tend towards zero with this approach.

Watch out for the different vertical scales in the segments - we still think this is better than using a logarithmic scale but what we gain in being able to differentiate smaller retailers comes at the price of potential distortion. Just be mindful of it, that's all.

Combined SPID and Volume view

In this version,  SPID gains and losses are the main focus but the chart includes the volume data. That way, you can see whether gains and losses tend to be more or less significant by either unit. For example, you may consider that the new entrant gains tend to be more marked in volume terms than by SPID, which suggests a higher level of engagement with larger consumers and a certain amount of cherry picking. 

Average Usage

In our End of Year assessment we look at some emerging models.

Without repeating that analysis, the updated chart still gives a picture of the different approaches being adopted across the market, at least in terms of usage segmentation.

The chart below shows the average consumptions for the retailers with a large enough portfolio by both SPID and volume to make a reasonable measurement (for this chart, we've excluded Dwr Cymru, which has a small number of extremely high consumers but does not acquire customers in the market).

Clear differences in market segmentation are starting to emerge.

Average consumption per customer is shown for all of the listed companies. The values for incumbents are fairly similar, with their large inherited portfolios having a significant normalising effect. For incumbents, we reverse engineer from their switching figures to determine what their approximate average was at market opening and the average of both their losses and gains.

Losses and gains tend to be higher than the initial position, reaffirming what we see elsewhere that market activity is skewed towards higher consumers, generally. In part, that is because of a "push" approach by retailers to gain those customers; in part it is a "pull" from those customers to initiate the switch. With a lesser imperative, lower consumers are less likely to be "pull" initiators and hence are going to be under-represented regardless of how much retailers are pushing for their business.

Performance Charts

This month, MOSL has included market performance charts for the first time that show how each market party is doing against the defined standards of service.

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