In 2018/19 85% of challenger brand energy suppliers were unable to make a profit - the wholesale market was particularly challenging in the latter half of 2018 with wholesale electricity prices reaching almost £70MWh in September.
Wholesale costs reduced going into 2019, but a combination of “pricing for growth” and challenging hedging decisions meant that on average Portfolio Gross Margins were less than 8% across the board for Challenger suppliers.
In the domestic market, portfolio gross margins of less than 10% will typically result in a loss for the majority of suppliers.
Out with Bulb's 1% GM and Customer Acquisition Costs, Operating Costs per Customer are low and Customers Served per FTE are high - which in a market with normalised gross margin should provide a route to profit.
With switching forecast to grow year on year, challengers are focusing ever more on digital excellence - with a focus on low acquisition costs and great service, whilst combining positive unit economics, with a reasonable return on invested capital over the short to medium term.
Ian Barker
Ian shapes the BFY vision and inspires our team to bring it to life, while remaining central to complex client engagements in Strategy, Commercial, and Operations.
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