Ikea Collective Switching

Collective switching: IKEA joins UK's Big Clean Switch

IKEA is encouraging customers to move to 100% renewable tariffs through a collective switch campaign. What does this mean for traditional utilities?
Published: Tue 06 Mar 2018

Flat-pack furniture giant IKEA has made a clear stance on sustainable energy measures in the past. From home battery systems to energy efficiency services, the big box company seems intent on promoting a clean energy future.

Now, IKEA will be working in partnership with UK-based company Big Clean Switch in a collective switching campaign driving customers to renewable energy contracts.

In this pairing, IKEA will act as a representative sales body for the Big Clean Switch, registering consumer interest for low-cost renewable energy tariffs.

In the meantime, renewable energy providers such as Bulb, Tonik, Octopus Energy and Ecotricity will vie to offer the best 100% renewable energy tariff. The provider with the best rate will be announced on 6 March, and customers will have a three-week window to sign up to the tariff and switch suppliers.

By swapping tariffs and provider, IKEA expects the typical UK household will see around £300 in savings per annum thanks to the collective switch structure.

The power of collective switching

This news follows the announcement from Ofgem that it is piloting collective switching as a mechanism for getting a better deal on energy for disengaged energy customers.

The Big Clean Switch is branded as a “profit with purpose” company, aiming to accelerate the energy transition to renewables and promote a cleaner energy industry.

To do so, the company guarantees tariffs based on 100% renewable energy supply, promising that all electricity sold is compensated by newly generated renewable energy.

Jon Fletcher, Campaign Director at Big Clean Switch, commented, “Our aim at the Big Clean Switch is to be a voice for change. We want to give as many people as possible the opportunity to switch to renewable electricity and our partnership with IKEA is a big step forward in helping more people achieve this.”

The business structure is simple; when a customer switches through IKEA, the company receives a commission payment. The more customers that sign up, the better the tariff rates will be and the more commission for IKEA.

As part of this new service, IKEA has promised to split the commission among various UK stores based on their contribution to the collective switch.

In addition, the company has promised to invest this money for local community initiatives at the discretion of the stores.

Consumer engagement and energy suppliers

Utilities should recognise now that their consumer engagement is less than ideal compared to other services.

In Which?’s 2017 United Kingdom survey, only 11 of 31 utilities scored 70% or above for customer satisfaction, with the highest score being 79%. Of the Big Six, the scores ranged from a low 45% to 55%.

Part of the appeal of this partnership between IKEA and the Big Clean Switch in particular stems from transparency and brand trust.

With a reputation for quality customer service and employee treatment as well as engagement with philanthropic projects, IKEA joins Amazon and Google as potential market disruptors.

Similarly, the Big Clean Switch campaign approaches customers with candour.

In its partnership guide, the company states: “We work hard to make sure we’re fully transparent with partners and consumers about the commission associated with switching, and clear about what we do with it.”

Caitlin Aburrow, Director of Product Marketing & Strategy at Oracle, discusses the opportunity for utilities to thrive in an environment of disruption.

Market disruption from external players

With IKEA and other large companies such as Amazon and Google using their customer-friendly branding as a segue into new services, the utility market is in an ongoing battle against disruption.

We discussed this with Caitlin Aburrow, Director Product Marketing and Strategy at Oracle. She says, “From our evaluation of other industries, we found that disruption favours the new entrants.”

In addition to this, utilities must consider the changing customer demographic. Increasingly, millennials, or Generation Y, are entering the market as customers with more progressive expectations than their parents.

2016 market research by Accenture of almost 10,000 millennials across 17 countries identified three key expectations - renewables and other new energy products and services, home energy management data and deeper engagement with their energy providers.

Following this, Accenture studied consumer engagement as a key driver for energy market success, citing that low-engaged consumers are three times less likely to buy additional products and services from their energy provider.

For these customers, recognisable brands such as IKEA and other market disruptors may hold even more appeal thanks to their customer engagement and branding.