Buying power but no buying power

Collective purchasing is a good thing. Joining together to increasing buying power can bring real benefits to consumers. As a student sharing a house we used to buy the most enormous containers of tea bags from the cash and carry saving precious money for beer and socialising. These days, with huge technological advances, the potential for consumers to purchasing collectively is far far greater. There’s no need for people to be in the same area or even to know each other. Countless commercial websites have made big bucks out of this potential over recent years.

So it’s hardly surprising that public benefit orientated organisations, including social enterprises, consumer groups and central and local government have sought to get in on the act. Fast-rising energy prices and raised awareness on the impact of fuel poverty have provided a focus for much of this as a way to counter the pressure placed on cash-strapped households. The Big London Energy Switch is one such initiative, aimed at giving consumers a better deal in the energy marketplace. The initiative has been backed by numerous local authorities. The idea is simple – by joining together consumers can get cheaper energy prices.

You don’t have to commit to moving, just express interest in being part of it. Then the organisers go out and negotiate a better deal with the energy companies, which is offered to all those who signed up to decide whether or not to take it up. Signing up is a bit of a no-brainer. There’s nothing to lose and the more people there are the more likelihood of negotiating a discounted rate. Even if you’re locked into a fixed contract, there’s a possibility that you’d be better off buying it out (paying the early release penalty) to switch to the new rate.

The recent London Big Switch proudly announced that 85% of consumers would benefit from the deal that had been negotiated with supplier OVO. Knowing that I’m probably atypical in hunting around for the best deal, I assumed I would probably be in the 15% who wouldn’t benefit. But when I saw the deal was with OVO, who already supply my gas and electricity, I thought I might be in for some savings…as surely the deal that had been negotiated would be better than the one I was on.

I asked whether I could actually ‘switch’ since I was already with OVO and was told I could take up the deal. Looking at the details of what was on offer I started to get a bit confused. It seemed to be exactly the same deal as I’d been offered. Just me. On my own. One consumer.

I asked the Big Switch people and they told me no one had been able to match OVO’s bid.

But that wasn’t what I was asking, I said, I want to know whether this was exactly the same deal as OVO was already offering.

In a roundabout sort of way they admitted that the deal they’d ‘negotiated’ was actually exactly the same one. It wasn’t any better than was already available in the market. The fact it was better than the other providers wasn’t the point. I wanted to know what had happened to the buying power this collective purchasing was supposed to produce.

It seemed that actually the scheme was simply directing people to the best available offer, and nothing to do with collective bargaining power.

Now I don’t know the numbers involved, but 38 Degrees – the campaigning organisation who were involved in the first Big Switch – say on their website that ‘so many people wanted to get involved…’ which suggests, well, lots of people…which suggests it should be enough to secure a better deal. The truth is apparently not.

My thoughts have turned immediately to how the situation could be improved. I can only imagine that the numbers involved – whether signing up or taking up the negotiated deal – were too small for the energy companies to offer much of a discount.

In any event, I couldn’t help wondering whether some different approaches could be taken to marketing the scheme to local people. Particularly given that there’s public money going into the scheme. At present, it seems as if councils might have been better advised just paying for advertising for price comparison sites…though that seems to be giving up on the whole idea of collective purchasing rather too easily.

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One thought on “Buying power but no buying power

  1. Pingback: Is this collective purchasing’s coming of age? | tobyblume

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