UK supermarket Sainsbury’s plans to retail electricity and gas to its reward card customers. Some believe the move could bring significant benefits to the supermarket, arguing that its brand leverage and retailing skills will provide it with a strong position to take on the incumbents. However, Datamonitor research indicates that the vast majority of households will need convincing to take electricity or gas from anyone but a recognized energy brand.

UK grocer Sainsbury’s has announced that it will form a joint venture with energy and water utility ScottishPower to market electricity and gas to its loyalty card customers under the Sainsbury’s brand. A month-long trial of the service across six stores began on Thursday.

Many industry commentators have predicted that a ‘household brand’ with expert retailing skills and a large client base will threaten the incumbent energy suppliers and prove successful in providing electricity and gas to residential customers in the

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UK. This would seem to bode well for Sainsbury’s own-brand venture.

Yet looking at the entrance of a similarly popular brand, Virgin, that entered the energy market just over 12 months ago, it did not initially win significant business. This was mainly as it was solely based on an Internet channel to market that did not prove successful. The company instead had to change its sales approach to more direct methods such as doorstep selling that has seen it steadily increase its customer numbers.

Recent Datamonitor research shows that a supermarket is the preferred non-traditional option for customers when considering a utility supplier. However, only 9% of respondents stated they would consider a supermarket to supply them with electricity or gas, with the overwhelming majority still wishing to be supplied by a recognized energy brand.

In terms of market entry, Sainsbury’s is wise to start this program out as a pilot measure for six stores and assess the take up from there. In terms of creating a large customer base, time will obviously tell, but it appears Sainsbury’s has a long haul ahead before it can create a substantial revenue stream.

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