As part of the process of creative destruction the market renews itself. Many people imaging that it is the business service, the product that is better, or an innovative advertising campaign. For instance meerkats are now indelibly linked to insurance. Perhaps that is because it is visual, talked about, or just easy to understand.
Within the book market Amazon came up with a business model that drove most sales of books onto the internet. The business model was entirely different to a bookshop on the highstreet.
Within the renewable heating market the advent of the Renewable Heat Incentive means that there will be more wood pellet, log, heat pump and solar heating systems installed in the future. What will be the winning business model in the domestic market?
There are a few online companies that take leads and offer them to heating companies. Established boiler manufacturers like Valiant, Worcester Bosch, and Baxi have traditionally been much larger than the installation companies. Installers have a seemingly higher investment to make to be able to install. They have to become MCS accredited, and in doing so they find themselves in a smaller pool than previously. Other interested parties include architects, energy assessors, and surveyors, who perform part of the function of installation.
At the moment it is difficult to tell where customers will go first. A local installer? A trusted make? A local specialist such as an architect?
Part of the issue for customers is that they do not have good knowledge of the products. Clearly product manufacturers are biased, so where do you get your information from? Some installers may be franchised or licensed by one make of heating system. Again not offering choice to the consumer. Online companies offer ease of access, but little discussion. Local professionals such as surveyors may not have the full information to offer, they are only one step ahead of the consumer.
Key factors to consider in the UK include the development of the market in Europe. For wood pellets the Austrian and Italian markets have developed significantly over the last 5 years whereas the UK market has developed very little. A scant glance at the renewable installed today show the UK at the bottom of the league. The danger for the UK boiler manufacturers is that they loose market share to other manufacturers and therefore dilute a market that has traditionally been 3 or 4 major players. This will decrease their market power and offers more choice to both the consumer and the installer.
In the wood stove market you may think that the shops that have acquired a local base should be able to branch out. The difficulty is that they install using contractors who are probably not accredited to install heating systems. The installer needs to be competent with wood flues, with wet heating systems, and therefore needs a background of both plumbing, probably gas or oil, and wood. This does not give the stove shop the easy access to labour.
The large energy companies are flirting with renewables also. As they are involved with the FiTs, they have found solutions for solar PV. British Gas has taken a stake in a biomass installation company. AS they deal in heat they also do not want to loose market share. British gas especially has a history of installing gas solutions and seemingly this is no different.
For solar and heat pumps, expense aside, you do get a unit that is essentially unbranded. This suits a market that adopts a one size fits all strategy - ie big marketing, big install teams, big processes. It may be that a large company with resources therefore does have the presence of mind to step in and go for growth within the sector.
For wood pellets and log gasification the market is more complex. There are a number of solutions and they do have different characters. The best model has not yet emerged, yet seemingly customers are adopting a range of solutions and all seem to be happy. This suggests a more fragmented market where the consumer will want to explore all the options before choosing one. This is hard for a manufacturer to do, and probably the retailers as well.
