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Powershop: Next stop, Australia

Powershop: Next stop, Australia

Ari Sargent PowershopPowershop has proven its place as an upstart player in the electricity marketplace. Where to next?

Powershop has had a cracker of a debut run since exploding onto the scene in 2009, cumulating in its best ever performance in 2011 – doubling customer numbers and claiming the title of New Zealand’s fastest-growing company with more than 5,000 percent growth.

But as it nudges towards 50,000 customers, Powershop is edging out of startup territory. While committed to growth and profitability, the company is determined not to go down the path of other ventures that have grown bigger only to lose the disruptive edge that made them successful in the first place. 

The online electricity retailer is small by industry standards, but has a faithful following. This year, however, will see the company face further pressure from owner Meridian Energy to show the Powershop model can be profitable – an uphill battle, according to chief executive Ari Sargent.

"It's going to be a tough year for profit. The network charges have gone up on the back of Transpower's grid investment, wholesale prices are going up, there's significant cost pressure."

The biggest thing on the Powershop agenda for 2012 is a launch into Australia. In a market five times the size of New Zealand's, there's plenty to keep the company occupied there.

Sargent says our Aussie neighbours are perhaps even more poorly served than we are in terms of electricity provision. But aside from that, the market isn't that different. Powershop will start off with a very similar customer proposition and evolve as necessary.

"A lot can change in five years," says Sargent. "It would be nice to take it further afield but that would depend on shareholder appetite and a whole range of other things." And with Meridian on the asset sales block, future shareholder appetite for risk is hard to gauge right now, although of course if Powershop can demonstrate success in Australia, that will be a start. 

Right now it employs 60 staff, half at its call centre and the rest in corporate roles. How much of the Australian operation can be run from New Zealand remains to be seen.

Growing into the role of a significant market player presents both huge opportunities as well as Powershop's greatest challenge:  how to move into the mainstream without losing the outsider credibility its customer base loves.

“We’re all familiar with bands who have exploded on the charts, only to crash and burn with a bland and uninspiring second album and lose core fans in the process. 

“Powershop has had a great start with a classic debut record.  Following it up well is going to spell the difference between our future success or mediocrity, and we sure as hell didn’t build Powershop to be just another mediocre power company.”

Sargent says it's about staying true to the company's DNA.

“The thing that has driven us from the beginning is providing better value power by engaging our customers, so we’re now working on how to turn even greater engagement into commercial advantage,” he says. 

In practice, this means holding onto customers for longer by developing more personalised service, products and specials, and demonstrating the benefits people get from engagement over time, such as reducing their power usage and saving money.

He's particularly proud that Powershop has topped Consumer's customer satisfaction surveys three years in a row, most recently achieving a 96 percent success rate.  He puts this down to the sense of control customers have.

"Most electricity consumers feel disempowered (pardon the pun), powerless – they get communication or bills and there's really nothing they can do about it. It's always a shock and an unpleasant experience."