Doorstep selling is in the spotlight again after a group of MPs last week threatened to ban energy companies from door-to-door sales following repeated allegations of mis-selling (MW last week).
Direct selling is a booming industry in the UK, with a majority of the nation’s 24 million households receiving a knock on their door from the thousands of sellers that pound the streets. This most traditional of sales methods has played a key role in getting people to switch utility providers and has been indispensable in introducing competition in utility markets since the telecoms, gas and electricity privatisations of the Eighties and Nineties.
But the techniques employed by door knockers are under scrutiny as never before. Doorstep selling has attracted considerable controversy in the gas and electricity markets with accusations that sellers working for the big six energy companies – British Gas, E.on, EDF, npower, Scottish & Southern and Scottish Power – use high pressure techniques and fraud to win sales.
Last week, MPs on the Department for Business, Enterprise and Regulatory Reform (BERR) energy Select Committee issued a report in which they threatened to ban the big six from doorstep selling if any significant new instances of mis-selling arose.
The warning comes after a newspaper investigation revealed instances where doorstep sellers employed by npower had misled customers to get them to switch contracts. The allegations have sparked an investigation by energy regulator Ofgem which could impose a heavy fine on npower. With this in mind, the Select Committee said the energy industry should “consider itself on notice” over doorstep selling. Any more revelations such as this, it said, would lead to calls for a complete ban.
The threat came in a report “Energy prices, fuel poverty and Ofgem” which is highly critical of competition in the energy market. The MPs claim switching between energy companies often does not benefit customers and that many people switch suppliers in the mistaken belief that they will be cheaper.
However, energy consumers’ watchdog Energywatch considers a ban on doorstep sales “extremely unlikely”. It accepts that it is highly effective in encouraging people to switch out of incumbent suppliers to cheaper contracts – an avowed aim of competition in this market.
Even so, an Energywatch spokesman says: “Fraud, mis-selling, bullying and aggression on the doorstep continue to the extent that one of the big six is under investigation. Steps taken by the industry to improve the situation have not been sufficient to rid the market of the problem.” It calls on energy suppliers to improve their processes and ensure that they carry out direct sales in a responsible fashion.
Npower says it has suspended the sales team accused of mis-selling. “When we conducted an investigation following the allegations we found this was very much a one-off. We are confident our sales teams operate professionally. It is true to say there are a lot of people who have switched energy supplier who wouldn’t have if somebody had not knocked on their door and set out the benefits of making a switch,” says a spokesman.
The Select Committee’s threat of a ban is a blow to the big six, which introduced a code of conduct in 2003 to stamp out doorstep mis-selling. Energy industry body the Energy Retail Association claims this has led to a 97% fall in the number of complaints about door knockers. But the allegations against npower have undermined their claims that they have put the situation right.
Surprisingly, energy supplier E.on says it is unhappy that doorstep sales play such a crucial role in getting people to switch supplier.
Chief executive Dr Paul Golby says he would prefer that the industry did not have to sell in this way, although a spokeswoman adds: “When we stopped field sales a number of years ago, we lost a considerable number of customers to our competitors.”
Golby says E.on’s sellers are above reproach in this area. “All of our sales staff carry a handheld device with tariff information on it. If customers won’t get a saving by switching to E.on, we tell them that,” says a spokeswoman.
EDF Energy insists that doorstep selling benefits many households. It welcomes the report’s findings that: “Doorstep selling is arguably one of the best means of reaching consumers that do not have access to the internet and price comparison sites.” EDF says: “All of our staff receive regular training and all sales are robustly audited to ensure customer satisfaction.”
Meanwhile, doorstep selling received a boost after BSkyB revealed last week that it had launched its own massive door to door drive to sign up customers for its satellite services.
Earlier this summer, the pay-TV giant sent out 500 “Skywalkers” to knock on doors across the UK in search of new customers. The company is under pressure to hit its target of 10 million subscribers and must add over 1 million to its existing numbers. Sky says doorstep selling has been particularly successful in signing up households resistant to the company’s £90m marketing and advertising campaigns.
Sky has hired field sales company Cobra Group to conduct its doorstep operations. Cobra has itself been in the firing line over mis-selling. It has worked with npower over a number of years and has helped it recruit some 3.5 million customers. But an investigation by BBC programme Inside Out in 2003 claimed to expose dodgy and misleading practices by an npower salesman who “conned” customers into switching to the company. The salesman was employed through Cobra.
Energywatch chair Ann Robinson demanded that npower audit all the sales made in the previous six months by the Cobra Agency. Npower says it is still working with the field sales company, and industry supporters say there is a tiny level of complaints about door to door mis-selling.
A ban on doorstep energy selling would be a severe blow to competition in energy supply. It is hard to see how else householders without internet access could be expected to find out which of the 3,000 or so different energy tariffs on the market best suits them.
With BSkyB joining the throng of sellers beating a path to the nation’s front doors, home services brands have recognised the power of face-to-face marketing. It seems that the latest advertising and direct marketing techniques are much less effective at winning new customers than traditional methods requiring sturdy shoes and a slick sales patter.