Minimising consumer detriment from energy door-to-door sales

7 Dec 2012

This report looks at the role of door-to-door selling in Victoria’s evolving retail energy market, the consumer detriment associated with it, and the policy approaches – both existing and potential – that may minimise detriment without compromising energy market objectives
Since the introduction of Full Retail Contestability to Victoria’s retail energy market a decade ago, unsolicited door-to-door energy selling has emerged and expanded, playing a major role in the transformation of the market. Today, Victoria’s retail energy market has the highest switching rate of any in the world. Nearly all retailers operating in Victoria use door-to-door selling to drive this switching activity, and it is estimated that door-to-door sales account for just over half of all customer switching.
As energy door-to-door selling has grown, however, so too has concern about the ways in which this sales channel can cause consumers – particularly vulnerable consumers – financial and non-financial detriment. In terms of non-financial detriment, the time loss and the annoyance that results when uninterested consumers are interrupted by a door-to-door sales call is often fairly minor, but it is also pervasive. This probably accounts, in large part, for the negative community perceptions of door-to-door selling. Should a sales agent conduct themselves poorly, or where the consumer is vulnerable, this non-financial detriment can be much greater. For consumers who agree to switch at the door, the aim is typically to save money.
However, there is real cause for doubt that most consumers make a saving when they accept a door-to-door sales offer. In the UK, a 2008 study found that just under half of those switching at the door were actually made financially worse off by the change. This may be because door-to-door selling creates a ‘situational monopoly’: an environment in which the consumer is reliant on the information provided by only one supplier and cannot ‘shop around’ to find the best deal. Where the product or service offered involves complex terms and conditions, optimal decision-making may be even less likely.

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