In April 2012, Nigel Morris from SolarBusinessServices met with TrueValue Solar CEO Suren Chandrajit to discuss the phoenix like rise of the company he now heads up. The following is a summary of the key topics discussed.
TrueValue Solar (TVS) has grown very fast to become arguably, the largest PV retailer in Australia. What would you say are the top 3 keys to your success?
I would hope it’s not “arguably” anymore Nigel, we have certainly earnt our position.
Firstly, without sounding too cliché, at the core of our success is the quality of our people. Although we have grown to the largest we have worked hard to maintain a high-energy, start-up culture, built on a foundation of integrity and customer focus. Plus I would be confident that our work rate in all divisions of our business is best-of-class.
Secondly, all solar participants needed to accept that in the medium term the industry would be volatile and this risk is difficult to manage and some have responded better than others. Regulatory changes that gradually reduce subsidies were mostly gazetted, however no matter how well planned they were the industry always found the transition difficult.
The multiplier scale-back, FIT [feed-in tariff] adjustments, STC price fluctuations [small scale Renewable Energy Certificates], commodity price fluctuations and FX movements were always going to be highly complex for solar participants to manage.
The one thing that is consistent in the solar industry is change, and at TVS we take quick and decisive action to manage volatility. We can see many examples of where solar companies have grown quickly, evolved into more corporate cultures and thereafter struggled to make the required changes. In fact, the True Value Solar management team continues to spend a lot of time analysing and managing the multiple risks within the sector, plus we kept a very lean operating environment, but most importantly, made decisions quickly when required to optimise market conditions.
Lastly, our scale has amplified our success. This month we will install in the region of 12 megawatts (MW) of PV. With that scale come opportunities around cost and product quality. Where cost is concerned we try as much as possible to pass these savings onto our customers making our products more appealing. On quality, our scale allows us to push our suppliers more on the quality of materials they use. Through our largest shareholder M W Group we invest in auditing the production lines of our suppliers and auditing the product at the point of production. We are also building testing facilities in our Victorian HQ. Our scale has supported us to deliver to our vision which is “To deliver our customers ‘True Value’ by providing the highest efficiency solar systems at the best possible price.” This approach has resulted in sustained strong sales volumes and growth.
What makes TVS different or unique to other large PV companies in the market?
Culture, as above.
The company has a reputation for aggressive pricing. How do you reconcile the quality versus price perception?
Quality is very important to us, I am very confident that we do more than any other large solar company to ensure the quality of our products are strong. I doubt very much many of our competitors audit the production lines of their suppliers, check the materials that they use etc. We only procure panel with positive tolerances so our customers are actually getting more wattage than they expect, we also have testing facilities in our warehouses and sample audit inverter and panel batches. Our largest shareholder is extremely quality focussed, that culture has permeated through our organisation.
On price, we have always set aggressive pricing to deliver to our vision. Fortunately for us and our customers we can support that pricing due to our scale.
What are your views on the profit opportunity in this industry at present; given how many companies are struggling?
Well that will depend on how long term your view. If you are in this industry to make a quick buck there will be winners and losers depending on which part of the cycle you enter the market. This short term view is not relevant to our business. I believe there is a strong tailwind behind renewable energy generation and, through cost reductions solar has become particularly competitive in the last few years. Of course we are in business to make a profit and have happy shareholders however the opportunity in solar is much bigger than the profit to be made in the short term.
TVS has some reputational issues in the past. Where did they stem from and what you have done to address the issues?
Firstly, we need to put a lot of these issues in the context that we are the largest retailer in the solar industry and therefore we have the most customers. We have done a lot of work collecting feedback from our customers. I can assure you that for the vast majority we deliver to their expectations, we have an NPS (net promoter score) over 90% and a significant number of new sales are based upon a strong word of referral basis from very satisfied customers.
That all said we have and will be working hard to get better from a customer experience perspective. As I said we are doing more work than any of our competitors on quality of product. We have brought down installation lead times significantly from this time last year. Most if not all of our development in relation to customer service have been achieved through increased investment in new resources, where we have increased our installation, customer care and administration staffing levels over 100% from last year.
Our challenges in the past were mainly caused by the exponential growth, both in the industry and our business. For example accredited installers were difficult to recruit last year when customer demand was strong, which negatively impacted installation lead times. The number of installers getting accredited grew across the industry however most installers were inexperienced , most required further training, and in our case our strict installation standards applied and including a high level audit activity was undertaken which slowed the installation rate.
On line forums have a mix of feedback from experiences with TVS. You are in a public meeting with 50 disappointed customers. What would you say?
Unfortunately online forums in this industry aren’t a great proxy for real customer experience levels. As you know this industry is very fragmented, with over 600 solar installation businesses in Australia and most of them small operators. We take negative feedback very seriously and engage with the feedback when we are alerted to it. A lot of the time we are disappointed to learn they are not genuine customers instead competitors trying to undermine our business.
There is however genuine customers who we do not service as well as they or we would like. I would ask them for their patience and assure them that we will fix wherever we have not delivered to expectations. We are here to stay and are committed to providing the service we promise in our customer charter. We have early last year established a Customer F1RST program internally to address any areas that require development and attention pertaining to customer service. The program has already seen fantastic results and I am sure will continue to do so.
Notwithstanding the competitive influences online, we have seen a marked positive increase in consumer sentiment online.
You are locked in a room with 50 small PV dealers. What would you say to them, given your growth and the pressure many of them face from PV goliaths such as TVS?
Nigel I am not going to apologise for doing all I can to grow our business even though this may put pressure on our competitors. I wouldn’t however call TVS a goliath; this isn’t yet an industry that supports goliaths. Although we are the largest we only have a little over 13% market share this year. There are hundreds more that occupy the remaining market share. I doubt very much True Value Solar is the major cause of smaller PV retailers facing pressure. I suspect volatility in the STC market, and cuts in FITs would affect the small operators far more adversely.
We are confident however, that our highly competitive value proposition has opened the market very widely and allowed customers to participate in PV in larger numbers than if the market was less completive. I am confident our strategy has proven highly worthwhile for consumers at large.
What are the top key risk factors for your business going-forward, and how are you addressing them?
In the short term there is no greater risk than policy changes, which has been the case in the last few years. Management of this risk is more about understanding the impacts of potential changes and planning for them and then optimising where opportunities arise.
Of course STC volatility is another major risk, and we believe this is best managed through conservative pricing and financial strength. We are fortunate to have the benefit of a healthy balance sheet with no debt.