The changing nature of the market and the rise to quality

Part four of an interview with Energy Matters co-founder and CEO Jeremy Rich.

Tristan Edis: How has the nature of the customer changed over the time period you’ve been in business?  Why they buy and their awareness of quality versus price?

Jeremy Rich: Back in the early days there were really only quality products.  They only had the Germans in SMA and there was the Austrian Fronius and then you had Power One coming in a bit later [all inverter manufacturers].  You didn’t really have poor quality options. 

Only of recent times you’ve had all these Chinese products.  It’s been a new product.  That product wasn’t that acceptable in Europe and other parts of the world, so they tended to use Australia as a bit of a testing bed. 

Another thing is with the high upfront rebates and the regular changes to the rebate - people sometimes haven’t had the luxury of time to make an informed choice. So therefore if the price was really good and they saw an advertisement on TV, they would probably go for that without looking into it too much. 

Also, in the early days you didn’t know anyone that had gone solar, so had no one to ask about the type of kit they had used.  So, customers see a lower price and a higher price and wouldn’t be able to differentiate why. 

But now there are lots of people who have installed solar. Obviously you trust your friends more than you trust a salesperson.  So, I think the more time solar is in the market there will be a rise to quality through learning by doing and people going through bad experiences.   

TE: Are you perceiving from your salespeople that they’re finding it easier to sell a higher quality product than say two to three years ago when this surge started?

JR: Well, I think it’s got more competitive now, so we’re seeing a bit of a narrowing in the gap in price between the high and low quality equipment.

It now comes down to productivity within the business.  Installation costs are the highest component of system costs now.  So it’s less how much saving can you get between tier one and tier three product.  It’s about productivity, efficiency, scale.  So I think that’s what’s going to drive a bit of consolidation probably in the market place is the fact that with scale it enables you to operate at a lower margin.. 

So, it’s those labour and install costs which are now driving the pricing more so than the equipment components. 

But a big problem is that people think they’ve missed the boat with government incentives.  Systems are a lower price to the customer than they’ve ever been before, even with the drop in the rebate.  When the rebate was at eight thousand dollars we were still charging the customer four thousand dollars for a kilowatt. Now we’re selling a one kilowatt system at the moment for fifteen hundred bucks with far less government support. 

But there’s a feeling amongst some customers that, “I’ve missed the boat”  and they think solar it is therefore expensive and they don’t even investigate it that much. 

Also many customers are now taking their time.  Previously we could say “listen if you don’t sign up by now, you’ll miss out”.  And you’d always get the mad rushes at the end. 

But now we’re calling customers and it’s very different.  They’re shopping around,  taking their time and they’re doing a lot of research.  It’s good for us because more research should lead you to quality but it’s also very competitive on prices.

Other segments of the interview:

-- The beginnings of Energy Matters

-- The importance of quality

-- The importance of scale, diversified markets and a strong balance sheet

-- The increasing importance of non-hardware costs