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Tech for People

Why price comparison sites may not get you the best deal

George Walters

Director of New Product

18 Feb 2021

We all like a bargain.

In fact, there are people – let’s call them Frugal Frans – who would never buy something in a supermarket unless it was on offer. We’re fine with that. Why waste money, particularly at times like now when money is in short supply and many of us are uncertain about our futures.

Research for the Competition and Markets Authority in 2017 found that 40 per cent of people in the UK use price comparison websites in order to make sure they get the best deal.

But what if using these sites does not guarantee you get the best deal for you? A scientific study earlier this year by the University of Leeds revealed there were 12 price comparison websites in the UK market but found no economic or anecdotal evidence to suggest they actually benefit consumers.

“The business model of commercial energy [comparison sites] is largely based on hiding information that could help switching,” the paper concluded.

And that’s not all we need to think about.

Comparison sites are very good for finding things with the lowest price but that does not necessarily mean that choice is the best for you.

If you are a Frugal Fran who uses Google’s shopping tool you will know what I mean. If you search for a product, you often find there are a number of online retailers whose prices differ by pennies. They clearly monitor each other’s prices in order to be listed first but without cutting into their profits too much.

It is only when you actually do your own comparison that a different picture emerges. Sometimes you click through onto a retailer and find that the product you wanted is going to be shipped from the US or China – with the risk that you might end up paying customs duty on what you have bought. Other times, the cheapest retailer might be the one that takes the longest to deliver or levies a hidden delivery charge.

In this case you are not comparing apples with apples.

That’s not the case with electricity and gas, though, right? A unit of energy is the same no matter who you get it from, surely?

Yes and no.

As energy gets smarter – and it doesn’t get much smarter than at Utilita (we installed Britain’s first smart meter in 2005) – energy suppliers will move away from flat rate pricing for their power to take advantage of when the National Grid has more than it needs. On a windy day in Britain, there is plenty of wind power and electricity is cheaper, for example. Smart technology like Utilita’s will be able to take advantage of this and help consumers save money.

This is what price comparison sites miss – the smart technology that will really push down prices that go beyond the headline price for energy.

Just think about it another way. Imagine you wanted to get laser surgery on your eyes so you can read without needing glasses. Would Frugal Fran automatically go for the company that offered a price half that of everyone else or would she want to make sure that their laser equipment really was up to scratch?

So price comparison websites do not necessarily mean you get the best deal. As it happens, we are often the lowest energy supplier for many of our customers but as we move into a smart future, we should always be comparing value rather than just the cost.

Frugal Frans might need to make way for Smart Samanthas.