Joining a Buying Group
Good or Bad Idea?
Is it possible for independent retailers to have some of the advantages that larger organizations have? Yes, and there is a way to have some advantages that large organizations don't take advantage of. It is by stores coming together as an loosely organized group. I do not call them "buying groups" because there is more to what a group might do than just buying. I call them "skull groups." (I don't know where the term came from but I first heard of it from a friend who had automobile dealerships and I've continued to use it.)
The basic format is a group of businesses doing or selling the same types of merchandise or services where their market areas do not overlap. How many could make up a group? Too few would not be effective; too many may be difficult to manage. I believe between 8 and 10 would be about right.
There are many activities such a group can use choose from as their goal. In order to keep participation in the group from cutting into a business's prime focus, the group could meet periodically (quarterly or as agreed) or keep in contact via e-mail to do the following activities:
- Exchange of ideas, problems & solutions, financial information – sales, expenses, profit/losses.
- Exchange of overstocked merchandise that others use. (I will tell you that many suppliers frown on this but I believe they are being short sighted.)
- Bringing in speakers to cover topics that would be of interest to the group
- Making a deal with a consultant at a special rate to work with the stores.
- Developing new lines or new "departments" or a private label for some type(s) of merchandise that are not already labeled.
- Developing advertisements, brochures, and mailers that could be used by member stores by adding each stores own logo.
- Group buying where all or most of the stores buy from the same line(s).
- Filling orders for stores that are out of stock of a particular item and/or obtaining an item for a customer that is not available either at the store or in the immediate area. Often, the sale is forwarded to the store who has the item.
What does one get in return for participating in a group? Some say membership increases sales. Maybe yes, maybe no. The real "payoff" is with all the other things the group does.
In my "past life" some 20 years ago as a retailer of fine giftwares, we had been a part of a group. Our store belonged to a buying office serving stores carrying similar merchandise. The office was a central point that, before e-mail and the internet, facilitated the activities mentioned above by telephone, letter, or at an annual or bi-annual meeting. Then, later, when we became associated with a major retail corporation, it took on a structure to do the same things. We would meet a day or two before a trade show to exchange ideas, problems, and solutions. We also brought along lists of what merchandise, mostly basics, that we all used, that we were overstocked on and what merchandise was needed. Over the Labor Day weekend, we would again meet to do the same thing. It was surprising how much trading we did, which opened up funds for other merchandise.
In working with my consulting clients, I tell them of my experience and how it can be an advantage if used right. By "right" I mean that all participants of the group must be willing to, first, set up the parameters of the group and then be willing to not hold back on topics that have been agreed upon that are open for discussion.
The big problem is finding people from other stores that are compatible and who have the authority to participate in all aspects of the group. Sometimes, when there are owners and buyers who are not owners, it does not work out well. Usually owners are reluctant to share financial information or personnel problems with those who are not owners or presidents of their firms. If that be the case, then do not have these topics as part of the group's agenda.
How does one go about starting or being part of a skull group? There are several ways that have worked for my clients. They are:
- If you are privileged to have a sales rep call on you, ask him/her of other accounts in their area who you do not compete with. It hasn't happened recently, but in years past some reps have set up such groups.
- Ask some suppliers about their other accounts not in your area. Tell them that you would then be able to refer people if the need come about. Some suppliers may have web sites that list their accounts.
- Attend trade shows and tell your suppliers that you'd like to meet some people from other parts of the country who sell their line.
- Attend trade shows and, besides looking at merchandise, look at the name tags of other buyers and, if they are not in your area, tell them you are interested in starting a group. You might even have an information sheet on what you want to do.
- Go to the yellow pages or do a search in different cities for like businesses and contact them about the group idea.