Ecommerce Tip Of The Week: Join A Buying Group


February 5, 2018

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What is a buying group?

Buying groups are cooperatives where buyers join together to purchase a large amount of units from suppliers. In exchange for the large order value, suppliers provide discounted prices.

Buying groups provide small retailers with negotiating power to purchase at lower prices on a per unit basis.

Benefits of buying groups:

There are several significant benefits to participation in buying groups.

Lower unit prices.

Buying groups provide small retailers with negotiating power to purchase at lower prices on a per unit basis.

Manufacturers will often provide large price breaks based on order quantity. So if you're paying $1 for a widget as a single purchaser, your buying group may be able to negotiate $0.70 per widget because they're purchasing 10 times the amount of inventory.

Lower supply chain costs.

Just as is the case with per unit costs, scale provides negotiating leverage with your transportation costs.

Networking, collaboration on product development.

Fellow buying group members often bring unique skills and insights. You'll gain exposure to new product lines and have the ability to expand your catalog.

Shared costs on brand development.

Many buying groups have their own private label brand. Building a brand is expensive, it's a lot more cost effective to pool the resources necessary to successfully launch a brand.

Brand exclusivity.

Having access to exclusive brands means you can sell on listings with limited competition. Friendly competition, "coopetition", is common as other members of the group will respect price floors. Many buying group members aren't even focused on the online channel...

Potential drawbacks of buying groups:

There are some drawbacks to buying groups, however. Rogue members may compete excessively on price. Management of the buying group may make poor decisions around product sourcing, product testing and certification and product pricing. As with any business, make sure you're comfortable with your colleagues.

Find your buying group.

Industry-specific buying groups are easy to find. A simple Google search will set you on your way. Industry trade shows are another great place to find and vet buying groups.

Are you looking to join a buying group? Zentail is happy to help you fund the perfect buying group for your product catalog.

Are you in a buying group? If so, we'd love to get your feedback and advice.

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