Setting up a buying group. Any advice

[SouthernBusiness]

I have been reading about buying groups. But I don't understand the costs involved we currently buying from manufacturers and wholesalers and get daily deliveries. If I got a few other stores involved who do we buy from who bears the costs, how do we transport the goods?

 

[Paul Kelly ICHYB]

The questions you ask are the ones that need to be discussed with your partners!

 

[SouthernBusiness]

But I can't phone up other stores and ask them to join a buying group and if they ask what it means I don't know lol

 

[Paul Kelly ICHYB]

But you can contact them, explaining your concept and that you should at least all sit down to explore the benefits.

 

[Esk247]

A buying group is just that, a group of retailers (or whoever) clubbing together to make a purchase.

The technicalities of paying for the goods are to be decided among your group, perhaps you setup another company where you are all shareholders and that company is invoiced by the supplier, you all pay an equal share (25%) each of the total order. The idea being that you'll order 4 times the quantity and therefore receive a big discount from the supplier. You're only paying what you would normally pay e.g. the 25% would be the value of your normal order with the supplier.

That's how it was explained to me but i've never joined one so i'll probably be corrected by someone who belongs to a group.

 

[SouthernBusiness]

But someone has to purchase a warehouse? Setup deliveries, repack the stock to the ordered stock. This would be a lot of costings wouldn't it?

 

[Paul Kelly ICHYB]

No one has to purchase anything but stock!!!

The whole concept is about the power of bulk buying. Sure a central operation/warehouse might show greater savings, however, it is not necessary!

 

[Esk247]

But someone has to purchase a warehouse? Setup deliveries, repack the stock to the ordered stock. This would be a lot of costings wouldn't it?

If you're a group of shops then you'll all be taking stock in anyway. If the supplier bulk delivered to one of the shops then you could all go and pick up your share of the products. There are a few bits of contractual paperwork to do but a lot of suppliers understand group buying so will be OK with it.

Say you normally order 250 bottles of shampoo at £1.15 per unit. You could bulk buy at 1000 and get them for £1.05 per unit. Each shop taking 250 units. That wouldn't require much storage.

 

[kelvin1950]

Buying group in a simple form, true story.

I have two friends one of whom runs a sweet shop in town A and one of whom runs a convenience store in town B. The sweet shop people live in town B. These two place one order with a supplier and get free delivery, two individual orders would both attract a delivery charge. The goods are delivered to the convenience store which is very close to where the sweet shop man lives. One of them pays for the order and bills the other solely for what they purchased. They don't save a huge amount but every penny is worth saving.

 

[IzzoNet]

Hello
what do you mean by a buying group?
it's suppose to lower the price of products?
or am i missing the point and you mean to something else?

 

[kelvin1950]

Hello
what do you mean by a buying group?
it's suppose to lower the price of products?
or am i missing the point and you mean to something else?

Two or more retailers buying as one from a supplier to get better terms, either bigger discounts or cheaper delivery charges.

 

[Bob]

AIS is the largest independent, non-food buying group in the UK turning over almost £2billion. You may find something helpful on their website

 

[SouthernBusiness]

This is making more sense. I thought there is no point in buying a warehouse as this would be a massive extra cost. But if I just get another couple of stores to agree to purchase some stock then I could get a better price on certain lines. We get one to buy it and the other to buy what they take and transport it over. I bet certain companies would do a deal. Cheers. Not sure what I didn't understand before now! lol

 

[Cyrane]

I don't know what type of stock is required or how important shipping / delivery costs are to you or your suppliers but why not try an agreed group purchase scheme with selected suppliers based on achieving agreed purchase targets over 6 months or a year with the supplier giving extra discount as a rebate / credit note at the end of the period. The rebate can be divided between the participants in line with their purchase volumes. If you negotiate with a supplier you will still be talking about larger volumes and if you agree you can always take your joint business elsewhere. No extra stock requirement, No risk! Just more margin? PS The difficult point will of course be reaching agreement with your buying group partners!

 

[PrestonLad]

This is making more sense. I thought there is no point in buying a warehouse as this would be a massive extra cost. But if I just get another couple of stores to agree to purchase some stock then I could get a better price on certain lines. We get one to buy it and the other to buy what they take and transport it over. I bet certain companies would do a deal. Cheers. Not sure what I didn't understand before now! lol

(Edit... obviously the post above was posted whilst I was typing... he/she beat me to the same suggestion!) OK... this is what I posted....

This model is easy to set up... but takes a quite a bit of messing about with admin and moving stock about.

There is another model... I'm not involved, so not talking from direct experience, but have looked into it for my own buying needs... and am considering joining a buying group.

To find you an example, I just Googled 'buying group', and picked the number one link www.[B]buyinggroups[/B].co.uk/ ... and just clicked on the map and randomly picked the link to BuyingForce. This looks like the model I'm talking about, but I'm not certain... and it's not a recommendation as I've never heard of them before! Obviously it must takes years to build up to a large organisation.

Essentially, you negotiate a discount with your suppliers based on HYPOTHETICAL purchase volumes.
You gather together a lot of shops to collaborate... and THEY place purchase orders through your buying group - but technically, the purchase contract is between the individual shops and the individual suppliers.
Delivery is made directly from the individual suppliers to the individual shops - so cutting out all the messing about with stock.

How you encourage the shops to buy in this way can vary. You could work on a rebate system. So that retrospectively, for example, when your supplier knows how much has been ordered in a given quarter (at which time they apply the rebates/discounts that you negotiated), you then share the benefits with members... in the form of shared rebates or discounts on next orders.

You can decide if the members work as a pure co-operative, and share work/ benefits equally. But it is probably better if one of you does most of the negotiation/admin/group-marketing... and that person (you?) takes an appropriate fee.

I guess these things often keep small, but I also think this is how many of the big buying groups started... in a small way... but sometimes they get big enough to attract such good discounts, that more and more people want to join and it gets a life of its own... and the buying group admin becomes a fully separate full time business.

To set up this sort of "virtual" buying group must take some strong characters to persuade suppliers and shops to sign up to the deal. And I presume that, on paper, the discounts might seem smaller at first, because the savings to the supplier, in terms of delivery and admin, are smaller than if they deal with and deliver to a single location... but remember that the costs and messing about needed to transfer goods from a single shop to half a dozen other locations need to be accounted for. Also, once you get to perhaps 6 members, for half a dozen suppliers, you're going to need a lot of storage space to accept all the deliveries... so this really caps the size of your buying group... hence the purchasing-power available.

So... a bit of food for thought for you. It may well be that the ad hoc buying group is best for you. But it could be worth investigating setting up a paper-based buying group as described above. Whatever you do, good luck. Well done for thinking innovatively!

 

[Asjs3n4]

Hi

I have been reading about buying groups. But I don't understand the costs involved we currently buying from manufacturers and wholesalers and get daily deliveries. If I got a few other stores involved who do we buy from who bears the costs, how do we transport the goods?

Did you set up a buying group in the end?

Collective purchasing or (collective buying, collaborative buying, collective procurement, purchasing groups, centralised purchasing) is not to be confused with group buying and websites out there that are effectively selling deals they have agreed on upfront with a minimum threshold of customers.

There are numerous group buying websites our there such as Groupon who mainly focus on the consumer market around beauty products and events. Collective purchasing however has become an integral part of government and private sector procurement around the world.

Collective purchasing is the practice or organisations and individuals cooperating together to obtain greater buying power for the service, products or materials they need.

Successful examples of collective purchasing for consumers are initiatives like Big Switch, coordinated by 38° the campaign group and Which Consumer Champion where nearly 300,000 individuals registered to collectively switch electricity supplier for a better deal. On average people saved £119 pounds when paying by direct debit through the Co-Operative Energy provider. Other examples are home heating oil collectives in rural areas.

The differences are, collective purchasing is around the buyer’s coordinating their purchasing needs in order to purchase together from any provider that meets their needs, as opposed to a seller selling the product/service they wish to sell and finding potential buyers.

Successful private sector industries already utilising collective purchasing are Hotels and Hospitality, Care Homes and Healthcare, Leisure, Restaurants and Bars, Shops and Offices, Schools and Construction.

Central UK government’s Crown Commercial Service has been utilising Co-Operative procurement for many years, examples of these are the Shared Services Alliance: Collaborative Procurement Plan, Fire and Rescue Procurement Aggregation and collaboration & local councils have been collaborating & sharing resources for public service delivery under initiatives like London Ventures.

What are the Advantages of Collective Purchasing?

Economies of Scale – The combined purchasing power of the group enables far better terms.

Reduced Costs – Individuals and organizations working alone cannot obtain the same deals. Typically coloration can reduce costs from 10% to 35%.

Increase Profits – Even a small reduction in purchasing costs will significantly increase the overall profits of all organisations within the network. To increase similar profit for an organisation that they would gain with collective purchasing an organisation would need to increase sales by around 4x.

Lower Carbon Footprint – By simplifying the procurement processes its possible two reduce the collecting unit/service cost, in addition to transaction/servicing costs.

Knowledge/Process Efficiency – Sharing information on best practice, suppliers, technologies and purchasing experience helps to reduce redundancies in the supply chain, find new efficiencies as well as leading to continued optimized Total Cost of Ownership – TCO.

Timesaving – The group organizer manages the process therefore, the individual group members achieve significant time savings.

 

[P&H]

I have been reading about buying groups. But I don't understand the costs involved we currently buying from manufacturers and wholesalers and get daily deliveries. If I got a few other stores involved who do we buy from who bears the costs, how do we transport the goods?

Hi, If you need advice on this matter, please feel free to call on 07967 673085

 

[Mark T Jones]

Hi, If you need advice on this matter, please feel free to call on 07967 673085

I'm guessing it's been sorted from 7 years ago..