An Introduction to Buying Groups
The Challenge of Being an Independent Business
Independents have great advantage over their corporate competitors. They possess an entrepreneurial spirit that is difficult to match and they have the ability to react to local market conditions very quickly. However the nature of the supply chain within which Independents exist can often lead to a competitive disadvantage versus their much larger corporate rivals.
Multi-National or even National competitors can offer some of the same products that Independents sell for prices that are below their cost. New products or services are often available to these competitors months before the Supplier’s salesman calls on the independent. When a product is in short supply, often it is the corporate competitor that has stock, not the independent business. The result is lower margins at best and at worst, the closure of the independent business. To top it all off many Independents are unable to find buyers for their businesses after a lifetime of work.
The reason for this seemingly unfair situation can be traced to the fact that the National and Multi-National Corporations have a much more efficient supply chain. The extra margins gained through the efficient supply chain has fuelled their rapid growth and enabled them to amass huge market-share power. In the past two decades there has been a rapid expansion of the both the Corporate Chain Store and the Franchise Model, where a successful format is replicated time and time again. This competitive onslaught from these business models has forced the “Independently” owned business to accept lower margins, operate in smaller communities, focus on more narrow market niches or simply go out of business.
The Independent has responded to this increased competition through innovation, finding market niches that they can compete in by providing the “customer service” and through “immediate innovation when required” that can only come from an owner operator. However this is not enough, since it does not address the supply chain inequalities. The only way to address these inequalities and yet remain independent is to join a Buying Group. That is, join a collection of like minded independent businesses that come together to achieve buying and marketing efficiencies.
We believe an effective, well managed Buying Group is the most effective tool the Independent, can use to increase margins, grow market share and compete effectively without having to give up "independence."