As many businesses continue to sink in today's rough economic waters, the current recession is motivating many independent jan/san distributors to go out and try new business practices to stay in business. One popular path distributors are taking is joining an industry buying group.
Buying groups, also known as marketing groups, are organizations that unite independent distributors into a more competitive business force. These groups offer better pricing and more pull with manufacturers in addition to value-added services and national account opportunities that help level the playing field for distributors.
Emerging in the early 1960s, buying groups saw some of their biggest growth occur in the past 20 years. During the 1990s, the increasing number of mergers, acquisitions and business failures along with the emergence of large competitors caused a significant reduction in the number of distributors across the country, forcing many to look for "strength in numbers"
Fearing that the current recession will force another unprecedented wave of industry consolidation, today's distributors believe that taking shelter under the umbrella of a buying group can help protect their margins and provide the resources to expand their business reach.
Traditionally, the most basic and desirable benefit of joining a buying group is access to deep discounts. This hasn't changed much today as groups are able to leverage their collective buying power by combining the volumes of their members to negotiate better pricing.
This proves to be advantageous for the smaller regional distributor, and is a major reason why most distributors are attracted to buying groups, says David Champagne, president of Beacon Distributors Inc., Lincoln, R.I., and a member of Cincinnati-based Distributor Partners of America (DPA). In fact, Champagne says joining a buying group is the best thing he has done for his company.
"We joined because they gave us better pricing points and buying power that we didn't have on our own" he says. "[We] carry more weight when you put all of us together, than I do as an individual. They've also introduced us to lines that we probably wouldn't have had interest in"
Like many small distribution companies across the country, Champagne wears many hats when it comes to running his business. By being affiliated with a buying group, he says he has been able to focus more on selling to his customers, while his group negotiates his product pricing.
"They're like my purchasing department" he says.
The purchasing power alone behind a buying group affords distributors the opportunity to purchase from manufacturers they would not normally be able to. Some buying groups have relationships with manufacturers in industrial packaging, foodservice and safety product sectors, on top of the extensive offerings of janitorial and sanitary products. Thus, distributors have access to a diverse product catalog and are able to expand their reach to more customer segments, while also becoming a more viable resource for end users trying to consolidate.
"We have become a better distribution house due to our alignment with vendors" she says. "We have grown quite strategically with the correct product mix to align our company for growth in a vast number of markets"
Discounts may lure distributors to join a buying group in these harsh economic times, but it's the other perks like access to a marketing department that are keeping them around.
Distributors now have the ability to work with their buying group to create product catalogs, brochures and flyers for their own distribution company. By working with the buying groups, this saves distributors the time it would take to do it themselves, or the money to hire an outside marketing firm.
Some buying groups also offer distributors extensive training resources. As a member of Tuscaloosa, Ala.-based Afflink, Chris Nolan, president of H.T. Berry Co., Inc., Canton, Mass., says his company and other members of the group are able to access human resource management packages that can assist with the development of employee handbooks and job descriptions, background checks, drug screenings, management and employee training programs, as well as professional development opportunities.
Distributors are also able to tap into the group's comprehensive educational platform that helps distributors with operational efficiencies in their warehouses, finance and accounting departments, as well as their sales teams, to name a few examples.
Aside from marketing allowances, buying groups also allow distributors to build their own brand identity through private-label product programs. These programs are tailored to distributors that do not have their own in-house label and offer distributors product and brand exclusivity in their geographical markets.
"Many markets have multiple distributors selling the same branded products" says Collin Carney, president of Great Western Supply Co., Des Moines, Iowa, and a member of Pro-Link, Canton, Mass. "It's never fun running into the same brand from another distributor. It's much like two women showing up at a party in the same dress. Having your own high quality brand allows you to differentiate yourself from the other distributors much more easily"
Private labels are also a way buying groups are helping distributors land national accounts. A distributor can use the private label as a selling point when bidding a national account and can meet the client's coast-to-coast needs by working with other members of the buying group across the country, says Jim Clayton, president of Clayton Paper & Distribution Inc., St. Joseph, Mo., and member of The United Group, Monroe, La.
On top of tapping into their respective organization's resources, distributors are also finding it extremely beneficial to consult with fellow members.
Networking with other buying group members usually takes place at regional and national meetings buying groups host throughout the year. During these gatherings, distributors are brought together to exchange business ideas and discuss current trends in the industry.
"The networking is always a highlight of every meeting" says Carney. "Being able to speak openly to other distributor owners or managers about opportunities or challenges you are facing is very helpful"
For example, regional and national meetings have been helpful for Clayton's pursuit of a new operating system.
"We're in the midst of evaluating software and it's invaluable the amount of information you can get from other members who have already gone through that process" he says. "There's a lot of insight that you can get from other members who are going through the same things you are but are maybe a little bit out in front of you. When you find friends in the group and you can bounce ideas back and forth, it's extremely helpful"
Networking opportunities aren't limited to just meetings. Distributors can also connect virtually via buying groups' Web sites where they can interact with fellow members to discuss anything regarding their business operations. These sites are password-protected and contain an extensive directory that lists contact information for all members of their group.
Using these sites, distributors can also access lists of manufacturers who each distributor member of the group purchases from. Products offered through the organization's suppliers are also broken into several categories to help each distributor procure products. The lists are further sorted by such categories as supplier location and type of products purchased. This can be helpful for distributors looking to take on a new line as they can consult with other members about the product first before committing.
Some buying groups also have sections on their sites devoted to helping distributors sell their slow moving inventory or overstock items in their warehouses to other members across the country, says Jefferson. Not only does this eliminate the dead stock in a distributor's warehouse and free up valuable space that could be storing other items, it also helps the other distributor who may have a customer looking for a particular product line.
The devotion to help distributors increase their business performance and boost sales is characteristic of most buying groups. With marketing assistance, Web portals, private-label programs, limited competition and networking opportunities, distributors say buying groups can lend stability during this time of economic unrest.
"If there are distributors who are out there right now that have not joined a buying group, they're missing out" says Clayton.