The Future of Buying Groups
What can national buying groups do to help us adjust to recent disruptive innovations that have altered business conditions, and how can they remain relevant to their members?
I explored this topic with the above executives last month. I asked each of them about the services that buying groups now provide, and those they might—or might not—provide in the future. Their responses reflected in part the composition of their own membership—which ranged from 100% bricks and mortar retailers (Nationwide) to a mix of regional retailer/e-tailers, large "power" integrators and small independents (Pro Source).
In view of recent industry upheavals, how can buying groups become more important to manufacturers?
The most obvious answer is the historical one. By continuing to aggregate dealers, buying groups can further concentrate sales and deliver them to vendors in return for price concessions, VIR and freight programs, group volume discounts, and other incentives—the sort of advantages big box stores have enjoyed for decades. But now that the big box model is being undermined by e-tailing, the buying group purchasing blocks are increasingly important to manufacturers. According to Jim Ristow of Pro Source, it's all about being an attractively large (and easy to administer) sales channel for the vendor. A buying group may account for up to 20 to 30 percent of a vendor's total U.S. sales, putting them neck and neck with Best Buy—while keeping administrative costs low (compared with servicing individual dealer accounts).
Both Bob Hana of HTSA and Tom Hickman of Nationwide felt that vendors look to specialty dealers as the preferred place to launch new technologies and products because of the knowledge and skill level of our sales staffs, and the superior access we provide to customers who will buy high-value products. (The plan by Sony, Samsung and LG to hold special Saturday 4K TV events at selected Busy Buy stores this Fall appears to contradict this, but it may reflect more on Best Buy's state-of-the-art marketing reach than on their sales skill or integration prowess. In fact, this could be showrooming that benefits us more than the pure internet marketers.) Richard Glikes of Azione added that buying group members represent an important feedback loop for vendors, providing shorter and better communications pathways for learning about consumer preferences and market conditions. We also deliver better brand loyalty and focus.