Under the surface, many non-branded groups have difficulty choosing and setting strategies to build a sustainable competitive advantage and deliver substantial extra profits for members year after year
For several decades, independent retailers around the world have been forming various types of groups; mainly for reasons of better buying power, collective marketing or looking for varying levels of support and networks.
Outwardly there seems to be some very successful non-branded groups with a focus on buying and support but under the surface most have difficulty choosing and setting strategies to build a sustainable competitive advantage and deliver substantial extra profits for members year after year.
Encouraging members to adhere to strategies is often difficult, mainly because it’s a majority rule situation and there are individuals within the group who resist fully committing to certain suppliers and marketing programmes because of personal preferences and previous alliances, especially to suppliers local to their business.
When it comes to selecting suppliers, there will usually be differences of opinion but it is necessary for members of a group to reach a compromise to achieve the end goal for the benefit of all. This one of the reasons why it’s so important that everyone is involved in deciding and fully understanding the focus of the group and what the strategies are to maintain the focus.
One reason to belong to a group is buying power and there are several advantages: Economies of scale; greater negotiating power, reduction in transaction and administration costs, reduced work load.
Being able to share any information about a supplier – their market knowledge; use of technology; their service and delivery. Past purchasing experiences with them. Is ordering and distribution easy and reliable? Is their product quality and reliable and are they easy to work with?
Already we can see some of the aspects the group should be focussed on and we can see it is necessary for all members of the group to get along reasonably well together in order to share information and network and mutually agree the better suppliers.
Group strategies should include protocols to build the best possible relationships; negotiate the best possible terms of trade and protect against variations in demand; unacceptable quality and unacceptable variances to delivery terms.
Loyalty and discipline within the group are very important and requires their own set of protocols. Credibility, honesty and trust are one of the pillars of a healthy, sharing relationship. It is very important commitments made are honoured; that alternative ‘deals’ direct from suppliers are not accepted by individual members; that preferred supplier status isn’t used to leverage better deals from alternative supplier by individuals. Any price advantages and preferential deals should remain confidential to the group.
It doesn’t stop here either; these protocols and rules must be passed onto your store buyers. They must fully understand the reasons for membership of the group and be disciplined to support key suppliers and promote product lines where you have a strategic advantage over a competitor. Support of these should be a key performance measurement in their job description and personal and development reviews.
The Garden Retail Success Marketing Manual has a comprehensive section about structure, strategies and operations of groups. It outlines some important points to think about if you are a member of a group; wanting to join a group or wanting to establish a group.
- Joy Lamb