Have you ever wondered how small businesses are able to buy inventory and supplies at wholesale prices that are normally only available to major retailers? The answer is buying groups. A buying group, also known as a purchasing group, is an organization that leverages the combined purchasing power of many small businesses to get wholesale pricing and terms from suppliers. Here’s a primer on what buying groups are, how they work, and why your business should consider joining one.
What Are Buying Groups?
A buying group or purchasing group consists of a group of businesses that join together to buy products and services at a discounted group rate. By aggregating the purchasing power of hundreds or thousands of small businesses, buying groups are able to command the volume discounts that were previously only available to large national companies.
Buying groups negotiate discounted pricing, shipping, and favorable terms with manufacturers, distributors, and service providers on behalf of their members. This enables small businesses to buy inventory, raw materials, supplies, services, benefits programs, and more at prices they would never be able to obtain on their own.
How Do Buying Groups Work?
Buying groups survey their members to identify the products and services they use in their businesses. They then leverage their combined membership to negotiate discounts and improved terms from vendors and suppliers. Many buying groups also offer private labelled products that are exclusive to group members.
The buying group handles the negotiations and contracting with vendors on behalf of the members. Once the deals are in place, members can purchase what they need directly from the vendor at the discounted group rate. Some buying groups also provide online marketplaces where members can easily find and purchase products.
Buying groups make the procurement process more efficient for members. They reduce the time that business owners would otherwise have to spend sourcing suppliers and negotiating prices. Members simply purchase through the buying group using the systems and discounted pricing already negotiated by the group staff.
Why Should You Join a Buying Group?
If you run a small business, joining a buying group can provide many valuable benefits:
- Access to wholesale pricing – Buying groups provide volume discounts typically only available to major corporations. Members can realize 10-50% off supplier list prices.
- Lower costs – The discounted pricing allows members to reduce costs and increase profit margins. The savings generally cover the cost of buying group membership fees.
- Wider supplier selection – Buying groups provide access to a wider range of vendors and exclusive products. Their combined membership allows for deals that individual small businesses could not obtain on their own.
- Simplified purchasing – Buying groups eliminate the hassles of sourcing suppliers and negotiating prices. Discounted pricing is already in place so purchasing is easy.
- Improved cash flow – Buying groups often negotiate improved terms with vendors like extended payment options. This allows members to better manage cash flow.
If your small business could benefit from volume pricing on the products, services, or benefits programs you purchase, a buying group is worth considering. The savings could significantly improve your bottom line.