Editor’s note: this column, originally intended for issue two of The Wine Merchant, is written by Paddy Eyres, owner of Bin 21. The front page of the magazine summarises what Paddy is trying to set up, but here he explains it in more detail, and in his own words. His contact details are included.
The bigger the business the better the buying power. True?
Well, not always. Small businesses have been getting together to increase buying power for decades in different ways. Co-operative organisations work together for the small business and buying groups such as “Euronics” work with independent electrical retailers, “Best Western Hotels” work with independent hotel owners and the list goes on.
However there is no national buying group that works with independent wine merchants and quality off-licences to build beneficial relationships with suppliers.
Why? Good question. I couldn’t answer it, so I made a decision … start one!
Having worked with a national wine and spirit wholesaler for nine years I have seen first-hand the benefits of having national pricing policies for “groups” of customers. It is simple. If you are part of a national buying group you get better prices from certain suppliers.
This does not simply apply to wine either, it applies to all sectors. A wine merchant/off-licence group should be able to procure fridges, confectionary, beers, accessories and gifts, glasses for retail and glass hire etc. Wholesalers such as Booker also have pricing policies for groups or consortiums.
The prices offered to a chain with 500 branches are much sharper than the prices offered to an independent with one or two branches. However, if a buying group of 500 independents went to a supplier, the supplier would offer the same prices as the larger chain.
So how will it work? Well, it can work a number of ways, but the buying group will be a non-profit making organisation, simply covering its costs and delivering the benefits back to its members, through reduced prices and possible annual dividends.
Members will pay a small monthly membership fee by direct debit and will then be able to benefit from reduced prices agreed by the suppliers for that particular buying.
If a business with a turnover of £400K-£600K paid £45 per month (£540 per year) to a buying group and was able to save just 3% on HALF the products it buys, that would represent a saving of between £3,495-£5,250 based on a margin of 30%. Now to me, that is worthwhile, particularly as the savings could in fact be more.
I have spoken to a number of suppliers and they are very interested but are understandably nervous about reducing their margins, however they also appreciate the benefit of being able to attract more customers through being on a preferred suppliers list that will be issued to buying group members. Therefore the challenge is agreeing a pricing policy and indeed the retailer qualifying criteria with key suppliers, which is underway as this article hits your inbox. Suppliers understandably only want to deal with viable professionally run businesses that operate with a minimum risk of exposure.
Therefore members will need to achieve some qualifying criteria to join the buying group, which in turn benefits suppliers from the knowledge that only well run businesses that are here for the long term will be involved.
What I now need is to understand the level of interest there is among independents to be part of a buying group. I am more than aware, being an independent is about having USPs and differentiating ourselves from multiple retailers. Being part of a buying group will not detract from this as the suppliers will be chosen by members and must show commitment to the group with stocking policies and what we stand for. The buying group is ultimately controlled by its members and their needs so your views really do count.
The benefits are clearly there when buying as part of a larger group, and this way we can all keep our individuality, specialisms and uniqueness. That’s what we all want … but I would also like to be a little more profitable too, wouldn’t you?
Let the buying group do your price negotiating and enjoy the benefits. Please give your feedback and let me know if you would like to join once we get the policies, pricing, supplier list, etc confirmed. I am still in the early stages so your thoughts will form part of the strategy and the foundations of what we all want to achieve. Please email me on email@example.com and I will answer any questions and respond accordingly.
Nothing ventured nothing gained!