Buying Groups: Should I join one?
Updated: Apr 20, 2022
You may have heard of buying groups if you own a small business. However, you may be curious about their functions and how they may assist you in achieving your business objectives.
We’ll go over everything you need to know about buying groups as well as some of the most common problems you could face.
What are Buying Groups?
A buying group is a collection of small companies that band together to bargain with vendors as a bigger group for better price and conditions on goods and services. Sometimes, these are run by membership organisations or as a business tool by brokers and suppliers.
Buying in groups isn't a new notion, but social media and other technical improvements have greatly aided these communities.
As a result, these groupings may be used for various sorts of purchases and for various types of customers.
What are the main disadvantages of joining a buying group?
While there are many advantages, there are also some disadvantages to consider.
One of the most significant disadvantages is that purchasing groups are unlikely to operate with all suppliers, so if you have a particular vendor you would like to buy from, you may not be eligible for buying group discounts on their products or services. You might not even be allowed to employ a different vendor if the buying group mandates supplier exclusivity.
You may also need to put in some time to assist the group and other members, depending on the size of the buying group this can add additional administration. Sometime buying groups require membership or fees so always take these into account when measuring how cost effective their products or services are.
Here are a few more drawbacks that you should consider before joining any buying groups:
Most buying groups tailor their services with key suppliers that have high credit thresholds which in most cases excludes those very businesses they are intended to support or represent. Therefore, in some cases buying groups only bring benefit to larger or more established businesses and can be detrimental to smaller businesses that need support.
In some cases, exclusive deals with suppliers leads to a lax approach to pricing. Always benchmark any quote from a buying group against what you can achieve directly with a supplier, third party broker or from a recommendation.
· Data Integrity
Ensuring your data is always protected always is vital. When Buying Groups and their owners go rogue this can cause issues with how your data is managed, held and to whom it is passed onto. In some cases, critical and sensitive business data could be passed onto a third party without your authority so checking your supplier complies with GDPR and legislation is always important.
· Track Record
Some buying groups make vast claims of making savings of 30% to 40% and suggest saving millions of pounds for tens of thousands of businesses. Much of this can at times be a marketing gimmick to encourage sign ups.
Case studies and testimonials need to be validated as a testimonial from a business 5-10 years ago doesn’t reflect the buying group or business capabilities now and look for independent testimonials from trusted sources.
Always check the relevance of any buying group and look to understand what they have accomplished in the current financial year and not historically and gain references from other businesses or organisations that have been supported by them.
Why you should join PSP
Delivering place solutions nationally, we provide direct support to businesses through our business support programmes and strategic support to BIDs, local authorities, and membership organisations on a wide range of services.
Since launching in 2021, we have identified over £3m in business cost savings for businesses nationally through our place savings programmes. We work with predominantly micro and SME businesses nationally delivering a campaign to enable businesses to be better informed on their costs and take back control from suppliers and rogue brokers.
We’ve seen both sides of the coin with our leadership team having set up and grown one of the largest buying groups for places in the UK. Our findings are that they just don’t work and that’s why at PSP, we treat each business as an individual entity and support them based on their exact requirements.
So, if you have poor credit, a debt with a supplier, looking to downsize or grow then we will find the right solution for you with the right supplier for your business.
Let’s talk all things place savings!