Buying groups: clout for small businesses.

In industry after industry, small businesses have found they can gain real power by coming together as buying groups. The number of buying groups in the drug industry alone exceeds 100. In the hardware business, the 139 wholesalers that deal with the 6 largest wholesale buying groups account for about one-third of U.S. retail volume. Among professional end-users like health care organizations, membership in buying groups is common. Where competition is heavy, where ownership of stores or other outlets is fragmented, and where price is a prime determinant in purchasing, buying groups are often powerful. The original impetus, of course, is to lower prices through volume purchasing. These groups customarily expand by offering accounting and inventory help, then promotions and merchandising aids, and eventually broad lines, including even private labels. These help build store identity, which is vital for retailers, especially in competing against chains. There are drawbacks, however. For wholesalers, joining a buying group means ending close relationships with many other suppliers. Small retailers are the losers when a large member rocks the boat or even leaves the organization. For manufacturers and other suppliers, it can mean losing control of pricing and reducing control of distribution. But when the choice is between gaining the advantage of numbers and losing out to the big competition, small retailers and wholesalers have found buying groups a haven. INSET: Some buying groups. [ABSTRACT FROM PUBLISHER]