Marketing Groups/Alliances offer resources for independent distributors
Higginbotham, Kevin D
Sometimes it seems that independent distributors go through life with a target on their back. There’s always some shift in industry that is going to put them out of business. A few years ago it was the big boxes and national chains. Then it was the internet and e-commerce that was going to do them in. Terms like “disintermediation” were bandied about and many observers predicted that independents would go the way of the dinosaur. In recent years, consolidation has been seen as the major threat facing the independent distributor.
Certainly independent distributors face considerable challenges in today’s marketplace. However, to paraphrase Mark Twain: the reports of their demise have been greatly exaggerated.
Independent distributors across many channels remain strong and vibrant. Like many small to medium size businesses, they continue to grow, add employees and find new ways to serve their customers. For many, the reason is quite simply the fact that they are closer to the customer than the big boxes and the national chains. They offer a menu of value-added services that the bigger players can’t provide consistently across all markets. In addition, they are able to move more quickly and be more responsive to their customers. Finally, independent distributors can invest for the long run without being constrained by the short-term Wall Street-type thinking that often pressures their larger brethren.
In addition, many independent distributors have found that they can enjoy the benefits of size by joining together in an alliance, a cooperative, or some form of buying group. Over the years dozens of such groups have been formed in virtually every industry. Through such groups, an independent distributor is able to gain perceived size and scale while retaining their independence.
Marketing groups and alliances can differ greatly. However, in general, most offer independent distributors with one or more of the following key benefits for joining:
* Increased visibility with Manufacturers: Most marketing and buying groups have an ongoing program to help their members increase their buying power with key manufacturers. In many cases, distributor groups negotiate rebates from manufacturers on behalf of their members.
* National Contracts: Some marketing and buying groups actively solicit national contracts with major end users in an effort to help members compete with the national players.
* Networking & Sharing of Best Practices: Most groups have meetings and other opportunities designed to encourage distributors to share ideas.
* Training & Education: Some groups share the expense of employee development through an ongoing program of training & education that can even include professional certification.
* Å-Commerce & Technology: Some groups have created common “e-commerce” solutions that members can share.
* Growth: Some groups have developed business planning programs designed to help members grow their business.
In determining whether joining a marketing group or alliance is right for your business, you should do some careful research and try to match your company’s values with that of the group. You’ll want to make certain that the group you join offers programs that fit your company’s culture and strategy programs that will help you grow your business over the long haul, joining an alliance or marketing group just for an extra rebate can be a short-sighted move. You’ll get more out of the relationship if your motivation for joining is beyond simple finances.
Researching groups is much easier today as a result of the internet. Most groups maintain comprehensive websites that can provide you with a great deal of information about the group, its members, and its programs.
In considering marketing groups and alliances, it’s also important to know a little bit about their structure and how they are managed. There are two basic forms of group structure-the cooperative model and the independently owned group.
Cooperative marketing and purchasing groups are owned by their members and governed democratically according to cooperative principles. A cooperative group has an elected Board of Directors and generally operates with a high degree of transparency to its members. Under this model, each member is a shareholder/owner of the cooperative and has a voice in how the group is managed. For more information on cooperatives, check out the National Cooperative Business Association website at www.ncba. coop.
Unlike a cooperative, independently owned groups are owned by an individual or partnership rather than the membership. While individual members enjoy benefits from being in such a group, the ultimate decision-makers are the owners of the organization. A number of independently owned groups have established committees and other processes in place to drive consensus building to share power with individual members.
Regardless, some distributors prefer to be part of an organization where they have an ownership stake and can take an active role in running the group. If this is you, you will want to look closely at groups formed under the cooperative model. For others not as interested in actively running the group, the independently owned model may be a better fit.
Beyond ownership structure, you will want to consider some of the following factors:
* Membership: Who is currently in the group? Are they the types of companies and people that you would like to associate with? Are their businesses similar in size and type as yours? Do they call on similar customers? Get a list of members and call them. If you don’t like what you hear, move on.
* Group mission: What’s the group stand for? Is there a philosophical fit? Are they just in it for the money or do they have a higher purpose? Do you like the programs the group provides? Do you feel these programs will help improve your business? Getting a rebate is just the tip of the iceberg. The true value of a group is how it can help you to improve your business overall.
* Participation: How involved do you want to be in the group? How involved does the group need you to be? Are there opportunities for you to participate? For most groups, the more you put in, the more you get out. What leadership opportunities are there for you and your people?
* Training: Will the group help you to train your people? People are your most valuable and costly resource. Does the group really help you in developing your people or do they pay lip service to it? Ask to see the group’s training schedule, find out how many training programs they did in the year prior. Ask to attend a school or workshop. Does the group have its own training center?
* Business processes: Will joining the group require that you change your business processes? Are these changes that you want to make? Some groups require that you let them handle payables to manufacturers. Make sure this is what you want to do.
* Growth programs: Does the group offer programs that will help you to grow your business? A good example of this is Evergreen’s Planning for Profit program which is a business process developed by the group that helps its members do a better job of working with key manufacturers.
* Management execution: Review the group’s recent business plans. Do they meet their goals? Is their financial house in order? Planning is easy; doing is tough. Get specific and ask them to show you what they planned to do and what they actually got done.
* Outsider’s opinions: Talk to your key manufacturers who are part of the group and get their opinion. Are they finding value in the group or are they reluctant participants? Your suppliers can be a good barometer of whether the group is just a social club or a valuable business partner.
For an independent distributor, joining a marketing group can be an extremely positive move for the business. The ability to network with like-minded distributors from across the country can help you to avoid having to “reinvent the wheel” with every new initiative you undertake. You’ll have the opportunity to build a peer group that can be a valuable resource to your company. In addition, there are networking opportunities for your employees at all levels of your organization. Generally speaking, the more your company gets involved and participates in group activities the more you will get out of your membership.
If you are considering joining a group, do your homework and follow some of the guidance described earlier. Plan to make a long-term commitment and get your people involved from the beginning.
Joining a marketing group can be a great way to maintain your independence while enjoying some of the benefits of size and scale.
Copyright American Fastener Journal Nov/Dec 2006
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