August 10, 2010

This article looks at buying and marketing groups’ value propositions and how they have evolved to draw and retain new members. The second part of this article will appear in the Aug. 25, 2010, issue of MDM and will focus on challenges buying and marketing groups face in today’s markets.

Dozens of organizations in the distribution industry exist with the sole goal of leveling the playing field for independent distributors. At their core, these organizations want to leverage volume through pooling distributor member purchases with a group of preferred vendors.

These buying and marketing groups continue to grow revenues to compete with the purchasing power of large national distributors. For example, NetPlus Alliance, founded in 2002, has 388 distributor members with $5.2 billion in combined annual sales. Affiliated Distributors has 530 distributor members, with a combined $27 billion in sales across six product categories. IMARK Group in the electrical sector has more than $15 billion in combined sales.

“The groups keep the independents independent,” says Susan Vinson, president of Consolidated Distributors Inc., a buying group for distributors of foodservice disposables with combined sales of $2.5 billion. “We have a lot of large chains operating in our industry. For the independents in our group to have the same advantage, they need a group affiliation.”

Many in the industry say that if these groups want their model to be sustainable, they must continue to add value that goes beyond just pricing and rebates. Adding value to the entire channel – manufacturer, distributor and end-user – is the key.