If you were a wholesaler, would you prefer to battle on alone or unite with others in a buying group? It’s a question that all independent wholesalers have to ask themselves at some point. And at first glance, the answer would appear obvious: they should think about joining a buying group.
There are many advantages: by combining their buying power, wholesalers can benefit from better collective terms; they can also work together to develop a credible own label range; and they can share information and swap ideas with fellow members.
But members can also substantially boost their profile, says Martin Williams, MD of buying group Landmark. He explains: “If you’re not in a group, it’s incredibly hard to support your own brand. For example, before Premier Wholesale, one of our members, joined us it had no recognition from suppliers and dealt with poor sales reps. We put its name in front of all our suppliers and the quality of support it received increased dramatically.”
Given all that, why do some wholesalers still prefer to fly solo? One reason is scale. John Murphy, director general of the Federation of Wholesale Distributors, believes some wholesalers have the strength to go it alone: “If you went to Booker and asked why it wasn’t part of a buying group, it would say it’s big enough.”
Bestway saw advantages in breaking away from Landmark in 2003. MD Younus Sheikh says some wholesalers can reach a point at which they naturally outgrow a buying group. “Bestway had outgrown Landmark. The group is better for smaller wholesalers,” he says. Besides, he adds, there were benefits to going it alone that outweighed the disadvantages. They included greater autonomy and swifter, more flexible, independent decision-making.
But even these C&C giants are still relative minnows against the likes of Tesco when it comes to negotiating terms. Sheikh accepts that levelling the playing field when it comes to terms is an ongoing battle. Yet he says the gap between individual, larger wholesalers and buying groups is often not that great when it comes to terms. Size isn’t
everything, he says: “In many ways it comes down to tough negotiating.”
Many commentators believe the future of the independent sector would best be served by having one mega-group that co-ordinated all buying activities of the various wholesaler and retail groups.
But it’s not an idea that is well supported within the groups - many of whom are competing with each other for the business of retailers and their consumers.
In any case, Williams thinks there is always an optimum size for any group. “We’ve always gone for around 30 quality wholesalers we can control, and for discipline. If we had 350 wholesalers we couldn’t do it. If all your wholesalers were 100% disciplined that would be different, but in the real world…”
Recent events at the Today’s Group would back those who argue the larger the group, the harder it is to remain focused on members’ needs. Sugro quit earlier this year and then there were reports over the summer, dismissed by Today’s, that some 20 wholesalers had threatened to form a breakaway group in a row over fees and strategy. Today’s has dismissed the idea of a row over strategy and says discussions about subscription fees have been resolved.
There are advantages and disadvantages with both models. But there seem to be fewer disadvantages for smaller wholesalers in being part of a buying group than there are for the larger companies.
And as the latter grow in size, only they can decide when the time is right for them to fly solo.