- What is a buying group?
- Who are the main groups?
- Negotiating power

What is a buying group?

A buying group is an organisation that combines the volumes of several members in order to obtain goods or services at a better rate than might be achieved through individual negotiation.

In addition to better buy-in prices, buying groups may seek to secure a range of other benefits for members, including special promotions, rebates and own brand ranges. In the grocery industry, the latter two activities often form the bulk of group activity.

Buying groups may therefore be distinguished from co-operatives or “symbol” organisations in that the latter typically offer buying as part of a suite of services for members but usually impose much more rigid relationships, with individual members being linked at a deeper level. Buying groups often incorporate mechanisms intended to reduce competition between members, e.g. by requiring that members operate in tightly-defined individual territories.
 

Who are the main groups?

The key European grocery buying groups and their membership rosters are as follows:

Note: Although this list is believed to be accurate at the time of writing, buying group memberships are subject to change.
 
 

Negotiating power

The simplest, and perhaps only, means of gauging the potential negotiating power of any buying group is to aggregate the grocery turnover of its members, as shown below.

Leading Grocery Buyers in Europe (2010e)

Note: Figures include European countries only. Currency conversions use average exchange rates.
Source: IGD research, 2010
 

It should be noted that buying groups rarely purchase the full range of goods sold by their members. They tend instead to aggregate demand, and therefore buying power, for a limited range and - paradoxically - this may give the group disproportionately more buying power than turnover alone would suggest, since this power is focused on fewer lines.

Buying groups can provide excellent benefits to their members due to the scale they are able to create by combining the demand of many retailers.

They can, however, present a number of difficulties, such as aligning the objectives of each business to ensure the best possible terms can be gained from suppliers.

	Related Items on IGD.com: Reports: - European Grocery Buying Groups - 2009 - Building Customer Engagement Capability - Maximising the Impact of Trading Relationships