Buyer-Initiated Formats.
These formats have been built on the concept
of all buyers joining together to buy large quantities at better prices. It has
expanded to give these buyers other securities and leverage that they might not
be able to obtain on their own (e.g., private labeling, advertising design). As
with the door-to-door concepts, variations of this concept are proliferating to
meet individual buyers’ needs.
a.
Co-op.
Companies, usually in the same industry, create an organization
in which each member becomes a shareholder. The organization uses the
combined strength of the shareholders to get economies of scale in several
business areas, such as purchasing, advertising, or private-label manufactur-
ing. This format is generally designed to allow small companies to compete
more effectively with large competitors. Although wholesaler-distributors
can form or join co-ops, their use as an alternative channel format may
direct buyers from nonwholesaler-distributors.
Example: Topco.
b.
Dealer-Owned Co-op.
Similar to the co-op format, except the co-op may
perform many of the functions rather than contracting for them with third-
party suppliers (e.g., own warehouses). Shareholders/members are generally
charged a fee for usage, and all profits in the co-op at year-end are refundable
to the shareholders on some prorated basis. In many instances, this format
has elements of a franchise.
Example: Distribution America.
c.
Buying Group.
Similar to the co-op, except the relationship is usually less
structured. Companies can be members of several buying groups. The loose
affiliation usually does not commit the members to performance. This format
has taken on a host of roles. A group can buy through the wholesale distribu-
tion channel or direct from manufacturers. Often, wholesaler-distributors are
members of buying groups for low-volume items.
Example: DPA Buying Group.
3.
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