What Is A Buying Group?
Before we talk about how to start a buying group, let’s take a moment and understand exactly what it is. A buying group is a group of people who have come together to use their collective bargaining power or collective spending power. Usually, there are two types:
- A buying group of companies in the same industry, often called a group purchasing organization (GPO).
- A buying group of individuals in the same neighborhood, often called a buying club.
What Should I Start A Buying Group For?
Because of bulk ordering, if you start a buying group you can ask vendors for discounts. This presents an opportunity for people to make more of their financial resources when deciding how to access goods and services. You can start a buying group if you understand some of the selling points for such a group.
By organizing together as a single group, the members of a buying group are in a stronger position to negotiate with suppliers of goods and services. The aim is to increase affordability or availability of supply which provides a benefit to the members. Such groups are a form of “social enterprise”.
How Should I Start A Buying Group?
Step 1: Gather Information
Once you’ve decided to start a buying group, start gathering relevant information. Review exactly what advantages you’re offering before contacting potential members. You’ll need to develop a list of suggested vendor partners for the group. Once you’ve compiled enough information, you’ll be ready to make a pitch.
Step 2: Pitch To Potential Members
You will need to make a sales pitch to potential members. For this, you need facts at your fingertips. Some of the things you should point out:
- A large group of buyers has bargaining power to reduce the cost of goods.
- Ordering becomes easier because a group can streamline the ordering process through more efficient procedures.
- A large ordering organization can establish stronger relationships with vendors, who will be more responsive because of the purchasing power of the collective.
Step 3: Set Up Group Staffing
When you start a buying group, it’s wise to designate position titles for various tasks. This way, members will know who to contact for specific concerns. Some of the tasks to keep in mind:
- Ordering: who will contact the vendor to make orders?
- Storage: who’s garage or warehouse — if necessary — will orders be picked up from?
- Messaging: who will be in charge of keeping members of the group updated?
Step 4: Set Up A Platform
For a collective of companies wanting to start a buying group, you could consider an office space. Your group purchasing organization may need a place for staff to work. Keep this cost as low as possible, because it is a back office function that does not require contact with the public. You should be able to find a small space that is relatively inexpensive because you do not require signage or public access.
Another alternative — especially for buying clubs — is to set up a simple online platform. In our experience, we’ve seen that the best combination for a buying group is:
- A project management platform to assign and track tasks — we suggest Asana.
- A platform to host collective purchases, and manage funds — the best is LetsPool!
Start A Buying Group Today
For companies and individuals, there are several good reasons to start a buying group. With the right technology in place it is the smarter way to buy. Purchasing in groups can save up to 20% of your annual spending. Get a jump on starting a buying group in 2016 with our free Group Buying Guide.