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Buying groups and cooperatives have, in some shape or fashion, been around in most industries for nearly half a century now. Their formation has undoubtedly been a driving force in shaping the economic landscape of our country. Over the years, these groups have spurred competition and helped move more goods and services at lower prices to more end-users by leveraging the combined purchasing power of their individual members, negotiating volume discounts on the goods and services resold.
According to one industry research firm, there are still 48,000 active buying groups and co-ops in the United States, operating in a variety of industries. And there is no shortage of buying groups in the Jan/San industry. In fact, a majority of independent distributor owners are likely involved in one or more of these groups today, generating additional income through rebates earned from selected manufacturers. But is this the answer to helping tomorrow's distributor grow his/her business?
While the "rebate-only" model was the right fit at the time, and has indeed served the industry well over the years, it has become obsolete. As with any business, change is inevitable. Look at the critical issues a traditional distributor faces today; they're not the same as they were a decade ago. Mergers, acquisitions, technological innovations, and even competition have all seen dramatic shifts during this time, and as such, the buying group mentality has had to evolve in order to keep up with the changing needs of its constituents.
More than rebates
The lure of the rebate-driven group is no longer the only carrot to entice educated distributors to join. Today, smart owners want more than rebates . . . they want solutions to build solid partnerships with providers who understand their business enough to offer the tools and technologies needed to help them grow. And while manufacturer payouts are an integral component, the value-added services, national account opportunities and avenues into new vertical markets are what will create a healthy, lasting distributorship.
"Our vision at AFFLINK is to continue developing systems and solutions for the mutual benefit of all our stakeholders, and to take advantage of today's technologies to achieve economies of scale and processing efficiencies," says Dennis Riffer, president of AFFLINK, LLC, a sales and marketing organization based in Tuscaloosa, Ala. "By doing so, we're giving our members a competitive advantage in the marketplace — reducing operating expenses, enhancing quality and improving service levels."
Unlike the traditional buying group, AFFLINK offers its members an array of sales and marketing services tailored specifically for the independent business owner: Information technologies (such as web catalogs, e-mail hosting and electronic data transfers), human resource solutions (such as employee screenings, drug testing and a 24-hour hotline) and industry-specific training opportunities all at a fraction of the street costs of similar services.
National account access
In addition to convenient access to value-added opportunities, the most sought after service many distributors seek from a marketing group is connectivity to national (and now global) account customers.
Today, AFFLINK is the largest sales and marketing organization in the Jan/San and packaging industries, has a growing safety business, and has recently added office supplies to its mix. According to Riffer, the organization is also currently looking at several acquisition opportunities that would expand its offering into other vertical markets.
"We have to close the procurement loop if we want to continue driving value to the end-user," he says.
It's no secret that in order to land multi-unit national accounts, one has to have a full compliment of product solutions. But to keep them requires producing quantifiable results, year over year.
"A successful sales and marketing group must have the size and scope to compete with today's logistical corporate giants," says Riffer. "Today's Fortune 500 companies are obviously looking for reduced operating costs and streamlined efficiencies, one-stop shopping and single invoice purchasing, but more importantly they want continuous improvements to their operations that validate their investments and partnerships."
This success is now being realized, as AFFLINK reported that it increased its Members' Global Account revenue by 20 percent in 2006, and improved its margins by more than two percentage points over the previous year.
New face of competition
In his latest best-selling book, "The World is Flat," Thomas Friedman, the New York Times columnist, argues that the most important force shaping global economics in the early twenty-first century is not the admittedly important war on terrorism, but a "triple convergence of new players, on a new playing field, developing new processes and habits for horizontal collaboration." In other words, we're entering a new era of globalization, and it has come with a new face of competition.
"Competition has changed," says Riffer. "No longer is it a price battle between one distributor and another down the street. Today, the biggest threats we face as an industry are from the box-moving conglomerates like Corporate Express, Grainger and Home Depot Supply."
"To continue creating opportunities for our Members and Suppliers on a national and global scale, we have to constantly be finding ways to keep our position as leaders in the industry. And that's what I've charged our organization to do — don't skate to where the puck is, skate to where it's going to be," he says.
At home and abroad
Planning to literally go global in 2007, AFFLINK is currently researching opportunities across the pond, looking into a European business that could potentially capitalize on global sourcing trends that will give advantages to both AFFLINK Supplier and Member partners, putting them on a global platform to improve sourcing opportunities benefiting all stakeholders.
Also celebrating its thirtieth anniversary this year, AFFLINK first opened its doors in 1977 with the sole purpose of creating symbiotic growth for its constituents. Over the years, it has remained the organization of choice, bringing the technological revolution into the industry and redefining the traditional buying group model.
Positioning itself at the forefront for another thirty years, the group is accepting the challenge to lead the industry into the twenty-first century by building trusting relationships between suppliers and distributors that will create healthy businesses for years to come.
Michael Wilson is the Senior Marketing Manager at AFFLINK.
author: BY MICHAEL WILSON