Retailer to Retailer

March 24, 2015  by in Furniture Retailing, Industry   

By: Janice Summers

Retail buying groups offer members discounts, rebates and an immeasurable wealth of networking opportunities.

Does size matter?

There are dozens of buying groups in the furniture industry. Some have thousands of members and billions in annual sales. But some, like Contemporary Design Group, are much smaller.

“We are not a classic buying group,” said Howard Haimsohn, president of the group and co-owner of San Diego-based Lawrance Furniture. “We originally formed the organization to give stores that had a similar product mix and style the opportunity to share the cost of printing color marketing circulars. It had nothing to do with power buying, but we bought the product that was advertised in the brochures. We created strong relationships with vendor partners who did business with most or all of us.”

The group was formed in 1983 with seven members. Today, CDG remains an intimate collection of 26 companies with similar business models and revenue of between $2 million and $10 million each.

“Don’t make the mistake of thinking your company isn’t big enough to be in a buying group,” said Chris Cooley, president of Michael Allen Furnishings and a director of Furniture First, another industry buying group. “Take the time to look into them and understand the benefits.”

Who gets in?

Each group has its own qualifications for membership¾perhaps it’s a certain credit rating, a specific merchandise offering, a minimum amount of time in business, geographic or regional location or a willingness to share. All require some type of investment.

“When we began, most of our members were on the West Coast, primarily Seattle and Portland, Ore., but some of our members were as far east as St. Louis,” Haimsohn said. “We are very exclusive by trading area, and allow only one member in a metro market. Our members are some of the best contemporary retailers in the country. It’s also about personality—who fits in with the group.

“We are proud to have partners that stay with us for a long time,” he added. “That’s more important to the group than people who pay a lot but bounce in and out.”

 

Fringe Benefits

Members typically receive rebates and discounts, but may also have access to merchandising concepts, private-label products, communications, including best practices, best sellers, best ideas, industry trends, real estate advice, store design help and marketing programs, as well as conferences, symposiums, and regional meetings.

“We also have staff that conducts research, negotiates special consumer rates with national finance companies, and sets up committees to select and negotiate with manufacturers and importers for special programs,” said Cooley.

Furniture First has more than 200 members representing 450 furniture retail stores across the U.S.

“We work together to leverage our purchasing power with leading furniture manufacturers and suppliers,” Cooley said. “Because we work together, we can bring great values in high quality home furnishings to our community.” 

Group staff and volunteers work to provide the best value to all their members. Their duties may include keeping up with new innovations, changing technology, and the best partners for the membership. They might also maintain relationships with preferred vendors in operating systems, website development, insurance, all categories of the products sold by member retailers, and others. Everything changes more quickly than in the past, and it’s a challenge to keep up with it all.

“We’re super efficient,” said Mike Herschel, executive director of Furniture Marketing Group, which has 112 members representing 800 retail stores. “We have only three full-time and three part-time employees. “We try to keep 90 percent of the benefits going to the retailers.”

Some groups offer different types of memberships, depending on need.

“We have five levels of partnership, with increasing benefits and required investment,” said CDG’s Haimsohn. “Our higher-level partners can request custom surveys and reports on designers around the country. We promote them more heavily, and they have access to better programs.”

He added, “I encourage new members to come in at the lowest level so their investment isn’t steep, and they can discover what works best for them before committing to a higher level.”

Because members don’t compete, they are free to share information, and the resulting networking is a huge benefit.

“We’re actually more of a networking group than a buying group, said Herschel. “Of course, discounts and rebates are a huge component, but our members also benefit from sharing merchandising, warehousing, and other back-office information.”

“Contemporary Design Group evolved quickly to a networking group. Within 10 years, it started to evolve into a performance group, and we began sharing financial information,” said Haimsohn. We have a huge amount of trust. We talk. We share information. We have great relationships with each other.”

He continued: “Today we do some collective buying, and some products are made for us. We have very strong vendor relationships, but our main strength is collaborative information sharing.”

Vendor Benefits

Buying groups act as a conduit between manufacturers and retailers. New or smaller manufacturers who would usually be overlooked by the largest retailers see it as an opportunity to be noticed.

“For the suppliers and vendors, it’s all about communicating their benefits to the members through our communication tools,” noted Herschel. “We have a variety of marketing assets for fostering those partnerships.”

“We spend a day and a half with the vendors,” said Haimsohn. “It’s an annual conference like no other. Our partnership is not just about how to get a special price from them.

“We don’t have a strict policy for adding vendors,” he added. “If they want to invest, I decide if they’re a good match. A lot of our vendors have partnered with us for 10 to 30 years. Many vendors want to invest with us because they think we will be a good target audience in the future and want to build a relationship. We have manufacturer partners. They help us financially, by giving us programs, information, and specials. We share a lot of data and information with them.”Relationships are key.

Most buying group members benefit from the rebates and discounts, which often far exceed the cost of membership. But many say the best part of belonging is the relationships that have developed over time.

“When we formed 25 years ago, we were all about buying at a better price and negotiating with our supplier base,” said Herschel of Furniture Market Group. “Our mission was to basically become a conduit between the members and selected service providers. Now, it’s more about relationship building and providing better information to grow our members’ businesses. We have a large annual conference each January. We also have membership meetings at each High Point Market along with an occasional regional meeting.”

Because FMG targets higher volume, larger independent retailers who can negotiate good deals on their own, its main focus is to foster relationships between members of like size, and to better their relationships with suppliers and other retailers.

“I’m in the relationship-building business,” Herschel said. “That’s my first mission. We try not to overlap market areas so members can talk business among themselves and not be worried about talking to a competitor.”

“I am proud of how the group has held together,” Haimsohn said. “Some members have been in the group 25 years. Our relationships with vendors are equally strong. It’s like a marriage. There’s compromise, you have to make a commitment.”

Perhaps Cooley summed it up best.

“It is vital to belong and give back to the home furnishings industry to help educate, share good business practices with other furniture families so that we may all prosper and learn together,” she said. “The more we help others the more it helps the industry as a whole.”