Go-ops: advantages and disadvantages

By Wally Lynch P.A.l.D. Associates

Why Dcnlcn Joln Go0pr

-nr pooling of multipte rotailcrc gi\lcr bctbr buying power.'

AtGc B.ck Prcddcnt Sbiplftry'Blal<c lilnbcr Co, ArntiqTx.

"Bcficr tuying, nadonal adyodi& Ing,rccognidon and ability to laoepup wlth cuncnt picoo natirinally.' DnvldEoofbgh

Buildturg matcriale mgr.

Robbic's Tnrc Vdue Hornc Contcrs Portqnoutb Va"

'No. I advurtage io bcing able to buy at lower picos"

Robelt Brccdlove Owncr

Brecdlovc Ace lrlmbcr & Buildirig Snpply

Analusia, Al.

. 'Brying advutages aod convenicDca' fhotrunrrgson .Owur/mg.

Aoc Home Conter Mayodan,N.C.

"We likc the advertising and rnarkcting help, eepecially the sales circulars which wc use all tho time."

LucyHowell

Co-owner

Howell Building Supply, Inc.

Carthage, Ms.

FO-OPS have enormous economic Yimpacton our industry. Theirmarket penetration is massive. One wonders how much bigger and more important they can become. Their growth strategies are simple, attainable and consistently met by doing a better job with existing associates, adding new members and making acquisitions. Five major reasons for their success have been identified.

There's a good and a bad side to each reason, so read on before seeking out membership. Get it out of your head that you can buy better than they can or that the help they provide isn't cost effective. The whole thrust of the co-op is to combine economic clout to buy better, pass it through faster and put more money in a member's pocket.

GROUP IDENTITY: Economic clout of thousands exceeds that of an individual, but it costs money to become affiliated. Participation in discounts, rebates, etc. can depend on the size of the stock purchase or the up front loans extended to the joiner. Although a new member takes on an "in guy" identity through name recognition generated by advertising, etc., local identity changes. Membership is an investment opportunity, but it's also a reduction in liquidity.

LARGE SCALE BUYING: Landed costs are less or it won't work. but it costs from l% to 5% of purchases to get these benefits. Quality problems are resolved centrally, but local direct access is lost. Turnover goes up if you play the game right, but it's still dependent on minimum packs and availability. The number of vendors on the affiliate's books is reduced, but the need for secondary or alternate suppliers does not go away. There will be broader assortments. but also dilem- mas if buying is not managed properly. Recent movement by hardliners to add building materials and vice versa has yet to prove itself. Being all things to all people is very difficult and costly.

PRIVATE LABELSLOWER COST: Some items and products are readily adaptable to private branding, others are too easily and successfully produced. We are in a retailing cycle where house brands are going against one another and the majors are competing by expanding lines with nationally known brand names.

CENTRALIZED PROMOTION: o Trade Shows: You travel, get away, see people and product, but the computer's at home. Buying without it makes no sense. o Field Reps: These are nice, helpful people who want you to succeed, but most have never run a store, much less met a payroll. e Composite Operating Statements: It's nice to know how you stack up. It's also nice to retain your privacy. r Discipline: Many groups provide systems to manage effective use of people and assets, but big brother can produce heat in the kitchen and expense. o Mechanized Ordering: The computer and the modem have devoured the "open to buy budget" and eliminated the order clerk. They also have altered management's ability to oversee and control buying. o Seminars: These are good and bad depending on how much you can take to the bank. Some speakers make you feel good on Friday, but you have forgotten what was said by Monday. r Displays & Signage: Good if managed and coordinated, but can make your store look like the aftermath of a political convention. r Price Tags/Labels: A time and labor saver, but it tends to produce stereotyped and/or margin based pricing.

Given the sheer size of the co-op sales volume, promotion and advertising, costs per outlet should be reduced. A creative professionalism results in better graphics for the same or less cost. The downside is that whatever is developed nationally doesn't necessarily apply locally. One size really doesn't always fit all, but some pass through is preferred to none at all.

MANAGEMENT AIDS: Programmed buying groups have all sorts of goodies to move products through your facilities.

. Weekly Delivery: This increases turnover on the 2OVo of your items doing 80% of your business, because it's based on hole filline. It would be nice if the outbound truIks could take

Cotter Adds Build

Cotter & Co. is launching a new Build America concept at Adams Building Supply, Dundee, Fl. A west coast prototype is still to be selected for the program introduced at the Winter Lumber Market in San Diego, Ca., Jan. 1114.

Designed to help Cotter True Value dealers create a new image or renew their market approach as suppliers of lumber and building materials, the program will progress through 1992 to be in full swing by the 1993 Winter Market in Odando, Fl.

Cotter will provide dealers joining the program with all support needed to develop a competitive advantage. Services include redesigning the store plus adding installation and service businesses. Training, strategic planning, buying, warehousing, and advertising help will enable the dealerto attract and keep contractor and consumer customers.

Dealers will be identified with Build America trademarks and colors. The program is designed to guide them through market, customer and site studies, exterior and interior retrofits or remodels, marketing, merchandising, display, signage and decor strategy. Customer service policies, training, advertising, scheduling and store services will be established as part of the program.

In conjunction with the plan, Cotter plans to broaden its lumber and commodity building products program, with them theSD% of the items that do 20% of the business. o Forms & Insurance: Generally offers huge advantages over individual rates, but nothing compared to what it could be if our fragmented industry could join on these needs.

Story at a Glance

An analysis of co-op benefits. ways to get the most from membership... pitfalls and negatives.

It's hard to believe that the tens of thousands of retailers now associated in some way with the co-ops could be wrong about them and they're not. There are, however, a few land mines out there to deal with, whenand if youjoin.

America Concept

strengthening trading offices in Chicago, Portland, Or., and Atlanta, Ga., as well as developing national wholesaler supply agreements with companies such as Georgia-Pacific and PrimeSource. Committed to helping dealers become building project centers of first choice, Cotter emphasizes that lumber and building materials should represent at least 40% of the inventory of stores entering the program. In addition, they should have a solid basic hardlines program including electrical, plumbing, builders hardware, tools, power tools, paint and decor products, paint sundries, fasteners, lawn and garden, power equipment and metal specialties.

Membership Advantages

. Lower costs due to increased buying power

. National store identification o Private label products in addition to national name brands o Patronage dividends/rebates r Conventions and markets r Management seminars

. Regional distribution centers

Retail cornputer systems o Electronic communications & ordering r Inventory management reports r National advertising o Direct mail catalogs & circulars r Ad slicks for local advertising o In-store display kits o Promotional materials r Training & counseling services r Exchange programs o Customized charge cards r Credit card & checkauthorization

. Programs covering insurance, employee retirement & profit sharing plans, bank loan & lease negotiations, market appraisals, payroll, sales & expense forecasts, site selection, building construction, store planning & modernization, internal store security, fixtures, vehicle leasing, etc.

(All co-ops don't offer every service)

Co.'s phcnolic ttrins for coatings hrsinca3 for ir chsnical division