With most kbb retailers unable or unwilling to join a trade association, is a buying group a more tempting alternative? Perhaps it's time for this industry to take a look at the way independents in similar sectors join together for the greater good. Simon King investigates... 

The kbb industry has a proud and well-established independent retail sector but there is a school of thought that suggests every now and again that the word 'independent' is taken far too literally by most retailers.

Of all the 10,000 or so kbb retailers in the country, very few belong to any kind of industry representative body. The largest, the KBSA, has only 400 members - although it's strict membership criteria means less than 2,000 retailers would probably qualify. Everybody else is pretty much fending for themselves and is left with virtually no influence or power over issues that directly affect them.

So what's Mr or Mrs Average Retailer to do?

Current economic fears mean the market is getting more and more competitive and for a business to succeed they need to focus completely on their core business - which in the case of kbb retailers should be selling the products, providing good customer service and getting customer satisfaction. But equally, they need to turn a good profit on those sales and that means getting a good margin on the product. But don't you need to be buying in bulk to get the really good prices? And it's impossible for small retailers to get those deals isn't it?

Well, not necessarily....

Joining a buying group is one possible way that independent retailers can have some of the advantages that larger organisations have by sharing economies of scale and while there have been attempts at this before in the kbb industry, there is an interesting example of how this can be run very successfully in a similar industry.

Numerical advantage
In the electrical retailing sector, which is based on a similar model to the kbb market, independent dealers can join one of two buying groups - Combined Independents Holdings (CIH) or Sirius.

CIH was formed as CI Southend in 1962 and today has more than 700 members who operate 1,400 retail outlets, and has a total buying power of more than £400m.

The Sirius Buying Group, formed in April 2001, has more than 100 members with a total of almost 200 branches and a combined white goods electrical buying power of more than £120m.

The current chairman of CIH is Robin Millwood, the md of Albany Radio in Enfield and he says he can't understand how independent retailers could survive outside of the group. "I have always had a very strong affinity for CIH - it's quite obvious that we could not survive, as we are, without it," he says. "I think the best confirmation is that there are very few independent dealers outside of CIH - I come across very few to be honest with you. You just need that umbrella, that safety net, the reassurance of knowing you are going to get decent prices on not necessarily huge volumes. I learnt from a very early age that I cannot go and buy 100 washing machines, I can only buy 10, but 10 doesn't necessarily give me the margin or the price point I'd like to be at. However, buying 10 through CIH gives me the equivalent to buying 100 without a great deal of effort."

CIH operates through from a central 105,000sq ft modern warehouse, distribution centre and office in Andover, Hampshire that opened for business in 2000. This gives CIH its key strength - centralised purchasing and marketing departments and the option for CIH members to trade under one national corporate identity - Euronics.

Euronics is Europe's largest independent electrical buying group, with over 5,500 retail outlets across Europe, and CIH also holds its own trade exhibition for manufacturers that is a members-only event. Held over two days each September, the tradeshow features products from more than 70 manufacturers and offers member deals on many of the key lines - negotiated by CIH's central buying team.

Incorporated into the purchasing department is a team dedicated to negotiating the best deals on areas outside of the normal retail strategy and products.

This team, CIH says, is focused on getting "the best deals that allow the retailers to focus on their business". Translated that means getting the best deals in areas such as vehicle leasing schemes; Euronics Procurement Services, which aims to offer the best deals on utilities; a shopfitting service and preferential credit card processing rates.

Euronics also provides centralised marketing, most obviously national television advertising 'Mr Plug' and the voice of former Men Behaving Badly actor Neil Morrissey. Over the last couple of years, Mr Plug advertising has highlighted to consumers the buying power of the organisation, as well as key messages, including 'We deliver, we install, we are' and 'Plug in to service and price'.

There is also a drive for constant improvement and growth. Earlier this year, CIH revealed that a membership drive would form part of an important year for the buying group. "We really want to bring in new members," Stuart Cook, CIH's chief executive, said. "We are at a crossroads and it's time to move on. We've got twice a week deliveries, marketing is at a new level, we have priced advertising and a retail strategy - and sales and service departments are ready to support the whole thing."

Benefits
All this doesn't come cheap, of course, the joining fee is based on the company size, turnover and volume but for the average retailer it runs into the thousands rather than the hundreds of pounds. However, as Cook points out, the price is high as everyone has to buy a share of the company and the savings members enjoy vastly outweigh the cost.

"We would like to get to a point where we invite the people who say it’s too expensive to come along and we'll prove to them, for want of a better word, that their investment is a good one. We can show all the services, but what prospective members want to know is how much money they can save - all the rest is icing on the cake."

And, because members are buying a share in the business, their investment is refundable when they decide to leave the organisation.

"All things being equal, they are going to get that, or more, back," Cook says. "I've been here for 12 years and I can't think of a member that hasn't gone out with more than he put in." 

Associations
Associations So if a retailer can remain an independent while still gaining the purchasing advantages of a large multiple, where does this leave the traditional trade association?

In January, CIH announced that it will be working more closely with the Radio, Electrical and Television Retailers' Association (Retra), for the benefit of both sets of members. Formed in 1942, Retra has more than 1,400 members operating over 2,300 outlets across the UK with a membership including electrical retailers, service engineers, custom installers, computer stores and electronic music shops.

The link between CIH and Retra will see the two organisations consulting on a broad range of issues "to ensure the interests of independent electrical retailers are fully represented". These will include Government legislation, problems with service and spares, and the involvement of independents in product launches and associated marketing opportunities.

Bryan Lovewell, Retra's chief executive, says: "Retra and CIH have a common aim but different areas of expertise. By combining our strengths we can help ensure a complete package of support is available to the independent channel. It is important that Retra and CIH remain separate and distinct, but we will collaborate closely on key issues. By doing so, we can make sure our activities complement each other and achieve the maximum possible impact." 

Kbb dilemma 
So in the electrical retail market buying groups are very successful and, in terms of white goods in particular, there are obvious crossovers with the kitchen retail sector. While CIH is geared up from an appliance point-of-view, there is no UK buying group that kitchen specialists can sign up to, although as the BMA points out, the bathroom industry does have a buying group, the National Merchant Buying Society, which is run in conjunction with the Builders Merchant Federation. Although how many independent retailers belong to that

Is the time right for a buying group to launch in the KBB market? Is it a viable alternative for those who don't want to or can't join a trade association? 

Resistance
In a written statement to kbbreview, the KBSA said it has considered the option of a buying group "on several occasions but has always felt that it would not bring many advantages because of the complex way the market operates".

Graham Ball, a consultant to the KBSA, said: "There is also a view that it would not be popular with some corporate members who would feel that they could lose business."

Yes, the KBSA corporate members. There are around 120 brands and companies that belong to the KBSA as supporter members, however this does not include any financial benefits for retail members in terms of buying product.

Colin Seaton, md of CRS Agencies and a former recruitment agent for the KBSA - and now outspoken critic - says there is scope in the market to set-up a buying group that is "inclusive of everyone that operates in the UK".

"Instead of being an old boy's club, the KBSA should work on getting some fundamental and tangible benefits from its corporate members," he says. "As it stands, the corporate members do not offer, for example, product discounts to KBSA members."

Mark Buchanan, the owner of Upstairs Downstairs in Chester and a former chairman of the KBSA, said that he would consider joining a buying group if he felt he was getting a fair deal from everyone. "Some brands are clearly being prostituted on the internet, so there is clearly not a level playing field on some brands," he says. "Euronics has been a brilliant success, with its financial muscle it seems to command its brands - I take my hat off to them."

So is there room for buying groups in the kbb industry? Is the KBSA right in saying the industry is too complex? With increasing complaints over service levels from major suppliers, internet discounting and increasing pressure from high street multiples raising their game perhaps this is a serious discussion the industry needs to have - after all, in the end, this whole game will always come down to how much you buy it for and how much you sell it for.  What do you think? Letters@kbbreview.com