Swift Electrical’s commercial director Malcolm Scott contemplates whether there is any need for buying groups in the kitchen sector
The increase in recent publicity from buying groups has prompted me to say a few words.
While I strongly disagree with some of the comments from Bill Miller (KBBG) in last month’s kbbreview [pg23], clearly there are many retailers, like Trevor Scott at Rugby Fitted Kitchens, who feel that there may be benefits in working together. Bill’s comment that “the rapid increase in internet sales, and the chase for growth, has led some suppliers to take the significant step of bypassing the retailer network completely and selling directly to the consumer” is not completely accurate.
Very few manufacturers are ‘going direct’. Many suppliers do support larger multiple outlets and some of the bigger internet traders. Against this, there is a rise in agency agreements that technically are ‘direct selling’, yet very much involve the retailer and the retail channel – for example, the Whirlpool agency agreement and the Montpellier PPP agency scheme. Agency agreements actually favour the independent over the multiples and internet retailers, as these agreements create a more stable trading platform. Retailers are in fact a core part of any agency agreement.
Buying groups are huge in Europe, with 15% of all buying within the whole German economy through buying groups – total German buying group purchases were estimated at €460 billion (£410.6m) last year. But this is a cultural issue, rather than purely a business one.
These continental buying groups are much more than just buying groups, they are management consultants and marketing agencies rolled into one. They often have very clear consumer identities and impose very clear trading requirements that enable most consumers to identify that the retailer is part of a specific group.
My own view is that the kitchen channel and kitchen specialist business is so fragmented, and lays so much emphasis on being independent and different, that buying groups will always struggle in this sector. The UK kitchen sector is a mature business sector with a huge number of historic agreements between suppliers and retailers and is already fiercely competitive. I am not sure if there is much more margin to be squeezed out.