Focus on… Buying groups

What are they and how could they benefit your business?

19 Dec, 18

Philippa Turrell takes a look at buying groups which are gathering momentum in the independent kitchen and bathroom retail sector. What are they and how could they benefit your business?

Focus on... Buying groups

Firmly established in the merchant sector, with the likes of NMBS, Fortis and Independent Plumbing Group (IPG), as well as the electrical sector with Euronics, buying groups are now making headway into the independent bathroom and kitchen retail channel.

In just the past five years, buying groups have gathered substantial momentum, with the likes of IPG, the Der Kreis-owned Kitchen Bathroom Buying Group (KBBG), Sirius and most recently MHK, now targeting independent retailers to grow their membership numbers.

Sales director of MHK Paul Wheeler comments: “The kitchen and bathroom sector in other European countries is already mostly organised in buying groups.

“MHK Group sees enormous potential in the UK kitchen sector.”

Targeting retail

The aim of the buying groups is to allow independent bathroom and kitchen retail businesses to benefit from preferential trading terms through collective purchasing power.

In an uncertain and possibly volatile market, the financial security provided from a buying group could be beneficial to a sole trader.

Managing director of KBBG Bill Miller comments: “Joining a buying group, such as the KBBG, creates a strong independent retail channel that is sustainable and enables retailers to achieve their full business potential.

“Buying groups offer retailers an effective and alternative way to buying products, as well as a valuable source of advice and support.”

Because it should be pointed out a buying group is not solely concerned with negotiating price, and offering discounts or rebates.

It may also provide business tools, such as CAD, marketing initiatives like building or hosting websites, and additional business support such as sales training.

“We therefore prefer to call ourselves a Membership Group,” says managing director of IPG Robin Beal.

Merchant synergy

There is a natural synergy between the merchant and bathroom retail sector, particularly as many plumbers’ merchants have added a showroom to their trade counter.

Robin Beal of IPG points out it has been working with kitchen and bathroom suppliers since its inception, adding most of its members have showrooms.

And he states the independent merchant and retail channels share the same threats to their businesses.

He comments: “Independently-owned kitchen and bathroom retailers are facing the same challenges as plumbing and heating merchants, both from online businesses and larger corporations.”

Interestingly, just like white goods retail buying group Sirius, the IPG is also looking to expand into the kitchen retail sector.

Entrenched in Europe

Buying groups have been entrenched in the European kitchen industry for decades.

With the UK market already heavily influenced by Germanic design, it’s unsurprising that retailers are slowly starting to adopt their business mindset too.

Paul Wheeler of MHK says: “Buying groups are starting to establish themselves in the UK.

“Each one has its unique approach that will attract different target groups.”

And he points to how there is plenty of opportunity for retail membership growth in the UK, particularly if it follows the European model.

He adds: “Throughout Europe, 80% of independent retailers are a member of a buying group.

“In the UK, the situation is the opposite – 80% of the retailers are absolutely independent and not organised in a buying group.”

And Bill Miller quotes an even higher figure in Germany, commenting: “It is a well-established business model, with over 92% of independent kitchen specialists in Germany belonging to a buying group.”

Capitalising on the possible growth in the kitchen sector, white goods buying group Sirius has Symphony as an approved supplier to help electrical retailers expand into kitchen retail.

Equally, it means it can target kitchen retailers with discount deals on major and small domestic appliances.

“It is a natural progression for our members to enter into kitchen retailing,” says commercial director of Sirius Steve Jones.

He continues: “Symphony has been invaluable in our bid to attract new kitchen retailers to the group, spearheading retail conversions across a host of existing interior showrooms and electrical appliance retailers.”

Jones further adds: “Through encouragement, retailers have started to allocate floor space to include 5-15 kitchen lifestyle displays as a way to attract new revenue streams and compete on the high street.”

And the KBBG has also teamed up with Euronics to further kitchen sales through independent electrical retailers and grow the kitchen retail sector.

Growing membership

Unsurprisingly, then, buying groups all seem to report an expected growth in membership over the next two to three years.

Bill Miller of the KBBG points out: “More members allow for even better buying conditions from suppliers, due to the increased purchase volume.”

And Steve Jones of Sirius agrees that growth in membership is key: “Currently, we have 160 members with 250 outlets throughout the UK.

“Of these, 29 have kitchen showrooms with another 10 ready to invest in the kitchen retail market.

“We see independent kitchen retailers as a natural growth area for the Sirius Group and expect to have 250 members by 2020.”

But with a growing number of buying groups targeting the independent retailer base, can they ever truly reach their potential?

Or will they offer a diluted version of the strong European groups?

Paul Wheeler of MHK believes there will be a consolidation in buying groups down the line: “One can foresee the market and the number of buying groups will grow at first.

But soon one will be able to distinguish between them and the market will consolidate, and only the best ones will survive.

“This was at least what we have experienced all over Europe.”

Now, buying groups are becoming more established in the kitchen and bathroom retail sector, they certainly seem set to stay.

Bill Miller concludes: “It is a tried and tested business model and is successful in many other industries in the UK, and across the continent, with tremendous success.

“When the benefits are demonstrated and fully explained, it is an opportunity that an independent will wonder why it has taken so long to jump the English channel.”

KBBG (part of Der Kreis)

Established: 1979 in Germany (2013 in UK)Focus on... Buying groups 1

Target members: Independent kitchen and bathroom retailers

Number of members: Operates in nine countries and has nearly 3,000 members across Europe

Combined revenue: €3.4billion

Suppliers: Beckermann, Bauformat, Stormer, Miele, Electrolux, JJO, Warendorf, Novy, Nolte, Nobilia

Services: CAD from Compusoft, business coaching from Action Coach and sales of display kitchens through Used Kitchen Exchange

Cost: On application

MHK

Established: 1980 in Dreieich, Germany (2018 in UK)Focus on... Buying groups 6

Target members: Kitchen retailers

Number of members: Operates in eight countries and has 2,700 members across Europe

Combined revenue: €5.5billion

Suppliers: 150 companies, including Miele and Electrolux

Services: MHK Advertising Agency, specialising in print and online marketing, business consultancy, planning software from CARAT

Cost: €2,000 but it’s fully refunded if membership is cancelled

Sirius

Established: 2001Focus on... Buying groups 4

Target members: Independent electrical retailers and independent kitchen specialist showrooms

Number of members: 160 with 250 outlets – expected to have 250 members by 2020

Combined revenue: £400million

Suppliers: Amica, Baumatic, Belling, BSH Group, Caple, CDA, D.A.D, Franke, Gorenje, Hoover, Candy, Hotpoint, Samsung, Symphony, Whirlpool Group

Cost: £3,000, can be paid over six months

IPG

Established: 2013Focus on... Buying groups 2

Target members: Independent bathroom and kitchen specialists, plumbing/heating merchants

Number of members: 200

Combined revenue: £400million

Suppliers: 100 companies including Ideal Standard, Roca, Vado, Lakes and Roman

Services: Access to experts, marketing-led customer growth and recruitment, support in local communities, fundraising for Missing People charity

Cost: On application