Buying Groups Seen Evolving Under Shifts to New Leadership
The shift in leadership at the Marta and PRO buying groups after years of relative stability comes as those organizations are confronted with changing vendor relationships and continued pressures from national retailers. While a buying group’s primary focus was once solely on securing the best possible deal for product purchases, the role is evolving to providing marketing and other services, said industry executives we polled.
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The most recent shakeups occurred last week when PRO Exec. Dir. Roger Heuberger resigned after leading the group for 10 years and was followed by David Workman, who left Marta a month after replacing Warren Mann as exec. dir. While the changes appeared unrelated, both stemmed from buying group’s boards taking a more active role in running the organizations. In the case of PRO, the board had begun discussions with Heuberger about his possible departure last summer as it sought to assume some of his responsibilities. In the case of Marta, Workman said many of his plans for the group would be duplicated by its alliance with AVB/Brand Source, which will supply a “tremendous amount” of resources including marketing and training.
“I think what you're seeing is that buying groups in all cases are searching for their respective relevance in the marketplace today,” Workman said. “The groups have many challenges today and a group has to represent more than ‘here’s your deals, make the most of it.’ I think that a group has to provide more than that. Groups are reinventing themselves with or without changes at the helm.”
Workman said his departure from Marta was unrelated to the changes at PRO. Workman was member of the PRO board when he was CEO of Ultimate Electronics, which he left last year as Hollywood Entertainment founder Mark Wattles bought 32 of the bankrupt chain’s 62 stores. “The events are really disconnected and there’s not a cause and effect there,” Workman said. “My departure [from Marta] had more to do with AVB’s capabilities and the suite of services they provide the membership. It was my determination that what was remaining didn’t fit with what I was looking to do at this point in my career. The last thing you want to be is an extra spare tire in the trunk and with that assessment I thought it was better that we part friends.”
While the groups have long had to deal with the expansion of Best Buy and Circuit City, discount chains like Wal-Mart and Target also have emerged as major purveyors of CE products. That coupled with Sony’s and Panasonic’s decision to reduce focus on buying groups is forcing a change in strategies, industry officials said.
Despite the expected arrival of new management, Mann said the buying group concept “hasn’t changed that much.” Manufacturers increasing the minimum annual sales required to be a direct account risk losing support at the “grass roots level” where brands are frequently first established, Mann said. “Brands are made at the grass roots level and those that abandon it often pay the price in terms of profitability.”
For his part, Mann is seeking to establish a new organization -- World Merchants Buying Group -- that would provide negotiating power while being minus the advertising, health and training programs that add to membership cost. While Mann had hoped to have 10 members on board this month, he conceded agreements have initially been difficult to secure. Mann hopes to add members once Marta, AVB and Nationwide conclude meetings later this month.
“It’s more involved getting things started than I thought,” Mann said. “It takes time to work the vendors and the retailers. It’s pushing a little bit here and a little bit there and for that reason it’s slower than I thought. I'll wait until the end of the month and until the after the retailers get the show specials and take care of themselves. Then I'll go to work to see if I can get people interested in coming my way.”
As for the future of buying groups, executives we polled noted that their downfall has predicted at various times over the years, more recently with the arrival of online sales and the increased buying strength of national chains. Each time, however, the groups have withstood the challenges, the executives said.
“A Whirlpool executive once told NATM that all the buying groups were going to be out of business,” Mann said. Several years later it was everything was going to be sold on the Internet,” Mann said. “Then it was that national accounts were going to crush everybody. But the groups have still managed to thrive.”