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Griff: Chris, you have a guest joining us today. Would you please introduce him?
Chris: I do Griff, thank you. Let me just tell you, when it comes to being successful in some of the more competitive product markets, Griff, I know you know this, especially things like electronics and jewelry, you really need to have a great deal of buying power. The more product you can buy at once, the lower your wholesale prices are, of course. However, most people can’t come up with that kind of money on their own. I mean, we’re talking about tens of thousands of dollars and sometimes more than that.
Griff: Of course.
Chris: This is where the concept of the buying group comes in. Attorney Harry B. Ray has been representing and marketing buying groups since 1985 and he’s established www.buyinggroups.com in order to help eBay sellers learn how to do this. Harry is with me today to talk about what a buying group is and how it works. So Harry, welcome to the show.
Harry: Thank you.
Chris: Let me start by asking you exactly what is a buying group?
Harry: Well, simply put it’s just a group of businesses that are usually in the same industry who combine their purchasing power to negotiate better prices and terms from their sellers.
Chris: Okay, so these are people who get together to buy large wholesale lots in a group and then they split up the products and they can sell them themselves, correct?
Harry: That’s right.
Chris: Okay. How do we go about finding and joining buying groups, Harry?
Harry: Well, there are several ways of finding groups. One way is through trade associations and another way would be to approach the vendors in the industry and ask them if they’re aware of any buying groups, and even competitors might know.
Chris: Okay. Do we usually get information like that out of competitors, is that a possibility? I know they can be pretty closed mouthed, can’t they?
Harry: Well, they can be, that’s why I put them third (laughter).
Chris: (Laughter).
Harry: But once you find out who the buying groups are, then you want to do some do diligence. Check them out. Are the groups compatible with what you’re doing? Are you buying the same types of goods that they participate in? And are they professionally run, or is it just kind of done haphazardly?
Chris: Well, I wanted to ask you, how are these groups typically structured in terms of who owns them, like for instance, does each member in the group own an equal interest in the group or are they owned by one or just a few of the members?
Harry: The answer is all of the above. It can be any type of organization. Some groups are organized with just a single owner who is like a benevolent dictator and then you have the democratic model where each member has one share of ownership and one vote. And then you have an in between model where say the founding fathers, or mothers if you will, come in and set the group up and they keep ownership to themselves and then the other people who come in are just members, but not owners.
Chris: Okay, so when I go to join a buying group, for example, I find one through a trade association, you said?
Harry: Sure.
Chris: Can you give us a website or an idea of where to look for trade associations like that?
Harry: I understand there is an association of trade associations, but I don’t have the website for it.
Chris: That’s okay, so we go on a search engine and look for trade associations. Okay, then once we do that we contact these buying groups and ask if we can get in. Now, we can’t always get into these things, can we?
Harry: No. Sometimes they’re closed or even if they’re open they have selected criteria as to who qualifies to be in them.
Chris: Can you just give me a couple of examples of the criteria that they might ask you for?
Harry: Yes. Of course they’re going to want to know if you’re credit worthy because a bad apple can bring the whole group down. If the group goes out on a limb and makes purchases on their behalf and then the person doesn’t pay for his purchases.
Chris: Sure.
Harry: So that would probably be foremost. They also will want to know what types of goods you’re buying and how much of them. Do you bring enough volume to the party to make it worth their while to bring you in.
Chris: Right.
Harry: And another thing they will be interested in knowing and just what your general reputation in the industry is.
Chris: Okay. Griff, I’m sure you have a couple of questions for Harry, so let me turn it back over to you.
Griff: I do Chris. In fact, the first thing that comes to my mind Harry, is how would this work with eBay sellers and have you heard of eBay sellers actually being participants in buying groups of this type?
Harry: Well, I think it could work quite well with eBay sellers if they had a minimum amount purchase volume that was required in order to get certain types of goods. For instance, maybe an iPod, if you had to buy X amount of iPods in order to be a dealer one person on his own might not make that minimum, but if you had a hundred of them joining together it would probably work quite well for them.
Griff: I think another question I would have is if there were more than one eBay seller in a buyer group could that be a little awkward? Normally buyer groups, I would assume, the participants all have their own separate markets, but on eBay it’s the one marketplace. Could that be a problem and have you heard of buyer groups that don’t allow eBay sellers as members?
Harry: I really have not heard of any groups using eBay as the basis of their group and I see your point. I think buying groups work better when the people are not directly competing against each other.
Griff: So it’s probably not smart for a bunch of sellers on eBay to get together to form a buyers group, but separate and individual sellers should pursue this as a potential for product sourcing, especially if they have limited resources it can be a great solution.
Harry: Yeah. In fact, what online sellers could do is just have an agreement that they’re not going to sell on eBay which I guess is not what you want to hear, but that might be one way of working around it or maybe they could sell together as a group and do it that way and then they’d be like a single entity selling on eBay.
Griff: Oh, that makes sense too. So, again, I want to remind folks that we’re talking to Chris Malta who is our regular product sourcing contributing editor and we also are speaking with Chris’ guest, Harry B. Ray. He’s an attorney and he has been representing buyer groups since 1985 and you can visit his website at www.buyinggroups.com to learn more. How is the cost of operating the group funded?
Harry: One way groups can do this is by collecting dues from their members. Another way, which is certainly more popular, is to have the vendors who sell to the group make contributions to the group. They might do it through the form of a rebate based on volume or they might give a presentation fee to the group if they come and make a presentation trying to persuade the group to purchase their goods over their competitors.
Griff: So it’s just a matter of being creative like so many sellers need to be these days.
Harry: Exactly.
Griff: Chris, do you have any other questions?
Chris: No, I just wanted to say I think, Griff, you make a very good point as to several eBay sellers getting together and joining a buying group and purchasing the same product, but then again buying groups don’t always purchase just one product, correct Harry?
Harry: Oh yes, that’s right.
Chris: Yeah, we’re talking about purchasing a wide range of products where you can put different eBay sellers into the same buying group and they can exercise options to buy different products and put them on eBay as well.
Griff: Of course, so there’s no need to believe that one buying group is just buying one product.
Chris: Exactly.
Griff: Well that makes a lot of sense and helps keep it diverse as well. I want to thank both of you for stopping by. Chris is our regular contributing editor and you can always visit his website at www.worldwidebrands.com. And if you have any questions for Chris about product sourcing, and I know I’m getting a lot of questions, Chris, about drop shipping and you know where I refer them.
Chris: Oh sure.
Griff: I refer them to you.
Chris: More than happy.
Griff: And he’ll field questions for you by email at eBayradio@worldwidebrands.com. And of course, Chris, tell us about your radio show.
Chris: The Entrepreneur Magazine E-Biz Radio Show and the Entrepreneur Magazine Product Sourcing Radio Show. Rob Cowie, my partner, and I do those Mondays from 9 a.m. to 11 a.m. pacific.
Griff: So you want to give those a listen. And we’ve been talking to Harry B. Ray and his website is www.buyinggroups.com. Gentleman, thank you for stopping by today.
Chris: Thanks Griff.
Harry: Thank you.
Griff: This segment has been brought to you by Entrepreneur Magazine, providing solutions for your growing business. Clear your mind and pump yourself up because open phone lines are next and if you’re excited to hear the questions and comments coming your way, imagine how excited we are to consider that some of those questions and comments just might come from you. Call us at 877-474-3302 (877-GRIFF-02). Stay tuned for more eBay Radio.
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