Your February 1 issue of Industrial Distribution featured a story on IBC, a for-profit buying club for independent distributors. While I'm sure IBC offers value to its customers, the writer erred in calling IBC a cooperative. It is not. It is a for-profit, privately owned company. There is a big difference.

Cooperatives have a strong and important presence in industrial distribution, and ID Magazine mentioned one of them in the article: Industrial Distributors Inc., based in Canada. In the U.S., several cooperatives pool the purchasing power of independent distributors, including Independent Distributors Cooperative-USA, which deals mainly in industrial bearing, power transmission, hose and rubber products; IMARK, which deals in electrical products; and Johnstone Supply, which deals in HVAC equipment.

Hundreds of purchasing cooperatives operate in other sectors as well, pooling the buying power of independent business owners and helping them to remain competitive.

What differentiates cooperatives from IBC is that co-ops are actually owned and governed by their member distributors, putting control in the hands of the independents. In a co-op, the Board of Directors [is] elected by and from the membership. In contrast to the advisory role played by IBC's members, members that belong to IDC, IDI and Johnstone are the key decision makers in, and owners of, the company. Co-ops appeal to independent-minded sole proprietors because they allow distributors to both pool purchasing power and maintain control over the cooperative — something that can't be done as just a member of a buying club.

In addition, in contrast to IBC, purchasing cooperatives are operated on a not-for-profit basis — their sole purpose, literally, is to serve their members, not to secure a return for investors. In a co-op, year-end profits not needed for reinvestment are returned to the distributors as a dividend. That's on top of year-round savings those members have received through their joint purchasing activities. While for-profit buying groups provide ... lower prices and other services, they do not distribute profits back to members.

There are other differences, but these are the most fundamental and important distinctions between a for-profit buying club and a member-owned co-op. IBC falls in [the] former category, not in the latter. I appreciate the opportunity to set the record straight.

Paul Hazen President and CEO National Cooperative Business Assn. Washington, DC