When discussing the general topic of buying groups, it is not unusual to hear the terms "buying group" and "cooperative" referred to synonymously.

It isn't a sign of confusion necessarily, nor one of hair-splitting terminology. Rather, as the various concepts of cooperatives and buying groups have become more known—or more distributors and manufacturers, at least, explore the possibility of joining one—the distinction can become a bit blurry.

Dan Judge is the president of NetPlus Alliance, based in Lockport, N.Y. He has worked with Ward, Beals and McCarthy, a distributor of industrial supplies and pipe, valve and fitting products in Western New York, as well as I.D. ONE, Inc., the first buying group in the industry, which was later acquired by another group.

In its mission statement, NetPlus describes itself as a buying group that "helps manufacturers of industrial and contractor supplies grow their market share while simultaneously helping distributors grow their net profit margin…."

Judge elaborates on that when he says "we try to be a pure and simple buying group, negotiating pricing and rebate programs with manufacturers for our members."

NetPlus charges a one-time fee of $100 to join. Judge says it has 155 distributors and 96 product suppliers as members, along with 22 business service providers in 42 states at more than 280 locations.

Judge's description of NetPlus as "pure and simple" is not modest or coy. That's what NetPlus was envisioned as becoming when it was formed.

"One [decision] we've made was to just stay a buying group, where in the past some of the buying groups are more national sales organizations," Judge explains. "Our focus is on the buying side, which not only translates into helping distributors increase their net profit, but in helping suppliers grow their business."

Duncan Co. is a distributor of abrasives and cutting tools, pneumatics and valves. Duncan is a member of NetPlus and its president, Eric Duncan, is pleased with the relationship.

"NetPlus is the first true buying group we've ever been involved in," Duncan says. "We went with them for a couple of reasons. We're doing more contract business these days, for one thing."

Duncan adds that he was pleased that NetPlus was "only" a buying group. That was all he wanted for his company.

"I knew they wanted to stay a buying group. Some of these guys, they start talking [as] buying groups, but pretty soon they're marketing groups and doing activity-based stuff. I never saw that as adding value. That's what our associations are supposed to be doing for us."

Duncan Co. has been "involved in a marketing alliance for more than 10 years. That's fine, but I've always separated them," from a buying group, he explains.

Independent Distributors Cooperative-USA is a bearing and power transmission cooperative—a "cooperative of independent distributors who joined forces to purchase, market and sell," as described by its president Jack Bailey.

Headquartered in Indianapolis, IDC-USA was founded in 1986 and incorporated into its present form in 1988. It has more than 190 locations in 39 states. The IDC distributor companies represent more than $500 million in annual sales.

Since 1988, IDC has grown from being primarily involved in volume purchasing to include national accounts as well as some global initiatives. IDC's technology initiative has advanced considerably as well, Bailey says.

"The area that has advanced the most in the past few years has been our technology," he says. "It is a three-phase initiative: one is our e-commerce, which allows members to check real-time inventory and to order online. If we don't have the inventory, they are about two clicks away from checking our suppliers' inventory at their various locations across the country."

Nobody can state that a cooperative is better than a buying group, or vice versa. A company should do its research and know what it wants out of a possible buying group relationship. IBC president Ed Sullivan won't pretend to be totally objective on the subject, but does give the cooperatives their due as far as being proven business models.

"They are just a different means towards going about it," he says, when drawing general comparisons between cooperatives and buying groups such as IBC.

A cooperative tends to be more deliberate in their decision making processes, Sullivan says. Such thoroughness is good, but can sometimes result in certain business trends passing cooperatives by due to their being too deliberate.

"However, the advantage of that model is that by the time that decision is made, everybody has bought in and it is sanctioned by everybody in the cooperative," Sullivan explains, adding that one cooperative he knows of "is jealous because we can make fast decisions. But then again, we're jealous of them because they can get X-number of members to buy in immediately once they have that decision made."

Sullivan does draw a distinction between a "rash" decision as opposed to a "fast" decision.

"We can't make rash decisions. How-ever, we can make fast decisions," he says. "We tend to set strategy, look at the marketplace from an analytical point of view, and set our agenda and the things we're trying to accomplish. Then we submit them to the distributors. …"

IBC conducts research that includes surveying its members to determine their needs. Sullivan adds that they will often consult and get feedback from potential suppliers before presenting the information to IBC member distributors. Members are not necessarily required to sign on, however.

"We adopted a model where distributors have a choice," Sullivan explains. "It's our job to get them going in what we feel is the right direction, but they have the ultimate choice of what they want to do."

The decision to join a cooperative or a buying group will come down less to one's definition and more on just what a distributor is looking for in terms of potential services and assistance.

Spartan Industrial Supply is a 47-year-old distributor that specializes in MRO, electrical, power transmission, medical, and maintenance fasteners. Scott Levereaux, vice president of purchasing operations, describes Spartan as a "small- to medium-sized industrial distributor" and estimates their sales at $14 million a year. They are members of the NetPlus buying group but joined, Levereaux explains, after doing thorough research.

Spartan had been a member of the Equity buying group, which was going out of business. (Equity would eventually be absorbed by NetPlus.)

"I looked at others…and [many] were carbon copies of each other," Levereaux says. He adds that he did not look into the "big buying groups," in part because of his impression that some could be "selective as to how many distributors they'd allow in certain geographical areas, so we never really got anywhere with the bigger guys."

He also had some concerns over the bigger buying groups catering to the bigger distributors, at the potential expense of a Spartan, Levereaux says.

"We're kind of on the high end of small," he explains. Spartan had been in a large buying group for many years, he says, but "dropped out because they catered to the [big groups]. It was all about the big guys at their conventions. But what about us?"

Spartan's research into joining a buying group paid off, he says, as they eventually decided to stay with NetPlus after it absorbed Equity.

"To compete with the big boys we definitely need to be in a buying group, and this is one way we can keep our competitive edge," Levereaux says. "Plus, NetPlus does a very good job of communication. We're more and more into integrated supply, for example. We can call Dan or others there and ask 'You know anyone in power transmission?' They'll exchange information and pass along names."

There appears to be no one-size-fits-all answer as to whether a buying group such as NetPlus is better for a distributor to be with than an IDC-USA.

Bailey says that there are some minimum requirements for a distributor to join IDC but adds that "we have some members as small as $2 million a year and a few as large as over $50 million a year."

Likewise, Judge explains that members of NetPlus include "some distributors at $50 million. There are two with sales in the $40 millions and half dozen or so with sales more than $20 million. And we have as many above $8 million as we have under $2 million."

In the long run, the distinction between a "buying group" and a "cooperative" may turn out to be a distinction that does not make much of a difference. All agree that knowing yourself as a company, and keeping that in mind when doing research into buying groups, is essential. And while a buying group/cooperative can be a great asset, distributors still must bring unique levels of value to their customers.

"The independent distributors can bring a level of expertise to the table that the chains cannot," says IDC's Bailey. "It's not uncommon with independent distributors to have second- and third-generation people there who've grown up in that business. And they really know what they're doing."