Collective purchasing or (collective buying, collaborative buying, collective procurement, purchasing groups, centralised purchasing) is not to be confused with group buying and websites out there that are effectively selling deals they have agreed on upfront with a minimum threshold of customers.
There are numerous group buying websites our there such as Groupon who mainly focus on the consumer market around beauty products and events. Collective purchasing however has become an integral part of government and private sector procurement around the world.
Collective purchasing is the practice or organisations and individuals cooperating together to obtain greater buying power for the service, products or materials they need.
Successful examples of collective purchasing for consumers are initiatives like Big Switch, coordinated by 38° the campaign group and Which Consumer Champion where nearly 300,000 individuals registered to collectively switch electricity supplier for a better deal. On average people saved £119 pounds when paying by direct debit through the Co-Operative Energy provider. Other examples are home heating oil collectives in rural areas.
The differences are, collective purchasing is around the buyer’s coordinating their purchasing needs in order to purchase together from any provider that meets their needs, as opposed to a seller selling the product/service they wish to sell and finding potential buyers.
Successful private sector industries already utilising collective purchasing are Hotels and Hospitality, Care Homes and Healthcare, Leisure, Restaurants and Bars, Shops and Offices, Schools and Construction.
Central UK government’s Crown Commercial Service has been utilising Co-Operative procurement for many years, examples of these are the Shared Services Alliance: Collaborative Procurement Plan, Fire and Rescue Procurement Aggregation and collaboration & local councils have been collaborating & sharing resources for public service delivery under initiatives like London Ventures.
What are the Advantages of Collective Purchasing?
Economies of Scale – The combined purchasing power of the group enables far better terms.
Reduced Costs – Individuals and organizations working alone cannot obtain the same deals. Typically coloration can reduce costs from 10% to 35%.
Increase Profits – Even a small reduction in purchasing costs will significantly increase the overall profits of all organisations within the network. To increase similar profit for an organisation that they would gain with collective purchasing an organisation would need to increase sales by around 4x.
Lower Carbon Footprint – By simplifying the procurement processes its possible two reduce the collecting unit/service cost, in addition to transaction/servicing costs.
Knowledge/Process Efficiency – Sharing information on best practice, suppliers, technologies and purchasing experience helps to reduce redundancies in the supply chain, find new efficiencies as well as leading to continued optimized Total Cost of Ownership – TCO.
Timesaving – The group organizer manages the process therefore, the individual group members achieve significant time savings.
Contact us to find out how we can help you join or start a collective purchasing group.