engleski

Trust and Knowledge Issue in Retail Buying Groups

Efficiency of domestic and international retail chains most often results from large scale operations economies of scale), use of advanced technology solutions in logistics management and centralized buying power which altogether translates in reduced operating costs and lower prices. Smaller domestic retailers most often have to respond by lowering their prices in order to stay competitive and keep current customers. Lower prices mean lower profit and lower profit means lower investments (all other things being equal) which reduces long term strategic capabilities of small independent retailers. Since small grocery retailers are price takers their only real possibility to substantially improve profitability and market position is to try to lower their buying price. Strategies they employ to achieve this goal are various but one of the most used ones is to form a buying group. A buying group concentrates buying power of various small retailers (members of a group) in order to increase market power in the process of negotiating buying conditions with vendors. Therefore many small retailers are turning to buying groups to level the playing field which will allow them to compete with big retail chains. In today’s retail market volume does make a difference. Croatian market is under strong competitive pressure from large international retailers. Small independent retailers cannot match their operational efficiency and prices. One of the strategies they can employ is to form a strategic alliance (e.g. buying group) in order to leverage their negotiating power with vendors and achieve economies of scale.

retail ; buying groups ; Croatian retail market

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