Exploring strategic strengths and weaknesses of retail purchasing groups

Abstract

Retail purchasing groups consist of small, independent, specialised stores that join together and collaborate on purchasing and other areas. In comparison to large-scale corporate retail chains, often labelled mega-retailers, retail purchasing groups are based on collaborative external integration between a central unit and the independent, local dealers. The overall purpose of this research is to explore the specific characteristics that underscore a retail purchasing group. The paper has two research questions: (1) What are the strengths and weaknesses of a supply chain structure based on external integration? and (2) In what areas are the purchasing groups' ownership structure particularly advantageous in comparison to the mega-retailers' vertically integrated organisations? This exploratory research is empirically grounded in a case study of two Swedish purchasing groups. The paper argues that under certain market conditions, a decentralised supply chain, which relies on collaborative external relationships, can provide a competitive alternative to a more traditional centralised structure. The paper elaborate three areas where the structure is particularly advantageous: (1) service-based competition in an industry otherwise focused on cost leadership, (2) in-depth understanding of local conditions and presence and (3) the ability to incorporate entrepreneurial strengths and innovations in the supply chain.

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