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01/04/2016

How To Save Money With Cooperative Buying

By James Harvey Stout, former Writer For BarterNews

Cooperative food-buying is a form of bartering. We are trading our labor for the extra food which we get for our money. This chapter explores some of the basics of co-op buying; before investing your time and money in the project, you might want to acquire more information from the books which have been written on the subject.

We can get members for the club. A few suggestions:

  1. We can begin with people whom we know: friends, neighbors, relatives, and people from our office, church, club, or barter organization.
  2. We can put an ad into a newspaper or onto some bulletin boards: "Food-buying club is being formed. Save money by purchasing food in bulk with other people. Call xxx-xxxx."
  3. We can start small, while we work out the details of pricing and distribution. With this limited membership, there will be a smaller bulk of food to transport, fewer questions to answer, and less pressure on us.
  4. We can be selective in our choice of members. Perhaps during a "trial membership," people will have a chance to prove that they are willing to do the work.

We can prepare for the first meeting.

  1. Talk with the prospective members to learn about their expectations and experience. If we know their expectations, we will be ready for their questions. And if we know about their experience with other buying clubs, we will be able to get their advice regarding ours.
  2. Gather information regarding the availability and price of food from various wholesalers. Combine those lists into one list, to use at your first meeting. Even though one wholesaler might have better prices overall, the other distributors might have some of the additional products which are needed. We can buy goods from more than one place.
  3. Investigate the possibility of offering non-food items. In addition to food, we might buy bulk quantities of other goods: paper towels, bathroom tissues, motor oil, pet food, disposable diapers, paper napkins, light bulbs, detergent, etc.
  4. Consider the other issues that are presented in this chapter, including the logistics of getting and distributing the goods.

The first meeting.

  1. Explain the benefit: the members will get more food-per-dollar. At this point, we might not have exact figures, but we can offer estimates.
  2. Explain the members' responsibilities
  3. Explain the costs and fees. There might be an initial membership fee of $l to $25 per person or per household. (Most clubs charge a fee.)
  4. Give each member a list of the goods which will be available from the wholesalers. We probably won't be ready to take orders at this time; the purpose of the list is just to let people indicate which products they use regularly, and the amount which they use. (One co-op director said that his list started with 30 items, and then grew to 70 items.) Most people would have difficulty in estimating the amount of food which their family consumes in a week, so we can let everyone take the list home, where they will make a note of the amount which is consumed at each meal for one week.

Make a list of goods which will be available. After the members return their lists (indicating the types and amounts of food which they use), we can compile these lists to see which goods should be available through the club. Consider these ideas:

  1. To simplify the process in the beginning, we might offer only the things which are most commonly used: bread, eggs, milk, and particular fruits and vegetables.
  2. We need to order goods in a large quantity so that we will gain a wholesale discount; obviously, there is no sense in ordering an amount that is too small to qualify for that discount. Some further considerations:
    • If the members don't require a large quantity on a regular basis, we might still get a wholesale price if we "stock up" -- buying a month's supply of non-perishable goods, even though our club takes orders on a weekly basis.
    • Even at wholesale, some goods will not be worthwhile; for example, on a purchase of 10 dozen eggs, the wholesale price might be only 2 cents per dozen below a store's price.
    • We can combine our order with the order of other co-op buying clubs. That strategy can quickly double or triple the size of our purchase, so we will qualify for a larger discount.
  3. After we create a list of goods which will be offered, we can change and expand this list when we get new members who want other items.
  4. We create an order form which will let the members indicate the goods which they want for the subsequent week. The form will list the goods, the prices, and the dates when the goods will be available. Members can get a new form each week when they get their goods, or they could receive the form in a weekly newsletter. The club will probably ask the members to pay in advance, when they submit their weekly order.

Consider these issues in pricing.

  1. We need to include all expenses: the good themselves, transportation costs for the car or truck which will pickup the goods, business expenses (e.g., photocopies, phone bill, etc.), taxes, special expenses (e.g., a butcher, when we buy bulk cuts of meat).
  2. We might have different markups, depending upon these variables:
    • The amount of work which is contributed. At one co-op, the members pay 10 percent above cost; nonmembers pay 25 percent above cost (but even at that price, they might save money). The workers who donate at least five hours per week pay one percent above cost. (As the director, we might even get our share of the groceries for free, if the club is large enough to absorb that cost. ) At another co-op, there is a monthly obligation of four hours of work for all of the adults even if they don't order food each week.
    • The markup for a particular product. If our wholesaler sells tomatoes to us at only 10 percent below the store price, it's not fair to sell those tomatoes to nonmembers at our standard 25 percent markup.
    • The size of the bulk. When we get more members, we can buy a bigger quantity of food each week. This might give us a larger bulk discount, which can be passed along to the members.
    • A small markup can be included to cover any shortages, losses, spoiled food, unexpected price increases, and other problems.

We will find a supplier. We can get the goods from various sources:

  1. Wholesalers. In a phone book, the companies might be listed under a category such as Poultry; Wholesale, Grocers; Wholesale, Dairy Products Brokers; Food Brokers; or Natural Foods. To find more wholesalers, visit other co-ops, and schools, hotels, restaurants, grocery stores, and other places which sell or serve food, to ask for the names of the distributors who provide their food.
  2. Farmer's markets. These informal events allow farmers and gardeners to sell their produce directly to consumers.
  3. Farms. Some small farmers will allow us to buy produce directly from them at their farm, or from their roadside stand. We might contact other farmers by putting notices onto bulletin boards, to indicate our interest in buying produce for our club.
  4. A newspaper's classified ads. In a category such as "Foods," we might find an ad like this one from a big-city newspaper: "Potatoes. 50 lb. bags, $3. Will deliver in tons and lots.... "
  5. Individual gardeners. Perhaps a friend or acquaintance has a large garden which can supply produce.

We will make an agreement with the supplier. The agreement can cover these issues:

  1. What is the smallest bulk order which is required?
  2. Do the orders have to be place in advance? How much time is required?
  3. Can the orders be phoned in?
  4. Must the orders be prepaid? Is a deposit required?
  5. What is the distributor's policy regarding the acceptance of cash, checks, manufacturers' coupons, or food stamps?
  6. Does the supplier deliver food? Is there a delivery charge?
  7. What are the days and hours when the supplier is open for business?
  8. How can we return damaged or poor-quality food? Will the supplier give us   a refund (or future credit) on that food? Can we give those unusable goods to the delivery truck driver?
  9. How will we know about any price changes and new items?

We will find a place where the food can be distributed. In a small food-buying club, we might distribute the goods from a member's garage or empty room; in exchange for providing this space, the person will receive an extra discount on food. The distribution point should meet these conditions:

  1. It is on ground level, so that we won't have to carry crates up or down stairs.
  2. It has a refrigerator, if we will have perishable items such as milk and yogurt. (We can barter for the refrigerator.)
  3. It is large enough for the boxes and for the sorting of food. And it has extra space, in case our club expands.
  4. It is sheltered, dry, and cool.
  5. The floor is easy to clean.
  6. It has a baby scale, which is more accurate than a bathroom scale.

We will distribute the goods. After the food has been delivered to this distribution center, the other members will break down the food into individual orders; they weigh the food, bag it, do the record-keeping, clean up, or help in some other way. (An alternative is to leave the food in the wholesaler's crates and then let the people take whatever they have ordered, if these people can be trusted not to take more than they have ordered). When there is a slight shortage (and a "50-pound" bag of rice turns out to be only 48 pounds), or a slight surplus, we might divide the difference among the members -- but a larger discrepancy should be reported to the distributor.

There are business opportunities in co-op buying. Although a co-op is generally a non-profit venture, we can find ways to earn a profit. As long as our members are receiving a fair discount, they might not mind contributing a few hours of work -- even if we are using their buying power as a leverage toward our personal profit. We can consider these possibilities:

  1. We can order more than our members need, and then sell (or barter) the surplus to neighbors and to shoppers at a Growers Market. Since we bought the goods at wholesale, we might earn a profit.
  2. We can increase the size of the order (and the discount) and retain the profit. For example, if the members' total bulk quantity entitles them to a 30 percent discount, then perhaps our personal order will raise the quantity to the level where we are eligible for a greater discount -- maybe 40 percent. That extra 10 percent discount is given on all food -- ours and the members' food, so we can pass it on to them. Or we might consider that they are satisfied with their original 30 percent, so the extra 10 percent on all the orders is ours. One way to increase the size of the group's order (and therefore the size of the discount) is to combine our order with that of a grocery store, restaurant, or other co-ops.
  3. Instead of distributing goods only to our members, we might distribute them to non-members and to retail outlets (such as grocery stores, restaurants, and other co-ops). Then we become a wholesaler, and we move up the distribution ladder to the next level, so that we can get the same quantities and discounts which are being given to our current suppliers.
  4. The co-op buying club can have other activities, which could be fund-raisers for the group, or money-makers for us. We can sponsor lectures on subjects like nutrition, comparison shopping, bartering, and consumer guidance. (We can barter for the lecturers' services.)
  5. We can include other goods and services. The Cooperative League of America has said that "many people are now using co-ops to provide housing, health services, consumer goods and services, farm marketing and supply facilities, funeral and memorial planning, parents' co-op preschools, credit, electric and telephone service, insurance, worker-owned businesses -- and others. Included among these are co-ops in such activities as auto repair, home repair, travel, recreation, crafts, legal services, babysitting, bicycle repair, laundromats, optical services, data processing, earthworms and catfish farming, and so on. [Members] might choose, for example, to have the co-op pool their purchases for one or more major appliances -- or get special rates for group attendance at a play -- or lease a lake cottage for subletting at a savings to members -- or buy prepared food in case lots -- or purchase power tools for scheduled member use -- or subscribe to several magazines for circulation among members -- or arrange group health screening tests for members -- or purchase snow tires at quantity prices -- or dozens of other things, on and on and on."
  6. In a larger sense, the idea of co-op buying is to get other people to pay our way in exchange for coordinating the activity. This concept can be used in many situations, if we find enough people to join our venture. For instance, we might charter a bus, and then get a "free" ride as we oversee a trip to a place of interest with a coachload of travelers. We can get free tuition in an aerobics class in exchange for signing up 15 other people. We can locate 10 buyers for parcels of a real estate development, and get one for "free."
  7. We can start a co-op food store. Instead of taking weekly orders, we would keep an ongoing inventory of goods, and so the project changes from a part-time club to a full-time business.