Is a Buying Group Right for You?

Buying competitively can mean the difference between so-so and sensational profits. But as an independent jeweler, you’re often at the mercy of huge corporate vendors who have the final say on how much you pay for their merchandise, even if the terms they impose don’t jibe with your business.

To avoid this frustration, hundreds of jewelers in a similar position have joined one of the industry’s three largest buying groups, the Independent Jewelers Organization (IJO), the Retail Jewelers Organization (RJO) and the Continental Buying Group. Their goal? To wield enough buying power to secure better prices and more flexible sales terms and to eventually gain parity with the chain stores, whose competitive edge lies in their ability to get hefty discounts in exchange for ordering the right volume.

IJO, RJO and Continental were all founded on the principle that there is strength in numbers. The concept is familiar to anyone who has ever contemplated the appeal of a gang or the dynamics of a well-organized army–unity begets power.

But in the case of jewelry buying, it also begets big savings.

“I pay about $295 a year for my RJO membership, and it pays for itself with our vendor discounts,” says Mike McFarlin of McFarlin’s Jewelry in Amarillo, Texas.

Other member jewelers invoke the same reasoning when describing their decision to join a buying group: Savings are the primary draw. On its Web site, RJO, a 33-year-old organization based in Newton, Idaho, boasts that its manufacturers’ discounts average between 5% and 7%. Norwalk, Conn.-based IJO, whose 860 members make it the largest independent jewelers organization in the world, makes the same claim.

“We form a triangle between the manufacturers, our members and us,” says IJO owner Richard Swetz. “Members can make $1,000 in cash just belonging to the group.”

As a card-carrying member, jewelers agree to make the majority of their purchases through the group, sometimes with a minimum order stipulation. But the groups are quick to point out that many of the vendors on their roster are ones jewelers probably already use. RJO has over 200 on its list, including Aurafin, Citizen, EGL of Los Angeles, Fossil, Frederick Goldman, Seiko and Stuller. IJO has many of the same names under its umbrella.

“Half to three-quarters of my suppliers are the same. I just changed my billing with them,” says Doug Heisey, whose late father joined RIO about six years ago to negotiate better buying deals for his Manheim, Pa., business, Heisey’s Jewelry Store.

In a typical RJO buying scenario, a jeweler will order from his supplier directly but, during the process, will specify that he is a buying group member and therefore entitled to the group discount. The supplier will bill the organization, who will in turn bill the member, whittling the retailer’s purchasing and billing process down to just one monthly invoice.

“It makes billing a little easier. You don’t have to write out umpteen checks to all your different suppliers, and you do get a discount,” says Heisey.

IJO, on the other hand, doesn’t offer central billing. Instead, the organization has its members deal directly with the suppliers, who issue a discount at the time of purchase. Members are also entitled to rebates at the end of the year, based on their IJO purchases. According to members, cost-cutting measures like these are the reason why their businesses have prospered.

“I’m in a different place than I ever thought I could be,” says Anthony Fratto of Anthony Jewelers in Palmyra, N.J. “Ten years ago, we were doing about $400,000 a year. Now we’re doing $1.2 million.”

The groups heavily promote their semiannual buying shows, where members are invited to make their big purchases, hobnob with fellow jewelers and attend educational seminars sponsored by the group. At IJO’s show in Savannah, Ga., last summer, course titles included “Making the Tax Laws Work for Your Jewelry Store,” “From Fee to Shining Fee: Pricing Repairs” and “Customer Loyalty: Dead or Alive?”

But membership perks go way beyond discounts and seminars. Both IJO and RJO offer low credit card charges, travel discounts and rebates, diamond buying trips to Antwerp, TV advertising, consumer newsletters, free Web site services, store critiques, merchandise reviews and GIA title course offerings.

“The buying group is only a small part of what we do,” says Swetz of IJO, where membership costs $495 a year. “We have 800 members. You have a problem, you want to move, you want to expand. We’ve done these things. You bring us your P-and-Ls and your business plan and we can help you. We’ve been there before.”

So, presumably, has RJO. The two organizations are remarkably similar, mirroring each other right down to their membership criteria. Geographic location is the first barrier. To join, you have to be located in a city or town where there are no current members. You also have to be a No. 1 or No. 2 rated store listed with the Jewelers Board of Trade.

Meet those requirements and you, too, can join the club, gaining the collective know-how of hundreds of your fellow jewelers and the bargaining power of a corporate giant.

“If we ever have a vendor dispute, I can get them to back me,” says McFarlin, who’s been an RJO member for three years. “I recently had a problem with a vendor on their service, and RJO pretty well took care of it. You’ve got a group of jewelers backing you. You’re not just one small-time guy.”

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