GROUP PROCUREMENT & PRODUCTION
Group Procurement Organization (abbr. GPO; Einkaufsgemeinschaft in German) is a model of procurement, known in German industry since the end of 19th century, where the members are independent businesses that act as a group with the collective buying power to get various benefits through a common purchase. GPO members are united their forces and resources to leverage purchasing power, obtain better discounts from vendors, secure the exclusive distribution rights on the brands, extend the portfolio of unique products, speed up all the processes and make them time, resources and costs effective. More detailed information you can find in Wikipedia by the link
Our Group Procurement & Production Organisation (GPO) consists of independent retailers (offline Direct-To-Retail or DTR and online Direct-To-Consumer or DTC) with own staff / offices / warehouses / training premises/ points of sale in 75 countries and purchasing volume over EUR 368 million a year. We buy only retail brands in industries such as Beauty/Wellness/Anti-Aging/Clean Food with 100% clear USP and a “blue ocean" approach. We pay only cash up front. Also, in case of urgent need in non-existent product with a great potential demand that fills a certain gap on the market, GPO can develop own brand from the scratch. Spinoff is the first worldwide who were forced to introduce the GPO extension. Only if GPO sees an urgent need or unrealized product gap in the market, it can enter into a deep collaboration with an independent manufacturer (not MNC) and, respectively, create own private label from scratch to fulfil the demand and fill in the gap on the market. GPO is guided by the fact that there are already own customers who need this product in all markets of operation and ready to buy it. It is very important that GPO does not consider the subject of copycats. Representing the interests of the market directly, GPO develops the products only after careful market assessments by all members within the framework of BRAND LAB thorough market testing and surveys of all GPO members.
The members of GPO are only online and offline retailers who work DTC/DTR in each individual home market. Each GPO member out of 75 countries has legal entity/ staff / offices / warehouses / training premises / budget and have at least one and more point of sales or POS (e.g. own beauty salons, offline and/or online store and do distribution themselves or network with other local retailers). GPO doesn’t cooperate with entities which act only as distributors or agents and do not sell anything directly to customers and do not have direct access to them, as well as with any other forms of the middleman. Each GPO member is independent of the others and decides on his own whether to work with the RB from the GPO portfolio or not according to his financial sources and capabilities. It is very important that all members of the group have equal rights regardless of any factors. They interact with each other exchanging best practices, new trends, experiences, marketing and sales statistics and feedbacks on brands in the portfolio. These connections have been accumulated over many years in corporate business and operating in the beauty and healthcare industry.
The members could be literary divided into two groups but more often they can combine both. The first group of GPO Members are focused on healthy/organic clean food, drinks, sports supplements etc. They manage distribution through all online and offline channels of the mass market from HoReCa and big retailers such as supermarkets, department stores, convenience stores to private coffee/tea shops, organic shops, sports clubs, fitness centres and other niche stores. The second group is focused on personal care and wellness products such as skincare products for the face, body and hair that can be either retail or professional cosmetics. They are more often have a medical degree and own businesses in personal care. Some of Syndicate Members own online and offline stores, spas, beauty salons, institutes, clinics, some resembling the entire network of 5+ stars hotel spas etc. They also manage all online and offline local DTС/DTR such as supermarkets, pharmacy & drug stores, department stores, speciality stores, internet retailing, beauty salons etc.
Taking into account the confidentiality and cherish the time of all GPO Members, the detailed information about them is provided to each individual retail brand upon request, according to and only after the direct interest by the partner in this particular brand. If, after acquaintance with the brand, GPO Member is interested in the brand distribution, the centralized Procurement office is ready to provide all the expanded profile on particular GPO Member to this brand i.e. the company name, contact details, annual sales volumes, brands references, local sales channels with which he works etc.
GPO members united into the group in order to leverage their purchasing power, obtain better discounts from vendors, secure the exclusive distribution rights on the brands, extend the portfolio of unique products, speed up all the processes and make them time, resources and costs effective. Also, to be able to develop own private label brand from the scratch, in case of urgent need in non-existent product with a great potential demand that fills a certain gap on the market. GPO differs from small suppliers and middleman in that all members work directly with the buyer and are united into one group ensuring large purchase power.
GPO provides its members (DTR/DTC retailers):
- Turnkey portfolio and it’s constant updating with unique high margin retail brands (hereinafter RB);
- Access to deeply discounted, pre-negotiated contracts; 100% distribution exclusivity for each particular market;
- Diluting of risks and marketing expenses between all members;
- Improving a part of the procurement chain; Increasing speed to market and speed to profit;
- DTC/DTR process house coordination and support if needed;
- Benchmarking, audit and analysis of similar activities within the GPO structure to identify errors and to avoid the principle “learning by doing”;
- Multiple compensations in case of the independent RB exit;
- Centralized advanced group training, offline and online seminars, open tables etc.;
- Support with logistics by importing/exporting good within the EU;
- Just in time (JIT) deliveries directly across the EU; Save money on freezing VAT and make.
GPO provides suppliers (brand owners):
Big volumes of purchase;
- Contract-guaranteed projected demand;
- General conditions and discounts for all GPO members;
- Protection against cross-border selling and clients poaching;
- Reduction of operational costs on the search of potential retailers-distributors in each market separately;
- Real customer checks and charge-free market assessment, competitors and pricing evaluation from 75 markets within BRAND LAB;
- Zero time to market;
- Dynamic growth and a rapid increase in cash flow.
Group Procurement & Production Organization consists of and regulates by its independent members that represent single buying power. Thus, it is not any kind of agent or consultant, since all members BUY products from independent retail brands CASH UP FRONT and SELL in up to 75 markets, respectively risk with own money and reputation the same as the owners of independent retail brands.
BRAND ASSESSMENT. GPO has a very simple procurement chain, where there is an independent RB from one side and there is a GPO member (offline DTR and online DTC) from the other. In the middle of this chain, there is a centralized office with an in-house international team for the effective GPO process house. The centralized team searches for the new RB into the portfolio, applying online and offline channels (member’s recommendations, mass media, social media, exhibitions, etc.) and selects the best brands according to generally accepted requirements as stated above. We start with markets assessment and at the request of the RB, we excluded the markets where the brand is already being sold or has an exclusivity. After the market assessment GPO tests the products for short, middle and long term performance within the BRAND LAB by a group of professional medical doctors and technologists, who either own retail companies or work for them and have the necessary experience and competence.
BRAND INTRODUCTION. After the assessment of the products, the centralized team personally informs GPO members in 75 markets about new potential RB in the portfolio and updates with all news with the help of special personal notifications. Based on the GPO members request and feedbacks, the team arranges online conference calls between the parties. At the final stage, after the presentation and warm introduction by the team, all communication is transferred to GPO member for further direct interaction. Also, in some cases, the team helps with the provision of business samples to GPO members, at their request, as well as with certification, sales and marketing and international go-to-market strategy, customers check and product demand in all markets. Usually, after the preliminary online conferences and meetings between the interested parties, if the situation permits, GPO members hold a personal centralized meeting with RB where it is more convenient for everyone, to define all the conditions and sign RB-GPO member direct contracts.
We are the first worldwide who were forced to introduce such GPO extension. Only if GPO sees an urgent need or unrealized product gap in the market, it can enter into a deep collaboration with an independent manufacturer (not MNC) and, respectively, create own private label from scratch to fulfil the demand and fill in the gap on the market. GPO is guided by the fact that there are already own customers who need this product in all markets of operation and ready to buy it. It is very important that GPO does not consider the subject of copycats. Representing the interests of the market directly, GPO develops the products only after careful market assessments by all members within the framework of BRAND LAB thorough market testing and surveys of all GPO members.
The new brand evaluation process consists of:
- Feedbacks from all GPO members;
- Careful evaluation for such a demand;
- In-depth analysis of all GPO markets and assessment of all conditions;
- Product validation checks and concept marketability in all GPO markets.
The new brand production process consists of:
- Very generation and selection of ideas;
- Concept development and verification;
- Marketing and sales strategy development;
- Business analysis;
- Product development;
- Trial marketing;
- Full-scale commercial production;
- International certification, marketing, logistics and sales.
GPO members who have developed the brand share all marketing costs and additional expenses on the development of such brand among the participants. In such a case, all rights on this brand 100% belong to the GPO members who participated in brand development and sales. In case of deep integration into product development, the right may be also shared with the manufacturer/brand owner.
The main focus of GPO are products by independent RB that improve human health and wellbeing inside and outside, lengthen the lifespan and help people “feel better - look better - live better”. Such brands could be literary divided into two main groups. The first group of brands includes deep tech healthy and wellness dietary and sports nutrition, supplements, clean organic food (incl. snacks, desserts and diabetic food) and drinks. The second group includes deep tech personal care and beauty products. GPO works ONLY with privately-owned RB and doesn’t consider any corporate brands since all MNCs, as a rule, sooner or later deprive independent distributors of their rights to trade brand’s products.
MUST HAVE FOR THE BRAND:
- Privately owned;
- A clear focus on best-aging and well-being;
- 100% clear Technological USP; High margin;
- Big potential market;
- "Blue ocean" strategy;
- The brand owner is ready for aggressive S&M strategy;
- The brand owner doesn’t plan to sell the brand at least within 24 months.
The portfolio of recently developed products could be found on the main page.
Since GPO develops private label from A to Z completely at own expenses and independently from the manufacturer, it retains full rights to the trademark, as well as intellectual property rights and remains unbound to the location of the production facilities. In case of exit of such private brand, the GPO receives an entire 100% compensation, that is distributed among the members who sold the product. If the manufacturer partially obtains certain rights for the private brand, investing in the brand's production, he gets the share in accordance with his participation in the event of the exit. The rest of the shares are divided between GPO members who were involved in its sales, in the percent ratio tied to purchasing volume.
GPO is funded by:
- Annual flat rate by the GPO members (only €499);
- 10% equity belongs to the GPO when it creates its private-label brands in case of urgent need; Sometimes, there are situations that the brands, that GPO worked with, are bought out by MNCs.
- Since MNC has its distribution network it will no longer work with GPO, and at the same time taken along with the brand our customers. Therefore, we lose a fairly large part of the client base, the revenue from them and have to start working with a new brand from scratch. Since GPO members have invested in this brand a large amount of financial and other resources for its development and promotion, it can count on some kind of compensation. In case of loss of distribution rights and customers, the member of GPO receives compensation from the brand in the amount of cashflow with the brand for the last 12 to 24 months. We receive 10% of the total amount of compensation to cover all legal, court and other expenses;
- In particular cases, if the young brand doesn’t have enough money to develop international sales, instead of selling a part of the company or attracting other financial means (e.g. from venture funds), GPO ensures cash up front payment with large leverage of up to 3 months and protects the brand owner against company diluting. In this case, GPO can count on a small share of brand equity upon reaching a certain volume of cash upfront purchases. We call this “Sales for Equity” (this definition was introduced for the first time by the Head of the GPO Dr.Alexander Miller).
We do not offer any services, since we are a group of DTC/DTR businesses that BUY best-aging products from independent retail brands (not any kind of corporate brands) globally on cash upfront terms and SELL them locally. Of course, upon request, we deal with certification and partially overtake marketing for brand launch that we share with the brand and agree in the distribution contract. If the product requires additional education, we can also make training locally, since GPO has certain competencies and training facilities for own needs.
CONTRACT & EXCLUSIVITY
All GPO members buy ready-to-market and already existing products by the independent retail brand at the same purchasing price with cash up front adhering common distribution terms and sell in their markets. Despite the fact that the volume of purchases and discounts, based on total purchases by all GPO members, are negotiated, the procurement contracts are concluded with each individual member of the group for each separate market. Accordingly, the retailer-distributor pays to the supplier and receives the products directly according to the terms of the contract. Such a contractual division allows simplifying the procurement procedure and proper build financial relationships between the parties.
Retail brand mandatory concludes a standard double-sided five-year exclusive distribution agreement with each interested member for his core market. Thus, the exclusivity is always given to a specific country and is necessarily tied to the volume of purchases by years. The contract has the possibility of prolongation for at least five years, subject to the fulfilment of the agreed annual purchase volumes by retailer-distributor for his market of exclusivity. If the retailer-distributor fulfills the purchase volume plan, specified in the contract, then the exclusivity remains, if not, then the parties are discussing why it is not possible to fulfill it in advance. If there are problems in the market, then the parties are looking for a solution (for example, the Coronavirus or the product cannot be sold offline/online). If the retailer-distributor does not work on the product properly (e.g. does not invest money or resources enough into its local development etc.), then the brand can revoke the exclusivity or even terminate the contract unilaterally, according to the terms of the contract.
The first step is a brand selection according to the main requirements (best-aging properties, clear USP, high margin, strong marketing, the potential for fast sales, readiness to aggressive marketing). The centralized team searches for the new RB into the portfolio, applying online and offline channels (member’s recommendations, mass media, social media, exhibitions, etc.) and selects the best brands according to generally accepted requirements as stated above. The centralized procurement office under the supervision of the Head of GPO and Focus Group makes an inner assessment of the products. GPO tests the products for short, middle and long term performance within the BRAND LAB by a group of professional medical doctors and technologists, who either own retail companies or work for them and have the necessary experience and competence. Afterwards, if the centralized office selects a brand according to positive test results, it is further presented to all GPO members with the help of unique dossier that is created by a centralized team based on brand's information and uploaded to the Spinoff.com Platform.
Since the quality and USP is the most important thing to make a decision to move ahead, each brand, that is later selected to the portfolio, goes through the initial Brand Lab. It is the process of products testing by Focus Group which includes the management of the centralized Procurement Department, MD, Technical Director and Technologist. Usually, the brand is asked for several full-sized business samples, more likely bestsellers in minimal quantities, that can give a clear understanding of the product USP and packaging quality, to one of the official addresses. Personal care products are tested for their performance in the first place from short to long term results. For food & beverage, of course, it is also important that they have healthy beneficial properties and, of course, great taste.
Upon the initial Brand Lab testing results by GPO's centralized Focus Group and, if the brand is interesting and matches all the criteria of brand selection, as well as the price list is pre-evaluated as adequate, the brand is equally presented to all GPO Members. For this reason, a professional publication called Dossier is made in two forms. The Open Dossier at the platform is presented to all partners. The closed so-called Secret Dossier (more extended version with additional sometimes sensitive infromation) is made for deeper presentation the new potential brand to interested partners. Afterwards, open markets and interested partners are checked on compliance, excluding occupied markets or with exclusive distributors at the brand's discretion. After acquaintance with the dossier, prices and presentation based in Secret Dossier, a series of online negotiations and conferences are taking place. In accordance with the interest and feedback, Syndicate Members request business samples to present product locally and evaluate the market according to the trading standards. This is when the second stage of Brand Lab begins.
At this stage, the brand's products are provided to GPO Members upon their direct request and in accordance with their interests. The business samples are sent to chosen markets in order to test them locally by the partners and present to points of sale and in the retail chains. This helps to receive direct interest and feedback and plan the total volume of purchases for each local partner at each separate market. Brand Lab from up to 75 markets is made on real customers and provides charge-free market assessment for a given brand, competitors and pricing evaluation, and recommendations from the partners on introducing the brand to each individual market, improving the product packaging, etc. This stage usually lasts up to 3-4 weeks.
What is the time frame and deadline for receiving feedback from a GPO Member in a specific country (positive or negative)?
Naturally, there is no specific time frame. After the brand was introduced to all GPO members with the professional dossier and the most interested retailers-distributors have received business samples for testing, this process we call BRAND LAB, approximate it can take up to a month under normal market conditions and the world market as a whole and varies for each individual member. GPO members in a specific market need time to test the product internally within the team by professional technologists and doctors (cosmetologists etc. in the case of a beauty product) for the short-term, medium-term and long-term action, to make market estimation and also calculate the margin, logistics and the price for each individual brand. Thus, this process is very crucial but quite time-consuming. Sometimes happens that part of the assessment process is done in parallel between the retailer-distributor and the brand within the framework of the negotiation process, in this case, the feedback from members may be obtained faster. In addition, having direct brand coordinates, group members can contact directly, while we cannot characterize the specific time frame when this will happen.
What happens if the brand gets green light to start distribution in a specific country off Spinoff Syndicate?
After the assessment of the products, the centralized team personally informs GPO members in 75 markets about new potential RB in the portfolio and updates with all news with the help of special personal notifications. Based on the GPO members request and feedbacks, the team arranges online conference calls between the parties. At the final stage, after the presentation and warm introduction by the team, all communication is transferred to GPO member for further direct interaction. Also, in some cases, the team helps with the provision of business samples to GPO members, at their request, as well as with certification, sales and marketing and international go-to-market strategy, customers check and product demand in all markets. Usually, after the preliminary online conferences and meetings between the interested parties, if the situation permits, GPO members hold a personal centralized meeting with RB where it is more convenient for everyone, to define all the conditions and sign RB-GPO member direct contracts.
Who is responsible for marketing and promotion the brand or the GPO retailer/distributor who sells the brand on the territory?
First and foremost, marketing and promotion expenses are always goodwill of both parties and always a subject of negotiations for a procurement contract and included as a separate clause in the contract. The manufacturer usually obliges to supply the retailer-distributor with any available and updated marketing materials in order to adequately represent the brand locally. That is, when it comes to PR and marketing, the parties perfectly understand that it requires adaptation for each market, at least there should be a translation of all materials into local language etc., in this regard, there is always a moment when the parties sit down and discuss all these costs on marketing, PR, samples, training etc.
These costs for marketing are usually included in the percentage of sales or in the margin. It is also decided with the brand personally, and the company could provide merchandise, marketing and promotional materials as a percentage of each invoice according to the contract. Well, it is always calculated judging by the profit and only by mutual agreement of the parties, that may share funds for marketing, taking into account the sales, discounts, margin, etc.
It is always a transparent and understandable process, based on mutual trust and professionalism since GPO members are always ready to show how much they earn on the brand, as well, based on extensive experience, GPO members know what is the production cost that they buy from the brand. Therefore, it is easy to calculate how much each party invests and determine who and what extent is responsible for these costs. For examples, on the side of retailers-distributors, there is always a valuable customer base, reputation, well build infrastructure and invested sources etc. On a part of the manufacturer, there is an end product, well-structured production processes, proper logistics, delivery etc.
Generally speaking, these costs aimed at marketing and PR are distributed in accordance with the work carried out by one party or another and must be covered by the parties in accordance with implemented activities.
As a standard, Spinoff team creates special detailed profiling on each brand it plans to distribute that is called Dossier. All the information that is included in the Dossier is provided directly by the brand owner. It is designed to properly present each brand to all GPO Members and is used as a communication and collaboration channel to help them with a brand evaluation for future distribution. All Dossiers have a similar standard structure and are backed with all required information that provides the professional insight into the brand and allows to save a significant amount of time spent on presentation. Moreover, Dossiers are supported by qualitative visuals such as product images and video. This allows retailers-distributors to get a complete picture and brand vision. Due to the fact that Spinoff Platform has own video streaming on secure servers, and does not use YouTube or other channels, makes it possible to upload any number of videos and protect users. Each Dossier has two versions Open and Secret which in essence is the copy of the Open Dossier but a more extended one.
Each Open/Secret Dossier covers the following standard sections:
- ENTRY (general information about the brand);
- THE FOUNDER/THE BRAND/THE STORY (to better understand who is behind the brand and how all started);
- PRODUCTS & PRICES (products description with some RRP for bestsellers);
- BRANDING & DESIGN (packaging and branding are the key in addition to a quality product and always affects the choice of retailer whether to sell a particular brand or not);
- ACCESSORIES /ADDITIONAL BRANDS (sometimes one company has several brands or additional accessories that they can also present to potential retailers-distributors for consideration);
- MARKETING & SALES (this part gives an understanding of the marketing and sales strategies of each brand which is the key for retailers-distributors. It describes which marketing tools, sales channels are used, where it is sold, how it supports retailers, plans for international distribution);
- MEDIA/AWARDS/REFERENCES (provide insight into the benefits and strengths of the brand).
Addition to the standard structure described above Secret Dossiers provides extra information about the brand and could be accompanied by NDA/sensitive information provided by the brand owner and dedicated to potential retailers-distributors such as:
- marketing materials such as leaflets, catalogues, presentations;
- price lists (ex-works and RRP prices excl. VAT);
- questionnaire form;
- certificates, registration documents;
- call recordings, protocols etc.
Since GPO Members often have a lot of additional questions to the brand, Spinoff found a solution in the form of an interactive feedbacks in Google Sheet inserted into the Secret Dossier. You can find the series of questions/comments from GPO Members and answers/comments by the brand owner to the most common in one form to all members at once. This feature protects against numerous ping-pong emails which are quite time-consuming. Brand owners are free to provide information for preparation of the Dossier according to the plan in any convenient electronic format with copy/paste option (doc, xls, pdf file) as an attachment or through any Cloud space with the ability to download. All additional materials may be provided in their original format.
Dossier presentation serves, first and foremost, to present the products to all GPO Members and to get feedback from them before starting to work with a particular brand. This detailed information allows GPO members to make own assessment of RB in the GPO portfolio and also to observe the assessment of others, as well as work with RB directly in the "all in one place" format, or work as a group on solving some problems or within the framework of best practices discussion.
As a standard, for the convenience of GPO members and RB, we developed the Spinoff.com platform (word "spinoff" was chosen for the title, since GPO members spinoff their tasks of the procurement to the centralized team, as well as because most of the brands in our portfolio were spun off by doctors or professionals), that works as a modern assessment tool to secure time and resources. The team compiles dossiers using the information provided by RB, that is shared among GPO members in a convenient electronic form with the well-remembered perpetual link by any modern means of communication. The platform has 10% of visible information, available to all, and 90% of invisible information, secured under the password and available only to GPO members. This detailed information allows GPO members to make own assessment of RB in the GPO portfolio and also to observe the assessment of others, as well as work with RB directly in the "all in one place" format, or work as a group on solving some problems or within the framework of best practices discussion.
The platform has a highly reliable level of protection since all information is located on secure German servers. Spinoff.com has its own video streaming. Tailored smart software ensures high-speed uploading/downloading unlimited number documents, including videos, to any device, with any operating system, in the highest resolution without the risk of viruses. It also allows tracking all viewed /downloaded information flow based on IP address, which gives the opportunity to secure all sensitive information.