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Purchase pool drives quantity discounts

“The more you buy, the more you save” (aka ‘spaving’) has to be one of advertising’s most egregious clichés, encouraging shoppers to buy things in quantity that they may not need in the first place.

But some small businesses in the Chicago Lawn and West Lawn neighborhoods are proving the copywriters right. They’ve formed a pool to purchase basic services – waste hauling, electricity and credit card processing – that’s saving them thousands of dollars and reaping a small profit for Greater Southwest Development Corp., a key NCP partner, which organized the pool last February.

Now Greater Southwest is encouraging other community groups to join the pool, earning a profit for them while helping their local shopkeepers and commercial corridors become more competitive in today’s rough-and-tumble marketplace. Nick Kollias, Greater Southwest's commercial director, explained how at a recent lunch meeting at LISC Chicago, part of the LISC Commercial Corridor Brown Bag Luncheon Series.

Photo: Gordon Walek

Nick Kollias, Greater Southwest's commercial director, explained how the organization has rolled out its shared services at a recent lunch meeting at LISC Chicago, part of the LISC Commercial Corridor Brown Bag Luncheon Series.

"If I understand correctly, I don't have to do the infrastructure, all I have to do is find the businesses that want to participate?" said Roger Sosa, business recruitment manager for new NCP lead agency Back of the Yards Neighborhood Council. "That's big."

Greater Southwest currently has 60 small businesses signed up for one or more of its three discounted services – waste hauling, electricity and credit card processing.

But business owners are requesting additional products and services, including insurance, Internet, cable, telephone, office supplies and maintenance services. "That's what we're doing right now," said Kollias. "We're seeing how many more services we can incorporate."

And the model can be replicated throughout every neighborhood in the city, he added.

Greater Southwest started the service pool by pitching the idea to vendors. Waste haulers were difficult to reach directly, so they worked through brokers, who can offer businesses a 10 percent discount on waste disposal without breaking a contract or changing providers, Kollias said. Those able to switch vendors were able to save as much as 42 percent. 

Photo: Gordon Walek

Roger Sosa, business recruitment manager for Back of the Yards Neighborhood Council, seemed impressed by the shared services model that Greater Southwest has put into place.

Overall, signing up for one or more services saved business owners an average of $2,000 in under a year. “For our businesses on the Southwest Side, that’s a huge amount,” Kollias said. “That can be equal to two months’ rent for them.”

To get a break on credit card processing, Greater Southwest bypassed the 700 “indirect” processors that subcontract with larger processors and therefore charge higher fees. Instead, they approached some of the 11 large processors directly and then “took it a step further,” Kollias explained. “We said, ‘We want wholesale rates.’ ”

Businesses in wealthier neighborhoods can expect to save much more, he added. And offering more services to more businesses will increase the potential profit for a chamber of commerce or community development corporation. Greater Southwest has earned $7,800 so far.

Perry Gunn, executive director of the North River Commission, another new NCP lead agency in Albany Park, wondered how much liability a service pool organizer would face if clients ran into problems with a particular vendor.

Photo: Gordon Walek

Ghian Foreman, Greater Southwest’s executive director, says the only complaint to date regarding service provided through the pool has been from Greater Southwest itself about not getting its garbage picked up on time.

“Zero,” said Ghian Foreman, Greater Southwest’s executive director. “Their contract is with the vendor. But the risk is [that someone says], ‘Perry you introduced me to Nick the garbage man, and he didn’t pick up my garbage.’

“In real life, we had one complaint,” he continued. “It was from [us]. We didn’t get our garbage picked up.”

Dionne Baux, program officer with LISC Chicago, wondered if Greater Southwest’s established relationships with neighborhood business owners were necessary for launching the service pool.

Kollias agreed, explaining that that’s why other chambers of commerce and CDCs need to sell the service pool in their own neighborhoods. “If Greater Southwest goes to Humboldt Park, they’re going to be, ‘Who are you?’ ”

To ease the expansion of the service pool, Greater Southwest has designed a website that other groups can brand with their own logos. Business owners can visit the website for their own neighborhood, upload their bills and chose their service providers. Vendors also can sign-up to provide group discounts.

Photo: Gordon Walek

Dionne Baux, program officer with LISC Chicago, asked whether Greater Southwest’s established relationships with neighborhood business owners were necessary for launching the service pool. Indeed, Kollias responded.

The more the pool expands, the greater the potential benefits, he noted. “It’s one thing to have 50 businesses opt in, and it’s another thing to have 5,000.”

**

This luncheon was sponsored by First Eagle Bank. LISC Chicago holds brown-bag luncheons for commercial corridor managers every other month on a range of topics at 135 S. LaSalle St., 22nd floor.

For more information about future brown bags, contact Jake Ament at jament@lisc.org, or (312) 422-9573.

For more information on joining Greater Southwest Development Corp. service pool, contact Nick Kollias at n.kollias@greatersouthwest.org or (773) 362-3371.

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