How Co-Ops Hurt Local and Small Businesses

I wanted to touch on a topic that I think effects all types of businesses, but mostly those just trying to get started, and that is co-ops. Recently I read a post by Cloth Diaper Geek, about how small businesses are being hurt by the very brands that they carry, but most of the bands are not aware that the situation even exists. Shady co-ops form and the leader of the group will pose as a business owner wanting to purchase product for their store. They get approved for the account and collect orders and payment from the members of the co-op. Often they are able to get products at wholesale pricing or other deep discounts not offered to the public. This in turn hurts small businesses that have their funds tied up in a bunch of stock they can't move because they are forced to adhere to the MSRP price points and aren't allowed to offer discounts.

I have been in one co-op like this before personally, about a year ago. It was shady the way things were done. It was ran by a business owner that had a tax id that she would use to gain access to these brands. There was a co-op fee and you had to wait weeks for your purchases, but it seemed worth it in the end cause you got a better price on products. I only participated in one co-op and felt that it was wrong because it was a secret group and the process just seemed not right. It was just a feeling I got. I now see as a small business owner that it was wrong. They are hurting many other companies like mine.

It is time to blow the whistle on co-ops that aren't authorized by the brands. By continuing to participate in these shady deals, you are hurting small businesses everywhere. I would love to hear your opinion on what you think about co-ops, do you think that hurting small businesses that are trying strive and feed their families is worth the discounts received?