The consumables market in Australia has long been supported by the lab, mining and agricultural customer. But now, biotech is changing the landscape. Faster moving, smaller and more disposable, consumables are making the move to a technology based market. Jeremy Torr reports
The two major trends in local market consumables are that customers are moving increasingly towards disposables, particularly in plastics, and that the average size of consumables is getting smaller.
Thanks mainly to more highly automated procedures, more specific and smaller sample sizes and a general move away from wet chemistry procedures, customers are moving to a faster-moving, quicker reacting stock model – one which makes trying to second-guess the market harder than ever for suppliers.
According to Michael Jones, marketing manager at glassware and consumable giant Crown Scientific, the potential is there for a sound consumables business – but it is taking ever more marketing smarts to keep the customer happy.
“I would suggest that the margins that companies can take from consumables will get slimmer and slimmer. They are small already, but I think it likely they will drop further,” he warned.
Jones noted that this ‘price-driven’ market move will tend to favour those companies with vertical, highly targeted product lines, rather than the traditional, multiple-line consumable department stores of yore.
“This style of smaller sized, faster moving product will favour the small, high volume specialist supplier that is only taking very small margins. But only as long as price is the single driving factor,” he asserted.
Like Jones, Tony van Staveren, managing director of Eppendorf South Pacific noted that the changing market was bringing different expectations from customers.
“To be honest, the traditional consumables are already in decline, sales-wise. Both the mining and agricultural users are moving towards automated, machine-driven procedures rather than using wet chemistry. It’s a changing market,” he added.
Van Staveren said the overall sales figures for both glass consumables and chemistry products have been dropping in the single digit range – and he expects them to continue falling.
“Both these (glass and wet chemistry) products have been showing 2% to 3% drops in sales over time. The trend is definitely down,” he said.
Nonetheless, the fact that ‘traditional’ consumable sales are slacking does not mean the industry should throw up its hands in despair and turn to selling wheelbarrows or burgers. Far from it.
“It is a buyers market at the moment, no doubt about it. But that just means we (suppliers) have to use different strategies,” asserted van Staveren.
“We now have to start emphasising things like repeat orders, like backup capability, and like web sites to help us push the business. Disposable glass is still growing, as obviously is plastic disposables too – so there is opportunity but we have to get close to our customers to take advantage,” he said.
Approaches currently being wheeled out include a heavier reliance on web-based product offerings and ordering. Crown Scientific and Biolab both offer highly interactive, accessible online catalogues for customers who already know what they want and simply need product.
This approach offers multiple advantages to the company – it removes the need for a visiting salesperson to make fruitless visits, thus cutting costs, and it also speeds up the delivery process as orders can be immediately processed 24x7.
“This underscores what is essentially a move away from consumables as we know it now,” noted Crown’s Jones. “It’s not that the number of unit sales is dropping, especially in glass consumables, but the sizes are dropping. People are now working in microamounts so the volume will go down and it will become more specialised,” he asserted.
This change in buying patterns will inevitably lead to other ways for suppliers to add value for customers, with the product being sufficiently standard that simple price will be the most important determining factor. But cost should not be the only consideration, warn many observers. As the demand for precision and quality increases proportionally with speed and sample size demands, ongoing backup and monitoring will come increasingly into play.
Consumable suppliers will need to offer extended services in order to convince buyers to stick with their product, said van Staveren.
“Things like preferred supplier deals offering a whole range of products, things like supplying the buyer with statistical information on their buying and usage patterns, things like ISO accreditation will all become key selling points,” he said.
“The supplier will have to take responsibility for more areas of the customer’s business than just offering stock – the object will be to set up a bond between the two,” he added.
This approach was echoed by Quantum Scientific managing director Derek Brown, who commented that being able to supply more than basic product was absolutely vital.
“To be honest there is not much difference to the user between 500g of one chemical and another, or one glass beaker and another apart from the price. You need to be able to differentiate your offering; one way is to sell equipment too.
“Even so it is not an easy market. Margins are being squeezed very hard by some of the big companies,” he said.
However, with many of the big consumable suppliers already looking hard at their product ranges with a view to whittling them down to a more manageable size, other pressures are still coming from outside. Global pricing pressures mean a hard line to tread for Australian companies.
“The problem with the Australian market (for consumables) is that in some cases, consumers can buy the product here for less than a distributor pays in America – even though the product has been shipped here, supported and marketed by the local distributor,” said van Staveren.
He added the situation was compounded by the introduction of many new, small specialist companies dedicated to supplying product with price as the only key differentiator.
This view was echoed by Jones. He described the Australia market as having always been a difficult one to work in, with little to dissuade what he called “garden shed” operators from setting up shop and supplying a restricted range of specialised consumables at an attractively low rate.
“I sometimes wonder if some of the (newcomer) setups in the market are being realistic about the future, or if they are in it just to make a quick buck,” he asked.
Yet despite the hardships experienced by suppliers battling to offer both value and support – the key area that all suppliers agree makes for good ongoing customer loyalty – there are reasons to be cheerful with the state of the market.
“There is increasing demand for PCR consumables, microarrays and some of the lower cost lower technology equipment. Even though it is hard to make money, there is still a good base market,” he said.
Summing up, Quantum Scientific’s Brown noted the consumables scene was a real grand final scenario: tough, demanding, but ultimately rewarding.
“It’s a growing market but there are a lot of players coming in. It’s hard, but it’s one we like to be in,” he said.
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