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Life Science Consumables Survey Reveals Customers More Concerned With Quality Than Cost

NEW YORK (GenomeWeb) – A proprietary survey on laboratory consumables conducted by Bank of America Merrill Lynch in conjunction with GenomeWeb showed that labs are primarily concerned with the quality of their supplies, and that most of them have one preferred supplier despite the increasing prevalence of online catalogs that would seem to favor a more fragmented market.

The survey — which included about 150 respondents in academia, the government, the pharmaceutical and biotech industries, contract research organizations, and hospitals — found that 59 percent of respondents have a favorite supplier of lab consumables.

Specifically, the analysis showcased the strengths of traditional suppliers such as Thermo Fisher Scientific over new entrants in the market such as Amazon and eBay, Bank of America analyst Derik de Bruin noted. As consumers are primarily concerned with a supplier's reputation and track record even above pricing, they tend to stick with established vendors.

"Notably, this confirms our view that even for the most commoditized and basic consumables such as plastic-ware and pipettes, researchers value the peace of mind of knowing their supplies are properly made (ie, correct materials, sterilized, DNAase/RNAase free, etc.), validated/calibrated, and consistent from lot-to-lot, over any modest savings they might realize by pursuing the lowest-cost supplier," de Bruin wrote.

And although the increasing prevalence of online catalogs would seem to favor a more fragmented market where labs use multiple vendors in order to get the best price, the "one-stop-shop mentality," de Bruin said, would favor a company like Thermo Fisher, given its more than 800,000 individual SKUs, with the majority being lab consumables.

Customers were also concerned with the supply chains of non-traditional vendors, citing it as the primary reason to stay away from them completely. In particular, survey respondents were concerned with whether these vendors had the capacity to properly handle reagents in the correct temperatures or levels of cleanliness.

"This is consistent with [the finding] which indicates that reputation and track record of the supplier (and thus ability to ensure product quality and satisfy proper manufacturing and shipping conditions) is the primary selection criteria when choosing consumable suppliers," de Bruin wrote. "We believe the complex supply chain requirements for many lab consumables are not easy to duplicate for non-traditional suppliers and represent a key roadblock for new competitors."

In fact, while non-traditional vendors have tried to make some inroads into the consumables market, the survey indicated that they continue to have a minimal presence. Specifically, only about 5 percent of respondents said they currently buy their supplies from non-traditional vendors up to 75 percent of the time, while 60 percent said they never use these suppliers at all.

Overall, the analysis indicated that companies like Thermo Fisher are well-positioned in the consumables market and face very little competition from novel entrants such as Amazon. "We came away more positive on the strengths of Thermo Fisher's diversified product portfolio and global distribution platform, as well as the high barriers of entry into the lab supply market," de Bruin said, maintaining the company's Buy rating. "We believe the company is well-positioned within its key markets and do not see any meaningful changes in the competitive landscape in the near future from unconventional players."

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