Monday, May 2, 2016

Let's Bring More Amazon to Veterinary Purchasing

It's no secret that the Vetcove team members are big shoppers.  We use it a lot.  Here's why we think it's so useful:
  1. One website, all products
  2. Quick and easy ordering
  3. Content, Reviews and Q&A
You might be thinking: All three of those points are what Vetcove is trying to achieve for us veterinary hospitals.  It's true.  We're planning to bring a little bit more "Amazon" to veterinary purchasing.  Here's how:

A Unified Catalog: We love that Amazon has such an extensive catalog.  If a product can be purchased in a store, Amazon usually carries it also.  With Vetcove, we want to provide a single source of purchasing for all clinics.  That means all products sold by all distributors or manufacturers, as well as services provided by compounding pharmacies and diagnostic laboratories, can be found in one place.  This includes products and services that previously could only be ordered by phone.  After all, no one wants to search multiple websites and make lots of phone calls just to get their ordering done each week!

Simple Ordering: Amazon is famous for its simple checkout and "One Click" ordering.  Even if Amazon isn't actually shipping the product (ie. "shipped and sold by SellerX"), it's easy to order from multiple sources, manage a single cart, and purchase all at once.  Vetcove strives to simplify the ordering process for veterinary organizations through our lists feature and easy to use cart.  We have more improvements planned to simplify ordering further and save even more time, so stay tuned!

Content, Reviews + Q&A: We generally feel confident ordering new products on Amazon, even if we've never seen or used it before.  This is because we have great rich content like high-resolution photos and videos, lots of reviews from real customers, and questions answered by both customers and the seller.  We can compare this content and community insight across products to find the best product for our needs.  We hope to bring this type of value to veterinary purchasers too!

The way most of us order for our veterinary businesses is light years behind what we're used to in our personal lives.  But it doesn't have to be that way.  We're trying to change all of that with Vetcove, and we appreciate your support as we continue our mission to do just that.

Tuesday, April 12, 2016

Price Shopping Is Worth It, After All

"Price shopping isn't worth it.  Time is money, and spending dollars in employee time isn't worth the cents you save."

I often hear logic from veterinary purchasers.  It's easy to understand why.  Purchasing the best veterinary products at the right prices is no easy task.  We order from distributors,  compounders, diagnostic laboratories, and direct from manufacturers. There are hundreds of thousands of different products available.  

To make matters worse, suppliers in each category all carry different products, and supplier catalogs have so little content and information that doing research is all but impossible.  For those of us looking to optimally supply our clinics and keep costs low, it's a complete scramble.  

Clinics generally fall into two categories: (1) Those that spend a colossal amount of time attempting to compare and purchase intelligently, and (2) Those that pare down sources to minimize ordering time.

When we pare down ordering sources to save time, the questions that remain unanswered include:
  •  Is this the most efficacious product available for a given task in our practice?
  • Am I overpaying for this particular product from my supplier?
  • Is there a cheaper/generic alternative somewhere that can save us money?
So what's the answer?  Is price comparison worth it in 2016?  There actually is a correct answer to this question.  

The answer is an unequivocal YES.  Here's why:
  • Price comparison takes less time than it used to.  Vetcove lets you search one unified catalog, so the amount of time it takes to price shop is virtually zero.  This alone makes price comparison worth it, even if the dollar value of the savings is small.  The truth is though, the dollar value isn't small.
  • Prices differ more than clinics think.  It might not matter where you buy your mandated fixed price products.  But for everything else, prices vary tremendously, by as much as 50% for manufactured products, and up to 200% (that's 3x the price) for generics.  Even though suppliers charge different clinics different prices for a given product, the price differentials persist.  Most importantly, the price differentials rarely favor just one supplier, even for clinics that believe they're getting "best pricing" from one source due to rep promise or a group deal. 
  • You'll get better and cheaper products as a result.  Due to various agreements, some cheaper products and generics are not available through some suppliers.  This goes for new products that are more efficacious, but aren't sold by a given supplier to preserve margins with an existing product's manufacturer.  By comparison shopping, you'll be able to discover alternative products that may be cheaper and/or better that what you're currently using.
Maybe the logic that price comparison isn't worth it used to make sense.  For some clinics, it could have been a futile exercise.  But not anymore.  Today, saying it's not worth it demonstrates a purchaser is either lazy or uninformed.  We've talked to and observed over a thousand clinics, and we have yet to come across a single one that we believe wouldn't benefit from price comparison.  

Now, if you're making the conscious decision to be completely loyal to a given supplier because of the value they add to your clinic, that's a different story.  We personally have a hard time paying more for the same products, but everyone is different.

Friday, February 19, 2016

Do Distributors Carry All the Same Products?

We all know that pricing differs between distributors, but what about the breadth of products they carry?  A common misconception among clinics is that their distributors carry all of the same products. Most of us do not realize how different these catalogs really are.

Vetcove's catalog lists more than 165,000 unique Products (SKUs).  Once we exclude compounded products from suppliers like Wedgewood from this total, we're left with 98,333 manufactured products.  This is actually an under-representation of the total, since many generic products have as many as 20 variations, which we count as only one product.  By comparison, the largest distributor that can be interfaced with using Vetcove has just over 34,000 products in their system.  Most other suppliers, including suppliers that serve the entire nation, carry many fewer products.

Here are some interesting facts about Vetcove's 98,333 SKUs:
  • ~ 80,635 (82%) are unique to just one distributor.
  • ~ 17,700 (18%) are carried by two or more distributors.
  • < 6,200 (6%) are carried by four or more distributors.
  • < 200 (0.2%) are carried by eight distributors.

These facts do not include tens of thousands of compounded products, which are all made-to-order and unique to just one supplier, or generic products we've grouped into just one item.  It's easy to see that having multiple distributors gives us much greater access to products, and has become necessary given how much distributors vary.  Below is the full data table for your information:

Of 98,333 unique products, how many are carried by X distributors?
1 Distributor  80,635 82%
2 Distributors  7,743 7.9%
3 Distributors  3,767 3.8%
4 Distributors  2,817 2.9%
5 Distributors  1,760 1.8%
6 Distributors  917 0.9%
7 Distributors  498 0.5%
8 Distributors  196 0.2%

Friday, January 29, 2016

How Many Distributors Should a Clinic Use?

The many hundreds of clinics that actively use Vetcove regularly order from, on average, more than five separate distributors.  Does having these extra sources really make a tangible difference in terms of cutting costs and increasing clinic profitability?  What we've found in our time operating Vetcove and talking to clinics, is that it absolutely does---and in a big way.  Here's why:

1.) Better Product Access: While all distributors carry a few of the most popular big brands, most products on Vetcove (>80%) are only available through one distributor.  For each distributor that you add, you'll have access to more products.  Some of these products are a better fit for your clinic and your patients than what is available through your primary distributor---and some are cheaper, too.

2.) More Generic Options: Each distributor carries a suite of generics, but they vary widely as to which they stock.  The price differences for generic drugs across distributors is far greater than branded products.  Vetcove clinics have told us that they have cut costs more than 70% on certain popular generics by finding the right source.  We've found this to be true in our own clinic too.  Given similar sale prices to customers, profits increase manyfold when dispensing these drugs.  In our view, generic is generic, so why pay more?

3.) Better Average Pricing: Except for mandated fixed-price products, prices vary across distributors, and even within a distributor from one clinic to the next.  You might be surprised to find that a distributor you don't frequently use stocks a product you order a lot of for much less.  Over time, and over many products, the savings to your practice add up.  No distributor is the cheapest for everything, even if you're a part of a buying group or are told you're getting "best tier pricing" from your distribution rep.

4.) Better Leverage: Having access to many suppliers arms a clinic with knowledge about what prices are "fair," and which aren't.  This allows a clinic to make smarter buying decisions, and to potentially lower average prices at their primary distributors.  When your rep knows you're price-sensitive and will look elsewhere when a price is too high, they'll do their best to keep their prices low to earn your business.

So, how many distributors should a clinic really use?  We believe, as many as you possibly can.  In a world before Vetcove existed, having too many sources would add time and frustration to the ordering process.  Having too many used to not make much sense, since the time lost would eclipse some of the cost savings.  With Vetcove, you get the benefit of all four of the above advantages without the added cost or time that used to be associated with using many sources.  For this reason, it now makes sense to spread orders around to many different distributors.

Thursday, January 7, 2016

Should I Use Vetcove as Leverage with my Suppliers?

We at Vetcove firmly believe in pricing transparency.  We think clinics should be able to effortlessly see all options available to them in a user-friendly way.  What Vetcove does is essentially take information clinics already have access to and make it make it quicker and easier to digest.  Since this information is challenging and time-consuming to collect and compare without Vetcove, we understand that having it neatly organized for the first time can have an impact on ordering decisions.  Many clinics call or email us to tell us that they've changed some of their ordering behaviors in ways that help the hospital, and we're glad to hear it.

Sometimes, products a clinic has been ordering can be obtained more cost-effectively from another source.  Clinics may become aware of this on Vetcove, during personal research, or from a competing supplier's representative.  In any of these cases, it is tempting to confront the original supplier's representative with this information as leverage to obtain better prices.  We completely understand.

However, we want you to know that obtaining leverage by showing Vetcove to your distribution representatives is not really the reason we created it.  It is your right, as a clinic, to obtain the best prices you can.  It's smart business to reduce the cost of your inventory when you're able.  However, here are some important tidbits to keep in mind:

When your distributor rep tells you that your prices are "rock bottom," are they being honest about that?  Probably not.  We resent that too.  However, your reps show up at your clinic, attempt to provide value-added service, and work hard for your business in order to keep their jobs and earn their commissions.  As your prices drop, their commissions plummet.  A five percent drop in your price could drop a reps' commission on that item to pennies. This fact is important to remember when you're deciding to contact your rep over a smell discrepancy.

From our perspective, if you decide to use another supplier's price as leverage, we ask that you not mention Vetcove, or show the competing price to your rep using Vetcove.  Why you ask?  Because it inadvertently positions Vetcove as the enemy of the representative that hurts his or her margins.  This, in turn, hurts our relationships and position with the representative's parent company.

Instead, we ask that you use the competing supplier's website when attempting to gain leverage.  This removes Vetcove from the discussion entirely.  The truth is that even though Vetcove was used to discover the lower price, or simply to demonstrate the lower price, that lower price existed and was accessible without Vetcove.  Vetcove is never the reason a representative loses a sale. Rather, it is the fact that the supplier's price is sufficiently higher than another source to eclipse any intangible value or convenience brought by them.

We certainly aren't going to tell clinics to stop working hard to obtain better prices.  We built Vetcove in part to help our fellow clinics do just that.  It is just important to keep the reps' and Vetcove's perspective in mind when doing so.  We are not shy about our mission to help clinics, but we also respect distributors' right to compete for your business when done in an ethical way.

Thursday, March 5, 2015

Rational, or Emotional? Choosing Our Primary Distributor

"We love our rep Sharon from DistributorX.  She brings us bagels on Mondays."

In our research we've talked with well over one hundred clinics about their ordering behaviors.  Most clinics do, in fact, have one primary distributor that's used for the day-to-day routine orders.  How do they choose which distributor they use?

The above quotation was one response by an office manager named Geri.  Geri is the office manager at a New Jersey small animal clinic we spoke with this winter.  It may sound silly to some, but we hear this type of sentiment all the time.  We office managers, technicians and veterinarians are only human.  Animal health suppliers quite intentionally provide us representatives that appeal to our humanity to build relationships and loyalty.

Distributors, after all, are offering an increasingly commoditized product.  They all offer online and phone ordering any time of day.  They all carry versions of the most popular products we use every week.  When we order, the box shows up at our door just the same—albeit with a sticker with one name on it or another.

For distributors, as much as 80% of potential profit margin is consumed by sales representative compensation, which is their primary tool to earn your loyalty.  And it has worked incredibly well for over a century!

When I talked to Geri this winter, and bagels were mentioned as the primary reason for her choice, I wasn't the least bit surprised.  I did wonder, however, how Geri would feel if she knew the likely truth of the situation.  Bagels cost about $9 per dozen.  If Geri knew that her clinic was overpaying by several hundred dollars each week by not comparing prices, would she still feel the same way about her rep Sharon from DistributorX?

But who could blame the rep Sharon?  She's playing the game correctly.  Bagels!  What a wonderful idea.  Just showing up each week is more than most of us get, but bagels are really the icing on the cake.  It's smart business on Sharon's part.

What should you be looking for then?  We suggest suppliers that not only offer fair pricing, but are also able to add value to your practice.  They're able to provide sound advice, business smarts, and relevant information that helps your clinic make good decisions.  Obtaining fair pricing is important, but the true service your rep provides should certainly not be forgotten.

How did you choose your primary distributor?  Was it rational or emotional?

Thursday, February 13, 2014

The ROI of Equipment Purchasing

You're seeing your very first patient of the day--a Golden Retriever named Molly.  Molly is currently pregnant, and it's time for a checkup to see how things are progressing.  You reach for your trusty handheld ultrasound that has been a staple of diagnostic and reproductive applications for the last five years, knowing full well that the images are not as clear as they used to be.  The transducer may be failing, or perhaps the daily wear and tear has just taken its toll on the unit.  You've seen the pamphlets of the newest units--they provide higher resolution, are more portable, and provide improved diagnoses that help you do your job better.  But at $15,000 or more for a new unit, is it really worth it?  Even if your old unit is still functioning, upgrading is often still a worthwhile investment.  Here's why:

To determine whether the value of an equipment upgrade, one must first determine the amount of the investment.  If the new unit costs $15,000, and units of similar age and condition as your are selling on VetCove for $3,500, then the net cost of the new unit will be $11,500.

How does a veterinarian cover or exceed the $11,500 upgrade cost?  There are many ways:

1.) Saved Time: Time is money.  As a trained and certified veterinarian, your time is worth a lot.  If your old equipment is costing you time--even if it's just a minute every time you use it--it may be time to replace it.  A better ultrasound unit will be equipped with higher resolution imaging, reduced input and software lag,  a speedier user interface, and increased portability.  If you use your ultrasound three times a day, and your old ultrasound is costing you even one minute with each use, that amounts to 18 hours of time at the end of the year.  As a Veterinarian your time is valued at several hundred dollars per hour (let's say $350 for this exercise).  That's $6,300 in time savings each year, which would more than eclipse the upgrade cost of the machine over the useful life of the new unit.

2.) Reduced Maintenance Costs: An older machine may be out of warranty or have an expired service contract.  As such, repairs or maintenance to the machine will be money out of pocket for you.  New or slightly used machines often break far less frequently, and have reduced or zero maintenance costs under the terms of the warranty or service contract. For a machine like an ultrasound, this could amount to as much as $1,000 per year on average when continuing to use an old machine.

3.) Reduced Downtime: We've already established that time is money.  If your machine does require maintenance, that means downtime for you and your business.  You may not be able to serve your patients properly, or you may have to push back appointments, potentially upsetting clients.  The losses in client revenue and reduced client satisfaction add up to real dollars--a single lost client, or a few days of downtime, could each cost your business thousands.

4.) Improved Outcomes: Improved outcomes may come in many forms, such as more accurate diagnoses, or improved client satisfaction arising from the new technology.  In either case, better outcomes not only mean you're doing your job better, but also means that clients are more likely to be retained, and that clients are more likely to tell their friends and neighbors to use you as their veterinarian.  In a world where customers have instant access to information on the web and through social media, providing top-quality outcomes and service are more crucial than ever, and could land you ten times more business than the cost of a new piece of equipment over the long haul.

5.) Tax Savings: Capital investments are good for the economy, and also for your bottom line.  When you buy a new piece of equipment, you incur additional depreciation expense on your business income statement for the useful life of your new device.  This depreciation expense reduces the amount of taxable income you have at the end of the year, thus reducing the total cost of the equipment purchase.  To make things even better, in many cases selling your old equipment via VetCove is tax free.

Alex is author of Strategic Digital Marketing (2014) and serves as Chief Business Officer for VetCove.

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