An Analysis of Marketing Channels of Biological Reagents in China and Canada

BAI Jian, MIAO Lan-ying, LIN Da-yong, WANG Hai-bo, LI Ye

(1.School of Business Administration, Shenyang Pharmaceutical University, Shenyang 110016, China; 2.Liaoning University of Traditional Chinese Medicine, Shenyang 110847, China)

An Analysis of Marketing Channels of Biological Reagents in China and Canada

BAI Jian1,2, MIAO Lan-ying2, LIN Da-yong2, WANG Hai-bo2, LI Ye1

(1.School of Business Administration, Shenyang Pharmaceutical University, Shenyang 110016, China; 2.Liaoning University of Traditional Chinese Medicine, Shenyang 110847, China)

Objective To provided references for the development of marketing channels of biological reagents in China by comparing the marketing channels between China and Canada. Methods Marketing channel length, e-commerce pattern and third-party logistics service, marketing channels in China and Canada were analyzed, and problems of marketing channels of biological reagents in China were discussed. Results and Conclusion Biological reagents enterprises in China can learn the experience from Canada to improve the efficiency of marketing channels of reagents by developing flat sales channel structure, optimizing the supply chains and accelerating e-commerce application.

marketing channel; e-business; enlightenment; marketing channel length

Marketing channels of biological reagents in China are relatively undeveloped, and most of biological reagent enterprises still adopt sales representative pattern to promote productions. Some companies even take the strategy of commission sales to achieve their goal of expanding market share in a short time. However, these marketing models have more disadvantages which can lead to high cost of biological reagent sales. The disadvantages may not only severely limit the potential customers’ demands, but also affect the enterprises’ own development. As one of the largest world’s biological reagent producers and consumers, Canada has formed the marketing channels network system with low cost and high efficiency. In this paper, we analyzed marketing channel of biological reagents in Canada and provided some suggestions on improving China’s marketing channel.

1 Marketing channel of biological reagent in Canada

Marketing channel of biological reagent in Canada works more efficiently than that in China. Normally, biological reagent enterprises provide products to dealers and e-dealers directly, and they do not provide products to the wholesalers or wholesale enterprises in the traditional way. Because the sales of the products only have two steps, the relationship among members is stable. Meanwhile, with modern logistics system and perfect e-commerce platform, the sales channel of biological reagent in Canada runs efficiently and rapidly.

1.1 Fewer reagents sales middlemen and stronger profitability

Biological reagent sales enterprises in Canada have formed a highly concentrated industry pattern after the fierce market competition. Through this competition mechanism, fewer biological reagent sales enterprises can survive and they have larger sales scale and bigger market share. Take the Fisher Scientific Company for example, as one of Canada’s largest biological reagent sales enterprises, it has set up an online marketing system covering the whole country through fierce market competition. The Fisher Scientific Company sales products cover more than 90% of the biological reagents brands including Qiagen, Promega, Invitrogen, Transgen, Rainin, Biohit, Sartorius, Nalgene, Bioind, Biolegend and CST. The Fisher Scientific company accounts for over 30% of the total biological reagents sales in Canada. The company mainly takes the following measures to increase profit[1]: (1) The companycan reduce operating costs by benefiting from the increase of sales scale and coverage; (2) Service quality and market competitiveness can be improved by providing fast and convenient service; (3) By providing competitive price to universities, research institutions, hospitals, and businesses to achieve the sales plan, the company makes itself more competitive and takes up more marketing share. As the largest biological reagent sales agent and e-commerce sales platform in Canada, the Fisher Scientific Company tries its best to meet the demands of customer services and also makes higher profits by setting up electronic order processing, contracts management, inventory management, real-time online technical support services and sorting and distribution services.

1.2 Modern logistics system

According to Canada’s Logistics Association, the definition of logistics system is the process of storing and transporting raw materials or product from the origin to the terminal effectively with low cost to meet customers’demands. Canadian biological reagent companies take technology innovation and highly centralized sales agents as the core, and rely on modern logistics system to make their projects standardized, automated and computerized. The biological reagents are produced and packaged through standardization and automation; products are distributed through the information platform to enter the market and they can be tracked in real time; channel efficiency is greatly improved to meet the demands of customers. In addition, due to high requirements of the biological reagents storage, this effective logistics system can reduce the inventory of reagents and the circulation costs, and shorten the time of transport.

1.3 E-commerce sales model goes first

Canada’s third-party e-commerce platform started at the beginning of 1990s. It can link the upstream and downstream supply chain directly, which plays an important role for the optimization and integration of industry chain. The e-commerce trade in Canada reached about $28.5 billion in 1998, accounting for 1.5% of the annual gross domestic product and accounting for 7.5% of total global e-commerce trade, which ranked in the second place after the United States. But in the coverage of the Internet, infrastructure construction, per capita utilizable time and frequency, Canadian is much higher than the United States[2]. The Canadian national e-commerce sales reached $156 billion in 2003 and pharmaceutical enterprises B2B sales accounted for about 7% of the total e-commerce sales. Due to the smaller population and high internet penetration rate, Canada’s domestic enterprises can take advantage of the e-commerce to run business effectively.

2 Marketing channel of biological reagent in China

Compared with Canada’s marketing channel of biological reagent, China’s marketing channel is complicated with many links. From producers to customers, there are many middlemen in the channel. The sales channels present the shape of “a broad middle part but pointed two ends”. This not only leads to high price of the products, but also reduces the speed of circulation and the efficiency of marketing channel.

2.1 More middlemen and weaker profitability

More middlemen, small scale and weak profitability are the characteristics of China’s biological reagents sales. According to China’s industrial and commercial bureau record, there were more than 20,000 registered biological reagents enterprises in 2009. More than 82% of them were small enterprises with registered capital of less than 1 million yuan. Less than 5% of the enterprises were large with registered capital of 10 million yuan. The annual sales of the small wholesale enterprises were about only a million yuan or even less. At the same time, there was no any enterprise that can play a dominate role in the reagent industry. We can take Biosino Bio-technology and Science Incorporation for example, its biological reagent sales were 73.68 million yuan in 2010. Compared with the total biological reagent sales in the market, it accounted for less than 0.2%. Due to their small sales scale, biological reagent sales enterprises do not have enough economic strength and marketing network system to make the stable profit. Therefore, producers adopt the “mixed model” to make profits and to increase the coverage of products. However, the agency model causes difficulties in management which increases costs. As the result of the complicated agents and chaotic price system, it is hard to develop the brand. This model leads to the complicated biological reagents marketing channel and the increase of cost[3].

2.2 Poor circulation and disorderly market

Although there are more than 20,000 enterprises engaged in biological reagents sales, few biological reagents enterprises have large-scale sales network. Most of the biological reagents enterprises adopt the agent salesmodel. Drug circulation among agents not only consumes a lot of human resources and increases the transportation cycle, but also seriously impacts the logistics resources. It is true that reagents with high technology highly depend on import. This situation causes many problems including small quantity of import with many varieties which makes the delivery circle as long as 3 to 4 weeks. Due to the lack of corresponding management experience, the products can reach consumers after multi-level circulation when they enter market. Many companies still take the traditional warehouse distribution way and the logistics cost is high. According to statistics, the average logistics costs normally account for 10% of total sales costs. By contrast, logistics system is efficient in Canada.

2.3 Traditional sales model dominated and slow development of e-commerce

Traditional sales model is still used by biological reagent enterprises in China, for instance, investment and trade symposium and free lecture training. However these methods are bound to affect the speed and scope of information transmission. Besides, the traditional way cannot match with the e-commerce in both cost and efficiency. Compared with Canada’s e-commerce, China’s e-commerce is still at a beginning stage, and a few enterprises can carry out the online marketing and online ordering[4]. In addition, due to the backwardness of e-commerce in China, many laws and regulations cannot satisfy the market demands.

3 The enlightenment of biological reagents marketing channel in Canada

Based on the analysis of biological reagents marketing channel between Canada and China, we can find that there are still some problems in China’s reagent marketing channel. Therefore, we should make clear the current situation and draw on Canada’s successful experience in biological reagents sales to improve the efficiency of China’s biological reagents marketing channel.

3.1 Changing the structure of marketing channel and improving its efficiency

Biological reagents enterprises in China can establish a flat marketing channel structure to reduce the channel links. In addition, they can shorten the sales channel by widening the distribution channels. As a new sales model, the flat marketing channel structure simplifies the sales process, reduces the cost and makes more profits for enterprises[5].

3.2 Optimizing supply chain

The establishment of the combination e-commerce and logistics models can reduce operating costs and improve transportation efficiency, especially for some import high-end biological reagent products. We can take Beijing International Biological Reagent Logistics Center as the third-party logistics platform which provides “onestop” services, namely, the public platform for enterprises to the government (B2G), enterprises to enterprises (B2B) and business to customers (B2C) so that they can exchange information. The logistics center builds a single window of e-commerce logistics services to satisfy demands of regulator bodies, biological reagents enterprises, transport enterprises and financial services companies. Therefore, the third-party logistics system can improve the efficiency of the marketing channels and provide new options.

3.3 Accelerating e-commerce for biological reagents salesBiological reagent enterprises should have an e-commerce platform to their support services so that they can improve the competitiveness of the industry. The government should enact e-commerce related laws and regulations, and change its attitude towards e-commerce. Besides, government should implement business law, patent law and criminal law respectively in order to protect intellectual property rights in e-commerce, which can play an active role in the national economy.

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Author’s information: BAI Jian, Lecturer. Major research area: Social pharmacy. Tel: 024-31207435, E-mail: baijian988@hotmail.com