November 2017
Volume 8, Issue 11

Buying Trends: What, Why, and How

Leading distribution specialists discuss purchasing patterns in dental technology

By Cathy Paulhamus

Dental products do not exist in a vacuum—they are part of a complex system of industry trends influenced by innovation, economic factors, and dentist and patient demographics. As part of the annual Product iNavigator buyer’s guide, Inside Dental Technology sought insights into industry trends from leading companies specializing in distribution. These companies are by nature forward-thinking on the needs of laboratories, offering an experienced perspective on products: evaluating what is needed and available, and how to best provide these components to an industry in transition.

In terms of spending, the insiders interviewed here agree that the dental technology industry is on the upswing. Benco Dental sees growth between 2 to 3% for the digital industry, with much of the increase related to dental implants, according to Paul Jackson, Benco’s Director of Merchandising.

“In a 2016 survey of dentists published by Incisal Edge, the most experienced practitioners offered their thoughts on aspects of the profession in which they aspire to become more proficient,” Jackson says. “On their ‘must’ lists were ‘implant placement using predictable guided surgery,’ and ‘full-mouth rehabilitation cases utilizing new technology.’” 

Zahn Dental/Henry Schein believes the factors used to analyze industry trends demonstrate that laboratory technology and associated digital materials—which have experienced steady growth for the past 3 to 4 years—will continue to increase for the next 7 to 10 years. 

“We are excited to see what comes next,” says Kenneth Haldeman, Executive Director of Business Initiatives at Zahn Dental/Henry Schein. “The innovation within this business, along with growing patient acceptance of technology for dental care, will continue to impact how laboratory applications and products develop.”

For example, new-to-market technology products generally improve and accelerate processes, with less expensive onboarding and operating costs, and ultimately result in better ways of producing deliverable products. 

What's Selling and How

Purchasing behaviors are also evolving in tandem. According to Terry Barrett, Vice President, Marketing and Supply Chain at Benco, as of August, benco.com showed an increase in sales of more than 13% over the prior year.

“Ease of use and the ability for customers to place an order from anywhere make Painless® Mobile—the latest in a stream of innovations developed by Benco—a favorite among dental practices,” Barrett says. “Among popular products ordered online at Benco are consumables and small equipment. Customers can even request quotes for large equipment online.”

For large equipment, Jackson says buyers generally prefer purchasing to leasing due to Section 179 of the IRS tax code, which allows for immediate deduction of up to $510,000 in capital equipment each year.

“Laboratories prefer taking the deduction all at once, rather than over the life of the lease,” Jackson says. 

“Mills, 3D printers, and, to a smaller extent, furnaces have the highest growth in dental laboratory sales,” Jackson adds. “Sales of pucks and resin for 3D printers have shown growth, as well, to support the equipment investment.” However, the increase doesn’t stop with these items. According to Haldeman, laboratories are still spending heavily on core products.

“Small equipment, core merchandise, and teeth are the major part of their spend, in addition to outsourcing products such as bars and custom abutments,” Haldeman says. “Digital equipment and consumables are quickly growing and will likely become the predominant share of the laboratory spend.”

More than 75% of digital equipment purchases are financed through the Zahn Dental/Henry Schein, Haldeman says. “Through our financing division, we can quickly finalize the transaction, which is important because once customers make the decision, they are ready now, and this gets the new technology in their labs more quickly,” he adds.

While Henry Schein Dental has seen a rise in online sales, the Zahn Laboratory division has seen slower growth rate in sales occurring online. 

“Traditional advantages, such as convenience, time, and ability to shop price do not really carry over into the laboratory business,” Haldeman says, “probably because the laboratory work environment is not one with easy access to online computers.”

In addition, Haldeman cites the relationship that the sales team builds with customers.

“Because the team always brings additional value to the conversation, technicians often want to interact personally,” he says. “They usually have questions about what they’re doing, how they’re doing it, and if there’s another way.” 

Benco also stresses the personal touch. “We are family owned and operated, like most of the laboratories we serve,” Jackson says. “Our team includes more than 350 service technicians nationwide and a specially trained CAD/CAM help desk.” 

With the industry in transition, customer support teams that can knowledgably answer questions and ensure that customers are getting the right product become increasingly critical.

“Our technical team can assist customers through complex cases and technical support issues," Haldeman says. “At the same time, our on-time delivery helps the entire industry—both small laboratories and large."

Q&A with ETI Digital Technology & Esthetic Professionals

For further insight into purchasing trends in the dental laboratory industry, IDT spoke to ETI Digital Technology CAD/CAM Sales and Marketing Manager Valerie Poon, and Esthetic Professionals Director of Business Development
Chad J. Crispin.

Inside Dental Technology: What percentage upswing/downswing have you observed for the industry in terms of spending for 2017? Is the market growing or contracting?

ETI: Based on my observations, approximately 70% of the market is on an upswing, and about 30% is on a downswing. The market is definitely growing rather than contracting. Those numbers generally correlate to early adopters vs those who have been reluctant to incorporate digital technology into their laboratories; those with in-house CAD/CAM systems have grown, while the smaller segment of laboratories that has not embraced technology has lost business because competitors are able to turn around cases faster and at a higher quality.

EP: We have definitely seen an upswing in dental technology in 2017. The  growth of this segment of the industry has been almost 10% over last year. We have also seen a fairly dominant shift of dental practices purchasing the technology that was traditionally purchased by laboratories, which has increased our sales. The trend of laboratories, usually small, partnering with dentists and group practices to purchase the equipment and form joint partnerships is also growing.

IDT: Where are laboratories spending most of their money—high-tech equipment, certain consumables, or elsewhere?  

EP: The laboratory segment has been involved with technology for a while.  Laboratories are quite astute regarding the subject of technology and which manufacturers to align themselves with, and have already learned from their mistakes. This is because laboratories were predominantly the early adopters of this technology and are consistently trying new materials and techniques. That being said, most of them are looking at purchasing second or third pieces of technology to add to their existing equipment. Those that purchased quality equipment that has lasted are adding to their laboratories. The laboratories that invested in less robust equipment because of price point are finding that these machines have run their course; they are forced to replace these machines and start over with new ones. We are also seeing a large uptick in the new zirconia materials, along with disilicate replacements.

ETI: High-tech equipment has accounted for most of our sales.

IDT: Are online sales increasing/decreasing for 2017, and by what percentage over previous years? What are the advantages and disadvantages of purchasing online, and what types of products are being purchased most that way?

EP: Online sales of dental equipment will be a tough sell because of the nature, cost, and information required to sell these very expensive and complicated pieces of technology. CAD/CAM consumable sales are of a similar nature. Online sales of CAD/CAM materials have grown, but not to the extent we anticipated. These materials are constantly changing. This requires constant education of the sales force to assist the purchaser with material selections. Small to medium-size distributors have this ability to be nimble enough to keep up with the consistently changing market.

IDT: Are you seeing an increase in the formation of buying groups purchasing on economy of scale, and how is that impacting your business?

ETI: Most of our customers are individual laboratories or single dentist’s offices.

EP: Buying groups are an effective tool to keep cost down for both laboratories and dental clinics. These trends of economy of scale have impacted almost every industry. The number of buying groups has increased substantially in recent years. Discounts for volume customers has always been part of the distribution companies’ business; this is just another new segment of the dental industry that will need to be addressed.

IDT: What is the ratio of buying outright vs financing or leasing, and what are the implications of the different payment options?

EP: The majority of our customers are going through some sort of financial institution for funding. We have lenders for all kinds of situations that provide many incentives and payment options for funding.

ETI: Through September 2017, approximately 85% of our customers had used some form of financing, while only about 15% paid outright. The advantage to paying outright is that the customers do not accumulate debt for their business credit, and that they own the equipment immediately. Some advantages to financing or leasing our equipment include building business credit, more flexibility with cash-flow, tax write-off, and more flexibility when choosing payment terms to fit your budget. Some financing companies even offer deferred payments of $99 per month for up to 6 months, with very competitive rates. 

IDT: What purchasing benefits do you offer for small laboratories?

ETI: We customize the most economical CAD/CAM system that best fits the needs of smaller laboratories. Support and customer service drive our business model. We are committed to our customers’ success and ensuring that their production is not interrupted.

EP: We offer a partnership with these laboratories. Because most of these laboratories do not have multiple machines, large staffing, or flexibility, we can offer various services such as backup milling/sintering if equipment fails; real-time support; design services; CAD/CAM residency programs; and educational workshops. We offer real-life experience because we use the equipment we sell every day.

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