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Henry Schein and Patterson Idea Proposal (HSIC, PDCO)

Henry Schein and Patterson Idea Proposal (HSIC, PDCO)
 

Can Henry Schein and Patterson defend their high-margin dental equipment maintenance and repair revenue as independent companies and franchises try to disrupt the space?

Report Available: November 20, 2019

 

Blueshift’s ongoing research found the commoditization of the medical and dental supply industry continuing as extensive competition, aggressive pricing, and significant margin pressure builds because of the Amazon effect. To retain their high-margin dental equipment business which includes maintenance and repair service, the big three industry suppliers HSIC, PDCO and Benco Dental Supply Co. have all stressed their full-service/bundled programs which provide supplies, equipment, maintenance and service as a one-stop-shop business model for their customers. At the same time independent companies and franchises specializing in dental equipment maintenance and repair are flourishing and threaten to disrupt this lucrative market segment.

Observations

  1. The maintenance and repair of dental equipment is a $38 billion industry according to one of its leading companies, Dental Fix Rx, a Dental Whale The industry is highly fragmented with a number of mom-and-pop companies, regional companies, a growing franchise network of well-trained service providers, and, of course, service divisions at the big three distributors. These local companies and franchisees promote the unbundling of services from the big three distributors, significant cost savings, faster service, and their local community involvement in order to capture share.
  2. To maintain and grow share in this lucrative market, HSIC reports that it has 180 equipment sales and service centers worldwide that provide repair, installation, and technical services for its health care customers. HSIC has over 2,000 trained technicians providing installation and repair services for dental handpieces, dental and medical small equipment, table top sterilizers, and large dental equipment. PDCO offers customers a range of related service programs focused on whole practice equipment maintenance and repair, and equipment financing which in 2019 generated $179 million in revenue.
  3. The competitive landscape in the equipment maintenance and repair industry is crowded. A simple search produced a listing of over 500 companies in the space. A search for the top franchise programs for dental equipment repair produced a listing of the top five companies including Dental Whale’s Dental Fix RX, Orion Repair, The Dentist’s Choice, Handpiece Express and Mi-Tek Dental Equipment Repair. These companies all profess to be able to provide their customers with significant savings and faster service compared to equipment manufacturers and repair services from the big three distributors.
  4. In a recent interview with Blueshift, an Ohio-based dental practice professional expressed frustration with PDCO’s equipment maintenance and repair services. The practice has a comprehensive maintenance and service agreement for its equipment including chairs, imaging devices, and hand tools. Service was described as slow and expensive. The practice is open to switching to any competitor that could offer faster and less costly service.
  5. Blueshift’s most recent report on the dental supply space on Jan. 9 focused on HSIC’s latest company redesign and the significant competition in the medical and dental consumable supply space. Sources said HSIC’s company makeover emphasizing high-margin products and services would generate growth, but not thwart the significant competitive threat posed by AMZN’s Amazon Business. PDCO and Benco were expected to be most at risk of losing dental consumable supply share.

 

Can HSIC and PDCO defend and grow their share of the dental equipment maintenance and repair market? Are dental practices, DSOs, and GPOs unbundling their maintenance and repair services from the big three suppliers? Are they switching to lower-cost providers? Are lower-cost providers disrupting the dental equipment repair space? Are independent repair companies staffed with certified technicians? Does that matter? How does the quality of maintenance and repair services from the big three distributors to independent service providers? Are independent/franchise dental equipment repair companies taking significant share from the big three distributors? Which of the big three distributors is gaining/losing dental equipment repair share? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Dental practices & dental labs including corporate practices and DSOs, Dental equipment sales & service channel including GPOs, Dental equipment repair and service providers, Private equity dental practice groups, and Industry specialists.  

 

 

Companies: Henry Schein Inc. (HSIC), Patterson Companies Inc. (PDCO)

 

Research Begins: November 4, 2019

 

To see other ideas Blueshift Research is currently working on, please click here.

 

 

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