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The total size of the United States' DIY market reaches 280 billion U.S. dollars, with 40,000 retail channels. The two-step distribution channel represents more than 50% of the total sales volume. They distribute through many retail branches. The US's DIY user market has two aspects related to customers: two-step channels and mass market. This has a fundamental significance for studying the structure of the U.S. market. The two-step channel, as a producer, sells the products to independent sellers and then sells them to the local DIY market and customers. The mass market mainly refers to such super markets as Homedeport and Lowes. These two completely different channels have their own characteristics.
In such a market, how do we focus on the current status of DIY customers? How does the market design products for them? Understand what is happening in the market now? According to our last market survey, the United States has 380 million people and 100 million residents own their own homes. The high housing rate in the United States also established the foundation for the US DIY market. Higher income and higher house ownership rate make the entire DIY market very active. Unfortunately, the housing market was strongly affected after the economic crisis in 2007. (Note: Bill Lee mentioned that the crisis occurred in 2007, and we generally believe that the impact of the crisis on China is from 2008.)
The middle class has a high home ownership rate and requires high labor costs. Because in the United States, the cost of hiring someone to do housework for you is very high, so the United States is a paradise for DIY. Ordinary Americans go to the tool shop to buy the products they need. They return home to repair and arrange the houses. After 2007, the dramatic changes in real estate in the United States made the American people more focused on small projects, such as the repair and maintenance of houses. After the crisis, the U.S. industry expects that 3% of newly-built housing will bring about market growth, and the growth that began in 2009 may be more radical, but this is what we want. Of course, the lower ratio of housing loans, the higher unemployment rate, and the lack of optimism about the economic situation will make it less and less costly for customers to update their homes. But in addition, the U.S. market is still a huge growth market. Especially if your product is focused on updating and improving the family, the United States will still be a good market.
Let's take a look at the market channels to understand how to reach consumers.
Two-step distribution. The two-step channel involved in the North American Hardware Retailers Association is also called an independent retail channel. There are 40,000 stores here. As producers, you sell products to wholesalers first, then they sell to independent retailers, and retailers give local customers or markets. It takes a lot of time, patience, and commitment to enter this market.
American wholesalers have different wholesale models:
Cooperative style. Some wholesalers are members of retailers, such as ASTUREVALUE and DORTBEST, which have sales of about $3.5 billion a year. They are not chain stores, but membership forms of cooperation. DORTBEST has more than 4,000 members. These major wholesalers have many branches all over the world and they also have their purchasing centers in China.
Independently owned wholesale channels. OREAL Corporation supports 6,000 retail customers and has $1 billion in sales. Their buying group, like PROR or DA, represents a regional retailer. For example, they have nine regional retailer representatives, with sales of $1.6 billion, as well as representatives from smaller retailers, with annual sales totaling $3 billion.
OGAIN also has many businesses in China. For example, in Tianjin, there are some business arrangements.
U.S. wholesalers have a large number of procurement specialists, and all products in the tool are completed by their own buyers. If you want to sell to the United States, you must be familiar with these buyers. Wholesalers prefer producers to find them instead of just carrying one product for display. They want suppliers to have a full range of product lines and have uniquely designed projects to attract them.
In the United States, there are three main channels for retail sales:
There are 20,000 tool stores with annual sales of US$4.5 billion. The size of the tool shops is very small. The general operating area is between 5,000 square meters and 10,000 square meters, and each transaction is about 60 US dollars. These tool shops mainly focus on house repairs and maintenance.
More than 56,000 family centers. In addition to tool products, there are wood and household appliances. Such family centers are generally large-scale shops.
More than 9,000 wood stores. These products and services focus on wood and tend to provide customers with tool products.
Independent retailers, tool stores, and family centers are all independent operating models that buy goods at their own will. Usually 60%-70% of the products are purchased from major wholesalers, while others are purchased from other special professional distribution agencies. The need for Chinese companies to pay attention is that they will not be purchased directly from manufacturers, and all channels are through wholesalers.
In the United States, a large number of retail shop owners own a shop. There are also many retailers who will buy some stores, and two to three stores that can achieve higher efficiency and profitability. Some retailers even have more than 100 stores, all of which are owned by locals and closely linked to the local community. Some shops even have hundreds of years of history passed down from generation to generation.
Once again, the United States has a very good segmentation of distribution channels. Many business representatives in the United States have to find manufacturers to let others know about your products. Maybe you have to advertise for the products and carry out meticulous marketing to have a lot of selling points. .
This is a very complicated combination. There are many small customers you have to face. Those small opportunities take a lot of time, patience and effort. But over time, you will eventually be rewarded.
Let's take a look at the business growth of Homedeport and Lowes as market players during the past 25-30 years.
The two companies have branches in major cities in the United States and are well-known American national brands. Both companies have roughly the same market strategy and want to work with them, especially if the producers want to get in touch with them directly. This is actually very difficult. Homedeport's requirements are very high. Each store must be provided with the same high quality products and services, and it must work very hard to improve the business, otherwise it cannot cooperate with them. If you establish a cooperative relationship with them, you will have very great benefits and room for growth. Therefore, for Chinese tool companies that wish to enter the US market, it is necessary to establish a complete product line, high-quality service, long-term focus and professionalism, so that you may succeed in the US market.
Analysis: How hardware tools succeed in the US tool market
The U.S. market is an important target market for the export of Chinese tool companies. Understanding the organizational structure of the U.S. market is of great significance to Chinese tool companies.