Startup LabFriend delivering scientific equipment at half price
Sydney-based entrepreneur Karl Wyzenbeek recognised a need for top class scientific equipment at competitive prices, after realising how many labs are having to compromise on the quality of equipment they purchase in order to stay within budgets.
Launched in August last year, ecommerce startup LabFriend, is helping the scientific community of Australia maximise the value of their taxpayer-funded research grants. The site offers over 360 of the world’s leading brands and more than 60,000 scientific instruments at significantly reduced prices – up to 50 percent less than traditional purchasing channels. All products are sourced directly from the manufacturers; so all purchases are covered by the manufacturer’s warranty.
LabFriend is able to offer scientific equipment at competitive prices because they operate online. Wyzenbeek says being in the online space allows them to reduce the costs associated with distributing equipment, and these savings are then passed onto research labs.
“We know that scientists in Australia pay more for scientific equipment than scientists trying to achieve the same breakthroughs in countries that are geographically closer to where the products are manufactured – like the US or Europe. Our prices are on par with these overseas markets,” says Wyzenbeek.
“Because LabFriend connects directly to the manufacturer our prices are always up to date, and new products are always being added automatically. Our customers don’t need to go through the hassle of registering to see prices or waiting around to receive quotes. Formal quotes are easily produced online.”
Whereas competitors offer to respond to customer queries within 48 hours, the LabFriend team have live conversations with them online through a feature called LifeChat.
Since launching the site, LabFriend has transacted well over $150,000 to Australian scientists – and this is without any offline marketing. Wyzenbeek estimates that researchers have saved at least $100,000 worth of taxpayer-funded grant money by purchasing through LabFriend.
Wyzenbeek who has a background in the sales and distribution of scientific equipment, realised how problematic traditional business models were. He says that in his previous role, he “encountered scientists who had been burnt trying to import equipment themselves to save money.”
“They didn’t want to spend the extra cash to buy the equipment locally, when they knew it was miles cheaper to buy overseas. But when they brought the equipment in themselves, they found out importing scientific equipment into Australia is actually quite challenging.”
“Plus if the equipment broke or arrived faulty they had no support network. So it would actually cost them more.”
From this knowledge, he was inspired to pursue a better business model. The idea behind LabFriend was to put all the best brands and information in one place, and develop a system that connected the website to these brands so that it would automatically stay up to date.
He then focused on streamlining the logistics and keeping company costs low to ensure prices were globally competitive, as opposed to just competitive in Australia.
“No other Australian owned distributor has our range of product or brands. By selling online all of the important information is right in front of the customer. We now have customers all around contacting an Australian company because we are so well priced, and we find this mind-boggling!” says Wyzenbeek.
The business has been entirely bootstrapped to date. Wyzenbeek recognises that raising investment capital could lead to rapid growth, but feels that it’s too early to have investors on board.
“[B]ecause we are still in the early phases of development we are wary of relinquishing too much control over the running of the business for the sake of investment. We have made sales since day one,” says Wyzenbeek.
Prior to the launch of LabFriend, Wyzenbeek spent 12 months developing relationships with suppliers and working on the backend technology for the website. He admits that design wasn’t their first priority.
“Making the site work has been the number one priority. We did look at outsourcing web development overseas but the results were not good and managing them was very hard, so we worked with a company based out of Melbourne to build the website and develop the technology to link with our suppliers,” says Wyzenbeek.
Their primary market is the Australian scientific community and industry bodies who monitor and manage manufacturing – including CSIRO, Universities, agribusinesses, medical facilities, pharmaceuticals and biotech labs, and other private industry research organisations.
However, Wyzenbeek says they have customers who are outside this market – for instance mums and dads who want to use test tubes as vases, ultrasonic cleaners for jewellery, or use their specialty light trolleys for the home. “We’ve uncovered some amazing customers,” he says.
LabFriend’s business model is lean and similar to that of other ecommerce stores. They make a small margin on the sale of each product.
“[W]hereas traditional scientific distribution business require 30 to 50 percent gross margins to survive, our lean business model allows us to operate off 5 to 15 percent gross margins,” says Wyzenbeek.
He adds that they’ve been investing all revenue into marketing, and will have catalogues and quarterly specials being distributed to their customers in the upcoming months.
Successes and challenges
Wyzenbeek’s proudest moment was seeing the first sale come through just a day after the launch.
“[W]e thought it would take a few weeks, maybe even a month, to make a sale,” he says.
Last month, they moved into their first small corporate office, and have increased sales steadily each month.
“We are still new, still learning and still working on our business model. But we are very focused on the fact that by using our web technology, some Australian scientists have already saved thousands of dollars whilst sill making sure they have the best equipment in their lab. This has been very rewarding,” says Wyzenbeek.
Like other startups, there were challenges to overcome. Once they launched the website and established agreements with suppliers, negotiating their way through Australian import regulations and minimising inbound shipping fees was a big challenge.
“We have had a number of shipments arrive where we unexpectedly lost money due to poor packaging, or we got the dimensions wrong, or incurred a miscellaneous duty,” says Wyzenbeek.
“These instances wipe away the profit from the sales as our margins are so small. When the manufacturing factories shut down over Christmas, we still had customers waiting for products but nobody shipping. It was very stressful! With 60,000 products we are still working out ways to optimise our logistics. I think this will be a long-running challenge.”
The LabFriend team is currently planning their first major revision of the website, which will go live in March. Now that they’ve ticked two priorities off the list, they’ll be focusing on design.
“This new design will bring lots of great features to our customers such as product videos and chat forums. It will also be optimised for the iPhone and iPad,” says Wyzenbeek.
“Having the site run so long in its Beta design has meant that we have collated a lot of customers feedback and are going to make a big jump to the next level of what we need to satisfy our customers.”
They also plan on having LabFriend live in New Zealand before the end of the year, and will be looking into expanding into Asian markets.
For more information, visit www.labfriend.com.au.