MARKET TRENDS REPORT 2015
BUSINESS TRENDS FOR 2015
Ring in the New Year with insider market intelligence—and a few fresh business strategies for boosting profits
BY ERINN MORGAN
What were your biggest business concerns last year? While 2014’s optical business buzzwords—healthcare reform, customer service, online competition—presented challenges, they also presented opportunity. In addition, the market’s sustained economic upturn has also encouraged the once-hard-to-realize intangible of hope.
“It’s been great to see growth taking place across almost all areas of the industry through 2014,” says Mike Daley, CEO of The Vision Council. “The number of eye exams has also increased significantly this year. It’s encouraging that consumers are making a point to take care of their eyes, and invest in their vision health, and this is something that we expect to continue into next year.”
Get a jump start on your winning strategy for 2015 with our hot list of key eyecare market trends, culled from the Eyecare Business 2014 Annual Market Trends Study—from the industry’s biggest challenge to the fastest-growing product categories.
GROWTH (THAT’S HERE TO STAY)
OPTICAL REVENUES CONTINUE TO GROW AND THAT’S GOOD NEWS FOR EVERYONE. According to the Eyecare Business 2014 Annual Market Trends Study, 53% of eyecare professionals say their sales were up from the first quarter of 2013 to first quarter of 2014. Additionally, this growth is a sustained trend that stretches back to the previous year—65% of ECPs reported that their sales were up from the first quarter of 2012 to first quarter 2013.
the GDP growth rate for the United States in the third quarter of 2014 (up from 2.8% GDP reported in the third quarter of 2013
As such, optimism is also on the rise in the optical arena—more than 62% of ECPs expect revenues to increase in 2015 for eyewear sales and services plus eyecare and exams.
MARKET WISDOM: “Whether you’re looking at frame sales, prescription lenses, or plano sunglasses, we’ve seen faster growth taking place this year over last year—in terms of both dollar sales and also units,” says The Vision Council’s Daley. “We also expect a continued increase in the sale of prescription eyeglasses, and even a slight increase in the sales of over-the-counter readers.
IMPACT OF HEALTHCARE REFORM
TODAY’S BIGGEST CHALLENGE
WHAT IS YOUR MOST PRESSING PRACTICE CONCERN? For others, the challenge presented by healthcare reform trumps all other concerns on ECPs’ minds today. According to the Eyecare Business 2014 Annual Market Trends Study, 49% of eyecare professionals say it is their biggest challenge.
How has healthcare reform affected eyecare professionals? A full 61% say it has decreased their profit margins and 41% say it has increased their costs. At the same time, some experts say that success has been realized with the inclusion of children’s wellness eye exams in most medical plans (though some say that the services provided under these plans are low margin).
number of ECPs who say healthcare reform is the biggest concern relating to their business today
The clear winner in a field of numerous business concerns, healthcare reform was followed by hiring good people (26%) and managed care (26%). The stagnant economy was a concern for 22% of ECPs, down significantly from the 58% concerned about the economy in 2009.
MARKET WISDOM: “Healthcare ‘reform’ represents additional burden on ECPs in the form of paperwork, EMR, and required additional support, all in an environment of eroding margins,” says Alan H. Cleinman, founder and president of Cleinman Performance Partners, a consulting firm for independent optometrists. “ECPs are being driven to specialized care models, which in turn drive improved margins. ECPs can also no longer simply accept all plans and provisions, but must clearly understand the economic contribution of each and every plan that they accept.”
WHERE DO YOU SEE THE MOST GROWTH POTENTIAL IN YOUR BUSINESS? ECPs reported that their biggest areas of projected future growth include primary care opportunities (54%) and eyeglasses (52%), according to the Eyecare Business 2014 Annual Market Trends Study. Interestingly, however, eyecare professionals report that spectacle lenses (30%) and patient exams (27%) currently ring in their highest share of revenue, followed closely by frames (25%) and contact lenses (15%).
the percentage of ECPs who see primary care opportunities as an area of perceived growth
Other notable projected growth areas include contact lenses (40%), regular eye exams (30%), senior care (26%), computer vision syndrome (25%), and sunwear (23%).
MARKET WISDOM: “Through primary and specialty care, O.D.s can focus on services that will separate them from ‘eyeglass retailers’ whose business is largely driven by some form of ‘deal,’” says Cleinman. “Primary care services are highly under-marketed, resulting in the fact that 25% of the populace has never had an eye exam. Opportunity abounds in localized marketing of such services, so long as the offerings are educational in nature and not driven by price.”
|Primary Care Opportunities||54%||73%||44%|
|Regular Eye Exams||30%||41%||25%|
|Computer Vision Syndrome||25%||21%||29%|
ECPs SEE PEDIATRICS AS HAVING SIGNIFICANT GROWTH POTENTIAL. The Eyecare Business 2014 Annual Market Trends Study findings also indicate that you might just want to give some additional priority to your pint-sized customers.
Last year, 8% reported it as a perceived growth area, but this year, a full 20% see it as an area with potential for growth.
Pointing to the fact that ECPs see pediatric care and exams as the true focus for growth—perhaps due to the changes in this arena inspired by health care reform—the study also revealed that ECPs are seeing a decrease in the sales of children’s eyewear. While 23% said it was one of their fastest-growing product categories in 2009, only 11% said the same in 2014.
the percentage of ECPs who see kids’ eyewear as an area of perceived growth
At the same time, ECPs still rank children’s eyewear as their third-most important specialty category in terms of the share of overall frame merchandise mix.
MARKET WISDOM: “The mandate of pediatric vision benefits as part of the essential health benefit package under healthcare reform has been providing a bit of a challenge for ECPs in terms of administrative implementation,” says Daley. “It’s important to remember, though, that this is increasing the number of kids who are able to get an eye exam, and receive the right vision care, who previously may not have had the opportunity. Overall, this is a huge benefit to the industry—increasing the number of patients visiting eyecare providers, buying glasses, etcetera—as much as it’s a great benefit to the children.”
DO YOU SELL EYEWEAR PRODUCTS ONLINE—OR LEAVE THE WEB TO WARBY PARKER AND THE LIKE? A full 24% of independent ECPs have informational websites that also sell products online for their business, according to the Eyecare Business 2014 Annual Market Trends Study.
And while 58% of eyecare professionals say their business’ website is informational only, nearly 20% say they plan to start selling online within the next year. Some ECPs, however, are very sure they won’t join the online retail ranks—25% say they never plan to sell online.
the estimate of U.S. retail e-commerce sales for the third quarter of 2014, an increase of 16% over the third quarter of 2013, according to the U.S. Department of Commerce
Even if you’re not selling online, you may be wondering how to better compete with the growing force of online retail. Over 75% of ECPs say they compete with online-only sellers by demonstrating the services they offer that cannot be duplicated online.
Of those independents that do sell online, a whopping 85% say they sell contact lenses. A far distant second sales category for ECPs selling online is plano sunwear (23%).
When handling requests pertaining to online sales, half of ECPs (50%) charge a fee when a person comes in and asks for their PD measurement. Nearly 30% also have a set fee for adjusting frames bought elsewhere and 25% actually offer a complete package of services for eyewear purchased elsewhere.
MARKET WISDOM: “Look at the macro picture—there’s so much angst about online selling but only about 6% of all retail sales are online in the U.S.—for the optical market, that number is in the 2% to 3% range,” says Jerry Hayes, O.D., founder, chairman, and CEO of Prima Eye Group, a practice management consulting firm for optometrists. “As a part of total sales, it’s small. And, we are seeing that online sales of eyewear are not really growing. What is Warby Parker doing now? They’re moving into brick and mortar.”
PRODUCTS SOLD ONLINE BY ECPs
GETTING SOCIAL IS AN EXCELLENT WAY FOR RETAILERS TO PROMOTE THEIR BUSINESS TODAY—BUT ARE ECPs UTILIZING THIS BOOMING MARKETING PHENOMENON? According to the Eyecare Business 2014 Annual Market Trends Study, nearly half of eyecare professionals say their practice or business has a Facebook page or Twitter account.
number of Internet users who also who use social networking sites (71% use Facebook, 22% use LinkedIn, 21% use Pinterest, 19% use Twitter, and 17% use Instagram), according to Pew Research Center
But only about 30% of ECPs say they post frequently (at least once per week) to their Facebook page or Twitter account—and only 6% say they post every day to their social media channels. Just over 30% say they post occasionally.
MARKET WISDOM: “I feel there is a huge opportunity in blue light filtering lenses and computer vision syndrome, so we are doing Facebook, mass emails, and flyers to promote it,” says Eric White, O.D., owner of Complete Family Vision Care in San Diego. “This has seen huge returns already.”
USE OF SOCIAL MEDIA
A LOVE FOR LENSES
WHAT’S NEW ON THE LENS CATEGORY LANDSCAPE? Premium products continue to rule the roost, with increases being realized in progressive lenses, free-form, AR coatings, and brand name lenses. While ECPs report that they sold fewer pairs of lenses as a percentage of total dispensary sales in 2014 vs. 2013 (60% vs. 65%), dollar volume is on the rise via increased sales of premium lens products, according to the Eyecare Business 2014 Annual Market Trends Study.
number of ECPs who say their patients request certain brands of lenses (an increase from the 61% reported in 2013)
For starters, nearly 70% of ECPs report that their patients are asking for specific brands of lenses (an increase from 61% in 2013). In addition, anti-reflective coating tops the list of best-selling lens treatments/materials, which is no wonder with 94% of ECPs surveyed recommending it to all patients. Over 80% of ECPs also expect to see progressive lens sales increase over the next two years, as well as the sales of free-form lenses (75%), both premium lens products.
MARKET WISDOM: “Through 2014 we have seen optical sales of premium products increase faster than total industry growth,” says The Vision Council’s Daley. “While the movement to premium eyewear products has been present in the frames, plano sunglass, and OTC readers industry, the movement has been far more pronounced for prescription lenses and contact lens markets.”
FREE-FORM SALES GROWTH
STRESSING CUSTOMER SERVICE
FACED WITH CRUNCHED MARGINS AND INCREASING COMPETITION FROM THE E-COMMERCE WORLD, ECPs say they are looking at new ways to become more competitive. An impressive percentage of ECPs (67%) say they are focusing on stressing customer service as a way to fine-tune their competitive edge today, according to the Annual Market Trends Study. Personalized customer service is one way brick-and-mortar retailers are defining themselves—and what they can offer that online retailers cannot.
the amount of money estimated that U.S. brands are losing each year due to poor customer service, according to a NewVoiceMedia study
A large percentage of eyecare professionals (31%) are also looking at retooling their merchandise mix as a way to become more competitive. Other key ways ECPs are overcoming business challenges include employing money- and time-saving techniques (22%), increasing advertising (21%), focusing on quality over quantity (21%), and reducing or retaining staff (20%).
MARKET WISDOM: “The optician needs to be fully educated on the product and be able to communicate clearly what the consumer is buying—and the benefits,” says customer service expert Edward Beiner, founder and CVO of Edward Beiner Purveyor of Fine Eyewear, which has 12 high-end retail locations in Florida. “Secondly, when the product is delivered to the customer, at the bare minimum it should be clean and inside a case with a cleaning cloth. This seems simple doesn’t it? But it’s not always the case.”
STRATEGIES TO OVERCOME BUSINESS CHALLENGES
WHAT DO YOU DO WHEN PATIENTS AND CUSTOMERS START TO RAISE A RED FLAG ON PRODUCT COSTS? A full 40% of ECPs say they move the patient towards lower-cost products, according to the Eyecare Business 2014 Annual Market Trends Study. In addition, nearly 35% choose to move to discounting measures. Another 18% offer patient financing and 7% offer Buy-One-Get-One promotions. Some experts say ECPs may be missing the boat, however, by moving to lower-cost options instead of discussing the features and benefits of the products they’re considering first.
the number of ECPs who say a doctor recommendation most influences consumer purchases today
This thought is even more potent when you consider that only 11% of ECPs say price is the most important influence on consumer purchasing today. In fact, eyecare professionals say that doctor recommendation (39%) is the number-one factor influencing consumer purchases. Other factors influencing consumer purchases include optician/salesperson recommendation (26%), product features (12%), and insurance (7%).
MARKET WISDOM: “The opportunity to do doctor-driven dispensing still exists,” says Dr. Hayes. “So few docs set the stage for doc-driven dispensing by asking patients about their needs and giving them options. Don’t be turned off thinking we are proposing a hard sell. We are simply proposing educating the patients.”
PERCEIVED INFLUENCES ON CONSUMER PURCHASING
THE FUTURE’S SO BRIGHT
A FRAME CATEGORY WITH GROWING PROFIT POTENTIAL TO WATCH IN 2015—PLANO AND PRESCRIPTION SUNGLASSES. In fact, according to the Eyecare Business 2014 Annual Market Trends Study, 40% of ECPs say that Rx sunwear is their fastest-growing product category, up notably from 2010, when it was reported at 33%.
the percentage of ECPs who say prescription sunwear is their fastest-growing category
At the same time, 7% of ECPs said that plano sunwear was their fastest-growing category in 2014. When asked to rank their specialty products in order of share of merchandise mix, ECPs noted that Rx sunwear was their number-one specialty product and plano sunwear was their number-two specialty product in 2014. Other areas of frame growth include computer vision eyewear (20%), kids’ eyewear (11%, down from 23% in 2010), and OTC reading glasses (6%).
MARKET WISDOM: “It’s been great to see growth taking place across almost all areas of the industry through 2014,” says The Vision Council’s Daley. “Moving into 2015, we expect to see the largest increase in sales come from plano sunglasses, keeping in tune with notion that the sunglass market is the optical market most responsive to changes in the economy.”
|Technology (Computer) Vision||-||20%|
|Over Rx Sunwear||2%||6%|