Clockwise from left: Frank Resignia, Gary Pollock, Bernie Weiss, Helmut Igel, Mike Hundert, and Don Howard

The optical industry has been singing the blues for the past two years. Business is tough because sales are flat in several areas due to market influences like managed care and consolidation at the retail and vendor levels. Retailers, opticians, optometrists, suppliers, and distributors have all felt the effects of this trend.

At Las Vegas's International Vision Expo West in September, EB discussed this issue with a group of top frame distributors. Our panel included: Don Howard, president, Kenmark Optical; Mike Hundert, president of REM Eyewear; Helmut Igel, vice president of sales at Neostyle; Greg Pollack, vice president of sales and marketing at Logo of the Americas; Frank Rescigna, CEO of Marcolin USA; and Bernie Weiss, CEO of Signature Eyewear.

Here, they share their opinions about what is happening and when they expect things to get better. The consensus: 2000 will be a growth year; however it will also be a tough, catch-up year as the dust settles from all that has transpired in the industry-consolidation, over-expansion, and the increased hold of managed care.

Frank Rescigna, Marcolin USA

Eyecare Business: How tough is business out there in the industry today?

Bernie Weiss: It's fairly level, and I think that's fairly dangerous because we're talking about some of the best economic times we've ever had. And within those great economic times, the industry is not growing itself.

I'm sure I'm not smart enough to know all the reasons why, but I think laser surgery certainly has something to do with it. If patients aren't getting it, they're thinking about it.

I think the price of lenses is also a factor. Most technology today is in lenses, and the prices inhibit people from buying their second pair.

What I hear from independents and chains is that things are pretty level.

Mike Hundert: The statistics show that the industry is very stagnant, and going into the year 2000 I don't see much improvement at all. The challenges will continue to mount. Laser surgery is an immediate and long-term threat. Reading glasses have definitely affected our pairs sold in this business.

What we do about it, of course, is the big question. I don't think there's too much debate that business is stagnant and that the challenges are getting much tougher.

Don Howard, Kenmark Optical

Supply and Demand

EB: As there is more competition and much chain consolidation, there are thus fewer places to put products. But we, as an industry, keep coming out with more products and brands. If we're not growing and we are simultaneously introducing all this new product, where is it going to go? Could this be part of the problem?

Frank Rescigna: All the board space has been pretty well defined, and meanwhile just about everything is being branded-things that should be, as well as things that should not necessarily be branded.

Some people are just putting a name on it to try to get a value on that name. That's made it difficult. Every month you see more brands launched, so somebody's getting hurt or every distributor is getting less and less.

And the hard thing here is that you need a certain amount of product on the boards to tell a story. And when the dispensers are only picking five of this or five of that, they really can't get the impact of what the brand should be or what it should tell the customer.

Another challenge we face is to guard against the cannibalization of our own brands. When the rep comes in, the dispensers say, "Okay, I'm going to buy 20 pieces from this rep." Whether you have 10 brands or five brands, they're still buying the same 20 pieces.

Bernie Weiss, Signature Eyewear

Weiss: You have to be careful what you ask for because you might get it. We declared eyewear a fashion accessory. Well fashion isn't the kind of stuff you leave on the board for a year or two and keep selling the same things.

Fashion is what's new. We've created it. Now we've got to learn to profit from it and deal with it, but we cannot bemoan what happens. I mean all of us make more money when we keep selling the same product over and over again. We get it from the factories at a better rate, and we don't have to deal with obsolescence so much.

We declared eyewear to be a fashion accessory. And that means new product. We've got to create new.

Helmut Igel: One of the challenges now in the industry is that the product is pretty boring in general. I mean, how many brown round frames can you have? So it's different today compared to 10 or 15 years ago when you had a little bit more to a frame.

So, how much duplication do you have? The customers come in and see the same thing on the board. So why should they buy?

Rescigna: The interesting thing is that the buyer also says it's boring. It's round and brown. They say, "I want to see something different, something new." So your design team gets to work on something like that. Then you come to market with it and they say, "It's nice," but then they go right back to round and brown.

Igel: It's too risky.

Mike Hundert, REM Eyewear

Greg Pollack: Last year I spent a remarkable amount of time in the field with sales reps and managers, and I found that there's a tremendous sentiment that business is flat. There's a lot of skepticism. There's a lot of fear. There's a lot of prevailing attitudes out there that are not positive. They feel inundated by sales reps.

I remember walking into an office one day. We had an appointment and they said, 'You are the seventh frame rep that's walked into the office today.'

So there is confusion. Dispensers think, "What brand do I want? Do I need to change pricepoints? Do I need to reposition myself in the market?" They are looking for a lot of input from their reps to help them make those decisions.

The Sales Rep's Role

EB: Is the sales rep more and more important because they're your link to the customer and they have to build the relationship?

Pollack: The rep has to get to know the customer's business. What's working for them? What's selling for them? How's their business?

Rescigna: Many dispensers are almost put into a mode of paralysis by analysis. They see the Internet, multiple brands, managed care...I don't think they know where to go with everything, so we need to educate them.

Managed care is interesting especially because the independents I meet and talk with hate it. It's a necessary evil. But part of the reason their business is down-what the statistics are showing-is that companies are getting rid of their vision benefits. So managed care is actually going away.

Hundert: It's true, the sales rep has to be more than just selling frames. And it's our job as employers of the companies to hire people and train people that have one objective: To help our customers be successful. So what do we do? The first step is to identify what it is about that retailer that will make them more successful. The bottom line is, again, selling more pairs. We have to revisit that. How are we going to sell more pairs?

EB: It's almost as if the vendors are really managing the frame boards as opposed to the independents.

Gary Pollock, Logo of the Americas

Hundert: In some cases, that is absolutely true. And in some cases, that's probably better for the dispensers who aren't understanding the retail business yet. If we stick with the old thoughts of being a medical business, it's going to be a much smaller industry.

The Power of the Internet

EB: There are so many people talking about online ordering. Will the Internet change our industry? And what does it mean for the sales rep?

Rescigna: I would hope that it never takes the place of the sales rep. Like many companies, we have computerized our sales force. We still have to show product physically, even though all of our product is up on the computer. The rep goes in, turns on his laptop, and sees the image on the screen. But you still need to show the real product.

So we still give buyers a couple of choices of colors to look at. We don't give buyers all of the samples because we've been able to cut our sample bags now. But not being able to cut it out 100 percent shows that there is still going to be a need to touch. There is always going to be some need for the one-on-one sales experience.

EB: But the buyer still has the option of ordering online.

pricing issue

Igel: The challenge we see is price. For example, the customer who goes to their doctor's office and then goes home to the Internet and finds the same frame they just tried on in the dispensary for just a little over cost.

EB: Some independents are selling on the Internet. Some of them are selling eyewear packages complete and there's a price war going on. How do you compete with that?

Helmut Igel, NeoStyle

Rescigna: You can still maintain suggested retail on the Internet just as they do in the store. It is very restrictive. Where we see the pressure coming over the Internet is a diversion in the gray market.

It's not our accounts that are doing it. It's people getting product from places like South America, coming in through Miami, and they're paying a fraction of the real cost. Then it shows up on the Internet.

We sell it for $200. It's priced at $70 on the Internet.

Pollack: There are two sides to the issue here. Websites help customers buy products. That's one. The second is that we really have to police what's going on out there.

We have done it already because we've had customers call up and say, 'I had someone walk into my office with this frame, and they asked me to put lenses in it and told me they just paid so many dollars for it.' So we start to track it back. We place an order for an obscure piece that most likely will not be on someone's board, and we track it back to the order process. Turns out it's someone in our industry, a legitimate type of account most likely, who is now setting up a discount website.

So we have to police what's going to happen with our products. That's probably going to be the most sensitive issue we have to deal with. We've done it already. We've closed down accounts. We can control the quality of the distribution and the image of the brand.

USING the Web

EB: What percentage of your clients have the technology, capability, and comfort level for ordering on the Net?

Pollack: We see it a lot.

Don Howard: They almost have to. With all the insurance that they're doing today-all of that has to be electronically submitted.

Igel: VSP has a program where they get a $5 rebate or $5 off if they submit orders electronically. So you see, a lot of them are doing it in the office now.

Howard: That's why we're trying to position our Website to the professionals. Obviously, we may do a few things to spur some interest from consumers, but we have a protected Website allowing our customers to come in.

It's more of a convenience for reordering purposes or to see other sizes and colors. It takes the place of our catalogue. It keeps them off the telephone or fax machine. It's pull-down menus, point and click. And very simple to run through.

They don't have to worry about dialing up a number. They just simply pull up, punch in their number, and then they're ready to place their reorder. It automatically tells them if the product is available. They can do it after-hours. We open early and close very late, but we're not open 24 hours a day, and this gives people the opportunity to simplify their lives.

EB: Do you know how many of your accounts are actually selling online through their own Websites? Weiss: We find it very small.

Howard: It's a small but progressive number.

Rescigna: It's growing. For example, Total Vision in New Jersey. He is an independent doing $16,000 a week in Internet sales. He came out of the box doing $3,000 to $4,000 a week in sunglass sales. And in eight weeks he was up to $16,000 to $20,000 a week.

The interesting thing is that it's mainly coming from new business. It's not coming out of the New York metro area where he's located. It's mainly coming out of the West Coast.

So he's found a completely new channel of business and anybody would love to get $20,000 in sales. And he's doing it consistently. I couldn't believe it when I saw it.

Hundert: On the consumer side, I think the biggest threat certainly is in the sunglass segment. Because that's something that people know and would be more comfortable buying mail order or online.

vendors' online role

EB: Especially with sunglasses, is there a potential that manufacturers will begin to sell direct online?

Hundert: Our job is to make a retailer successful. The consequence of making them successful makes us successful. So if we're going to undermine them, we're cutting off our food chain.

Rescigna: It's critical to realize it's going to happen, and we need to be in front of the parade on this. Years ago I worked for LensCrafters when they pioneered one-hour service and everybody said it's not going to work and look what we have today. I think it's going to happen.

What I think what we need instead of competition is co-opetition. We all need to work together to try to figure out how we can do this.

There's a company out there called EyeWeb, and I think they go straight to the consumer from the optician in a very professional way on the Internet. Once this hits, and I think it's going to, you're going to see a lot more of it and we're going to either be stuck behind or we're going to have to be pro-active now and figure out ways to make it happen.

Optical sales over the web is not out of the question. It's going to happen.

Weiss: We say we're in a fashion business, but still this is not-an eyeglass frame is not a sweater. It has to fit and be professionally fitted, and I don't see how that can happen on the Web.

Rescigna: I just think it can happen. But I agree with you, Mike. If we bypass the customer, we're killed. We live and die by the customer.

I think what we need to do is figure out a way to keep the customer new so that when the he/she comes onto our Website they can identify a list of accounts by zip code and then the sale goes to the dispenser. There's going to be a lot of work on our part to make that happen, but at some point we're going to be forced to do it or react to it. I'd rather be proactive than reactive.