Staying Afloat
A stormy economy post-September 11 has buffeted businesses throughout the country. How buoyant is optical? The answer may surprise you
By Erinn Morgan
Illustrations by Paul Anderson

It is the million dollar question: In today's sea of economic uncertainty, just how well is optical faring? The general downturn in the country's economy first reared its ugly head during the opening quarter of 2001, when the signs of a slowdown became clear. The tragic events of September 11 cemented the immediate future of the economy, which some experts speculate would have recovered quickly from the original stagnation save for the terrorist attacks.

As fearful consumers indicated a plummeting confidence and unemployment rates rose to hover near six percent, retail sales quickly spiraled downward. In August 2001, overall retail sales for the U.S. reported by the National Retail Federation, were $276.3 million; this number fell to $244.9 million in September, but rebounded to $275.4 million in October.

While the harshest effects on the economy were felt immediately in the days and weeks following September 11, the recovery has been a slow and painful process. Adding fuel to the fire, the stock market has limped along, at best, keeping investors on the edge of their seats, and big-company financial scandals have marred the economic landscape.

The optical industry is no stranger to this fallout. For a few days following September 11, retail sales came to a standstill--patient appointments were cancelled, and business as usual was suspended. Still, many report that business bounced back by November 2001 and continued to get better in the following months. While some optical retailers and eyecare professionals say it has been a road peppered with difficulties, a surprising number report solid sales generated in 2001 through 2002 and, in some cases, growth.

t is the million dollar question: In today's sea of economic uncertainty, just how well is optical faring? The general downturn in the country's economy first reared its ugly head during the opening quarter of 2001, when the signs of a slowdown became clear. The tragic events of September 11 cemented the immediate future of the economy, which some experts speculate would have recovered quickly from the original stagnation save for the terrorist attacks.

As fearful consumers indicated a plummeting confidence and unemployment rates rose to hover near six percent, retail sales quickly spiraled downward. In August 2001, overall retail sales for the U.S. reported by the National Retail Federation, were $276.3 million; this number fell to $244.9 million in September, but rebounded to $275.4 million in October.

While the harshest effects on the economy were felt immediately in the days and weeks following September 11, the recovery has been a slow and painful process. Adding fuel to the fire, the stock market has limped along, at best, keeping investors on the edge of their seats, and big-company financial scandals have marred the economic landscape.

The optical industry is no stranger to this fallout. For a few days following September 11, retail sales came to a standstill--patient appointments were cancelled, and business as usual was suspended. Still, many report that business bounced back by November 2001 and continued to get better in the following months. While some optical retailers and eyecare professionals say it has been a road peppered with difficulties, a surprising number report solid sales generated in 2001 through 2002 and, in some cases, growth.

"Business stalled immediately following the events of September 11. Our no-show rate increased to about 40 percent, our patient encounters were down significantly, and our revenues and net profits suffered as a result," says Stephen Franklin, chief operating officer at Accurate Optical, a chain of five stores in Salisbury, Md., which has been a part of the state's Eastern Shore community since 1956.

"Still, we had an excellent year last year with a 13 percent increase in business over the previous year. Currently, business is stable, and we are experiencing comparable-store growth in the four percent area. We know we are not the norm, but we think business is not all that bad."

THE GOOD NEWS

Recent data shows the U.S. economy continuing to improve. This improvement, however, has been carried on the shoulders of the consumer--who, according to Carmetrics, a forecasting and analysis company for the auto industry, accounts for roughly two thirds of overall economic activity. The company predicts consumer spending will remain strong throughout the remainder of 2002, enabling other sectors of the economy to recover as well. This consumer-fueled boost has provided a jumpstart to industries, including eyecare. Still, the optical market appears to be somewhat less severely impacted by the current recession than many others.

While business is definitely off for some eyecare operations, others offer reasons why they've been more fortunate. "We have experienced double-digit increases all year," says Jeff Obstfeld, president of Iacon, the 55-store sunglass chain that was recently purchased by Oakley. Iacon stores are located in 13 states and operate under the names Sunglass Designs, Sporting Eyes, and Occhiali da Sole. "The affects from the terrorist attacks on our retail sales were short lived. There was certainly shock in all the malls. But we took the attitude to continue business as usual and have new product in all the time."

Iacon is, in fact, in a major expansion mode, opening about one new store location per week. "Oakley said we would open 18 to 20 new doors, but we will probably beat that number," says Obstfeld.

Making investments. Carmel Mountain Vision Care, a 3,000-square-foot optometric practice located in San Diego, reports, "We are up over 15 percent from the same month last year. We have added extra staff and square footage, updated our computer system, and now have four doctors rather than three. Our business fluctuated for a day or two after September 11 but the recovery seemed quick," says Joel Cook, OD.

Premium products. Some eyecare professionals admit they have lost patients, customers, and unit sales in the past year, but say they have managed to maintain or even increase their volume of sales through premium products. "I think we might not have as many patients now, but we do have different patients. They are seeking premium products that have better margins and more profit," says Angie McClain, director of operations, at Linden Optical in Pasadena, Calif., which boasts a staff of 180 people, including 22 sales opticians, 10 dispensing opticians, and 14 optometrists. "We have increased our bottom line, but not necessarily our patient base. We have seen more people buy premium product this past year than any other year. The fact is that people are just more educated about the high-end products as opposed to the $39 products."

Pent-up demand. Bill Thomas, executive CEO with the Vision Council of America, sees a reason for some growth. "In 2001 we saw a general downturn, but not as much as other industries," he says. "We see some sales rising up now because people can only delay getting eyewear for so long."

Even some labs expecting a downturn in business from September 11 and a lagging economy were pleasantly surprised. "Doctors are typically booked four-to-seven weeks ahead of time so we expected a downturn in business four-to-seven weeks out," says Pat Patterson, president of the Optical Laboratories Association and chairman of Walman Optical, which has 22 lab locations across the country. "We never had the devastation that hit other industries."

THE BAD NEWS

Nonetheless, some eyecare professionals report a different reality. "Our increases have continued, but it has still been a tough year," says Randolph Brooks, OD, in group practice in Ledgewood, N.J. "We are seeing stable to slight increases--2001 was already a tough year leading into September 11. Things began to get better in November and increases started during the first quarter of 2002."

Still, others have a more somber view of business today. "Business was blazing before September 11," says Earl Cleveland, ABOC, president of the Optician's Association of America. "It wasn't until the 12th or 13th of September, a day or two after, that it slowed down. I am in a shopping center where the parking lot was always full. Two days after 9-11 there were only two to three cars in the parking lot. It has been gradually coming back, but it isn't what it was before."

Even some large optical chains are feeling the effects of the economy. "Business is steady," says Barry Feinberg, president and CEO of Consolidated Vision Group, which operates more than 200 locations of America's Best Contacts and Eyeglasses.

"It was good from February through Memorial Day. Then business declined until mid-July and after that it picked back up. Business in 2001 was tough. But 2002 will show to be slightly better," Feinberg says.

Why do we have conflicting sides to the sales story? Many cite location as the main point of difference.

Geography. An optical business' proximity to the disaster sites of September 11 holds one key. Brooks' practice is not far from the New York City metro area in New Jersey.

"The closer optical businesses were to the World Trade Center, the more they were affected," he says. "Farther away, people were not hit as hard and did not have the same concerns."

Format. Another factor related to business health is the type of location--be it streetfront, an office park, or a mall. Those hardest hit appear to be mall-based businesses. Many of them are struggling along with other retailers such as department and chain stores.

Consolidation. Additionally, times were changing in the optical industry prior to September 11--consolidation had been a major force in both the wholesale and retail sectors. With the big ultimately getting bigger, business was much more competitive and suddenly, when there was much less of it, some businesses were certain to falter.

Financial footing. "The people who are financially sound, have stayed on their course, and haven't done anything differently because of the economy will thrive," predicts Obstfeld. "Those who were undercapitalized and did things out of panic will struggle."

STAYING AFLOAT

While there are certainly some areas of concern in optical, many retailers are glad to be in what appears to be a relatively recession-resistant category. Factors such as eyewear's medical nature, managed care, and an aging population help optical professionals get a leg up over the recession's wall. This market also has proven to be more stable than many over the course of time.

Steady industry. "Back in '98 and '99 when some industries were having double-digit increases, we were trucking along at four to six percent growth," says Thomas. "I think that we don't reach the highs when the economy is moving, but we don't get to the lows either."

He notes that while the industry saw a general downturn in 2001, it was not nearly as much as other industries. "We are more of a steady industry than others. We are not recession proof, but we are recession buffered. We have a product that people need."

Managed care. Many eyecare professionals also cite managed care as a boon to sales in difficult economic times. "I believe we as the optical industry have been a bit exempt from what is happening in rest of U.S. economy," says Pat Cummings, OD, president of the American Optometric Association (AOA). "Part of this is due to the abundance of third-party managed care plans where the benefits are pre-paid for patients, so they come in to get benefits regardless of economy."

Boomers. Another major factor is our aging population. The baby boomer population is quickly moving into an age where the need for some form of eyewear and eyecare are imminent.

"We can have a downturn in the economy, but the fact is that we are all getting older and needing that eyewear," says Richard Edlow, OD, a private practitioner in Baltimore, Md., and chair of the information and data committee at the AOA.

"If someone was to ask me what profession to be in to take advantage of the aging population, eyecare would be a no-brainer. With the baby boomers buying progressive lenses, AR coatings, and more, the revenue will only be increasing in this profession," Eldlow says.

"We are somehow buffered as a profession to some of the economic downturns because of the population aging. This will last another 40 years and will have a strong impact on the marketplace," he adds.

STRATEGIES FOR SURVIVAL

Focusing on product categories in this tight economy can help boost sales. Optical retailers report top sellers as plano and prescription sunwear, progressives, all premium products, and reading glasses.

Sunwear. "We made a conscious decision to try and sell more sunwear," says Cyndy Elkin, owner of Point of View in Falls Church, Va. "We have created a special sunwear section, increased our inventory of plano, and have also made a concerted effort to sell more as second pairs."

Cook says Carmel Mountain Vision Care has also invested in sunwear. "We increased our sunglass line from 40 up to about 250 selections. That's made a big difference in our sales."

High end. Others stress that the premium product area is less affected by the recession. "There are more people buying high-end products," says Cleveland. "They want the good stuff. People want to make themselves comfortable."

Accessibility. In addition, many retailers are proactively making changes in their businesses to keep a positive flow of patients and clients.

A rudimentary but effective tactic is to simply keep your doors open longer. "We are approaching the tough marketplace by having hours that are convenient for patients," says McClain of Linden Optical.

"We are open and accessible seven days a week. A lot of ODs are missing out on dollars because they are not available to the customer," she adds.

Service. Another basic strategy is to focus on customer service. Cook notes that Carmel Mountain Vision Care has added staff to meet customer's needs. "It is important to not let growth die on the vine for a lack of opportunities and your staff being able to handle it," he says. "We added an extra doctor and his schedule is now filling up."

Another way to beat the economic heat is to reassess your product assortment. "We improved our margins by eliminating the products and vendors that didn't make sense, and have been making decisions that will allow us to provide the best product at the best price," says Accurate's Franklin.

FUTURE PROJECTIONS

It is no doubt that the economy, while in recovery mode, will continue to experience the trials of this recession.

Despite the fact that the optical industry appears to be more buffered from it than many, all eyecare professionals must stay on their toes. As competition and consolidation continue, savvy business strategies remain a necessity.

Still, most optical retailers remain hopeful. "I am optimistic for 2003," says Brooks. "Nothing ever got better from people just wishing things to get better. You have to make some efforts to make it happen."

Some are even upgrading. "We have made some significant investments in equipment," says Brooks. "If we didn't believe in the future, we wouldn't be spending this money."

Most agree it's a time for cleaning house and repositioning for the future. Many companies are examining their balance sheets and focusing on the problems in their business. Are you? Because if you are, the future could be a very bright place, concludes Franklin. "You couldn't pick a better profession to be in right now for future growth."