Beyond The Brand

Profitable Options

An inside look at how the industry's competitive

Have you ever considered joining a buying group or cooperative — or even moving your business over to a franchised format? While each of these business models has a somewhat different modus operandi, they all can offer significant value to eyecare professionals in the bottom-line form of increased profitability.

Still, every format may not be good for every ECP. Which is why we uncover the nuts and bolts — and benefits — of some key potential business models for you here. Armed with information, you can easily pick and choose the format that is all-important for your customer demographic, your practice, and your profits.

VIEW TO A FRANCHISE:

Emerging Vision

■ Current # of Locations: 110 Sterling stores across the country (including 10 corporate locations) plus 40 Site for Sore Eyes franchised locations in Northern California

■ How It Works: Qualified ECPs can convert their existing location (or open a new one) to the Sterling Optical or Site for Sore Eyes franchise format. ECPs pay an initial franchise fee and a small yearly royalty fee on gross sales.

■ ECP Benefits: Emerging Vision's corporate office supplies local and national marketing and advertising, ECP training, an IT department, inventory planning, and maximum vendor discounts on products. “Our services free up the ECP to operate their stores and generate retail sales,” says Sam Herskowitz, chief marketing officer and president of Emerging Vision's franchise division. How much more profitable can you be? “One location converted in early 2009 is on track to increase its sales by more than 50 percent,” says Herskowitz.

BUYING GROUP WITH A TWIST:

Preferred Select

■ How It Works: This unique buying group prefers to work with only a select group of top vendors in an effort to save ECPs time and money. Because Preferred Select is run by Soderberg Ophthalmic Services, which offers lab services to ECPs, it is also a single source for lab work and buying group needs. A small administrative fee is charged to members.

■ ECP Benefits: Product discounts are significant and range from 10 to 25 percent depending on the vendor. They also offer rebates for prompt payment. “You also don't need to waste time seeing 12 to 20 vendors every month because we narrow them down for you,” says Craig Giles, vice president and general manager at Soderberg.

BUYING GROUP BONUS:

Optiport

■ Current # of Members: 500

■ How It Works: This buying group is actually an alliance of ECPs that offers cost savings via vendor discounts plus revenue-enhancing opportunities such as marketing and education programs. There is no cost to join, but a membership fee is charged based on the types of profit-enhancing programs ECPs choose to participate in. The bottomline cost is $0 to $1,000 yearly.

■ ECP Benefits: As a member, ECPs have access to four different programs, including (1) group purchasing discounts; (2) a web-based platform that enables ECPs to order electronically and patients to order online; (3) education via conferences and online training; and (4) marketing solutions such as email programs, creative services, pre-made commercials, etc. “We are an alliance of ECPs with a focus on cost savings and enhancing revenue,” says Jim Edwards, president.

COOPERATIVE BUYING:

1st Eyecare, Inc.

■ Current # of Members: 22 shareholders plus 90 additional offices in the buying group

■ How It Works: This cooperative consists of a core group of independently owned optometric practices (all located in the DallasFort Worth area), all of which are “shareholders” in the company. While their numbers have not been expanded since 1986, 1^st Eyecare also runs a buying group that is expanding its membership on a regular basis. Members are charged a small administrative fee on their net optical purchases.

■ ECP Benefits: The buying group offers product discounts ranging from 20 to 33 percent to its members. “A lot of the interest in 1^st Eyecare comes from our contact lens pricing,” says Pam Bishop, executive director. “We also offer lens discounts through our labs of up to 40 percent.”

BUYING GROUP WITH A MISSION:

Vision West, Inc.

■ Current # of Members: approximately 3,800

■ How It Works: This group started as a nonprofit run by the California Optometric Association. Today it is a privately held organization that still donates millions of dollars to state optometric associations across the country. A small administrative fee is charged based on the volume ECPs order each month.

■ ECP Benefits: Discounts range from 20 to 30 percent for product, with some lab discounts as high as 35 percent. “Our members have the ultimate AmEx card within the industry–we offer over 260 vendors, all the Essilor labs, every major frame company out there, plus many specialty frame companies,” says Joseph C. Mallinger, OD, MBA, FAAO, president and CEO of Vision West. The group also offers billing statements online, which shows SKUs on invoices for easier invoice and inventory reconciling.

MEMBER-OWNED COOPERATIVE:

Texas State Optical

■ Current # of Members: 102 member shareholders

■ How It Works: Each member of this cooperative is also a shareholder and an owner of the company. “One share of common stock is issued by the Secretary of State of Texas to each member,” explains John Marvin, president and CEO of TSO. He adds that, by nature, a co-op is not designed to make money; instead it takes a collective contribution and spends it to the benefit of the organization as a whole. Fees include an upfront $4,000 stock price, monthly shareholders dues of $200, and a small percentage of gross sales that goes toward advertising.

■ ECP Benefits: Members get significant discounts on products by buying through TSO plus they benefit from a professional marketing and advertising program used to support the brand. Additionally, this co-op also offers a comprehensive training curriculum for members and their staffs. “We also have a benefit with third-party vision providers as a panel of 102 members–they often offer much more generous reimbursements to the ECP,” says Marvin.

A BUYING GROUP WITH LAB PRIVILEGES:

Red Tray

■ How It Works: An offshoot of the behemoth, 4,000-member HMI buying group, Red Tray is a “lab-focused” purchasing group that offers notable discounts on lab services and frames. A small administrative fee is charged based on ECPs' lab business volume.

■ ECP Benefits: Beyond discounts on product and lab work, Red Tray puts the onus on education for its members. “We work hard to provide practice management content to help ECPs run their businesses in a more professional manner,” says Jerry Hayes, OD, president of Red Tray. This information is provided, in part, in the form of online forums, including Hayes' weekly educational blog, www.drhayesblog.com.

Fall 2009 BCBG collection Luciana (in black laminate) and Perla (in black)