Is Luxury Still Smart Business?

An inside look at how ECPs are making luxury eyewear work for them today

By Erinn Morgan

The overall luxury goods market—for everything from extravagant sunglasses to posh vehicles—has taken a serious downturn as economy-weary consumers keep a tight grip on their disposable income. "The reality today is that the luxury market has come through a period of unprecedented decline," says Pam Danziger, president of Unity Marketing, a firm that tracks the luxury market.

In fact, even as the economy rebounds ever so slightly, the international luxury goods market is expected to come up only four percent in 2010 after having declined by a full eight percent from 2008 to 2009, according to a study conducted by Bain & Company.

In the U.S., the picture was even more grim. Bain & Company estimates that the high-end clothing, fragrance, and accessory market dropped by 16 percent from 2008 to 2009.

The luxury optical business has suffered similarly from the economic crisis. Within luxury optical, some of those hardest hit are ECPs who have a moderate price focus in the dispensary overall but added in luxury as a business boost.

For some of these ECPs, luxury no longer seems to be a viable option in today's economy. "We currently have just two $600 frames with Swarovski crystals and they have been sitting here for six months," says Elizabeth Ann Davey, office manager at Inland Eye Center, which has locations in Spokane and Colfax, Wash. "The economy has been hit harder here in the last couple of months, so until we notice these frames moving we will only keep those two in stock."

For some others, luxury continues to be a very viable business. "Luxury is well and alive," says Ed Beiner, owner of the nine Florida-based Edward Beiner stores. "We see good opportunities but that doesn't mean we are selling $2,000 glasses every day. There is a new reality today, but the luxury market is going to come back again."

How are ECPs competing in this business? And, are they considering a shift in their assortments as a result of today's economic difficulties? To provide a better handle on the luxury landscape, we offer some key strategies) from veterans of high end.

DELIVER INTEL

Today's luxury customers are willing to open their wallets if the product they are interested in has a story behind it. "Generally, people are looking for a lot less bling and they want to know what they are buying—they want to know it's handmade and they want to hear the story behind it," says Beiner.

Because of this, he is emphasizing training. "We've focused on new technology and brand stories. In particular, brands that have a certain niche because there is a market for that right now in luxury."

Beiner says he still sees a demand for luxury, but "you just can't put it into the window anymore and expect it to sell. The customer wants to know that their lenses are digital and the frames are made with the latest technology."

GET SPECIALIZED

A number of luxury purveyors report going back to their roots and focusing on offering lines that are unique to the U.S. market.

"What I'm selling now is very elitist and very unique," says Valerie Vittu, owner of Margot & Camille Optique in Philadelphia. "Today, people want glasses that nobody else has. My product priced around $600 is selling like hotcakes."

In addition, Vittu says that after a slow 2008, 2009 was a banner sales year for her. Beiner also notes that business in his stores is "up considerably," mainly due to a new focus.

"We have become more exclusive and more high-end," he says. "We wanted to distinguish ourselves from the mass opticals out there, so I am looking at what can I carry that nobody else has."

Beiner says this move signals a return to how things used to be in the high-end arena. "I like to think that we are going back to our original DNA," he explains. "We all got carried away—the consumer wanted certain things and we supplied. Now it's time to regroup and go back to what we did 25 years ago. I'll be going to Paris to get more unique things that only come to my stores."

GO NARROW AND DEEP

Vittu has focused on building a fuller selection in her dispensary by going narrow and deep into her existing lines. This strategy can help the shelves in luxury dispensaries appear to be more fully stocked.

"The way I am buying is usually one model but six colors of that style," she says. "This way the store looks more defined instead of more mixed up with having one frame of this model and color and another frame of another. Now I pick few shapes and take four to six colors."

Vittu, who says she applied the same approach to her inventory of closeouts in 2008, says that she also doesn't reorder the same frame twice so that her dispensary's inventory always looks fresh. EB

Put the Onus on Lenses

Some luxury-focused ECPs are looking to lenses to bolster their bottom line. "My business is actually up this year but it's lenses," says Craig Chasnov, owner of the two Eyetopian luxury optical shops in Bonita Springs and Ft. Myers, Florida. "With the economy and the oil spill, we really have no traffic, so thank God for lenses," says Chasnov.

One boon to Eyetopian's business has been the practice's ability to turn drill mounts around quickly by completing the work in-house. "We still do 60 to 70 percent [of our] drill mounts here, and we offer a specialized service because no one else will do these lenses for customers while they wait," he says.

Eyetopian offers patients two choices when it comes to lenses. The first option is a Trivex progressive with AR for $475 (a tint is $50 extra). The second option is a basic polycarbonate for $250 with no AR.

"I don't sell any of the basic poly. Today, it seems they'd rather buy a $200 frame and $500 lenses," says Chasnov. "Ninety-nine percent of them are not going to skimp on optics."

In addition, Chasnov says his margins are increasing as lens prices go down. "My lab has a program that if you do 100 percent AR they will take 50 percent off each pair," he says. "They also offer a deal if the customer gets a second pair they get 50 percent off the entire order. About 60 percent of our sales are two-pair orders, so it ends up that it's cheaper to get a surfaced Trivex with AR if you get a second pair now. You can't beat that—this deal has been a windfall to me."

Luxury for Everyday Dispensaries

While many moderately priced ECPs are shying clear of luxury today because it seems to be a tough sell to their customers, a few are actually making inroads in the high end.

"We ventured into it a lot more in last six months," says Michele Bautista, practice manager at the five-location Access Eye Center, which is based in Fredricksburg, Va. "I didn't think we had the clientele for that, but it actually did really, really well. As a result, we will probably do it more in all of our offices."

Access Eye Center's frame mix now breaks down to about 80 percent core pieces and 20 percent of the "really high end." Bautista credits their success with the high-end category to the fact that many patients have an insurance vision allowance that helps defray the cost.

She says this success is also happening because they carry some of the brands that consumers covet. "People may love to look at designer goods in fashion magazines but they feel they are out of reach," she says. "With glasses, designer names become a lot more attainable for people. They are the best accessory these days. This product focus is working fantastic for us and we are really going to expand on it."

Consider Closeouts

While Valerie Vittu's business at Margot & Camille Optique turned around significantly in 2009, she kept her business afloat during the difficult 2008 business year by bringing in an assortment of closeouts. "The time was very difficult and I changed my inventory by going in this direction," she says. "I contacted some companies and asked for old inventory, so we accrued lots of quality product at a lower price. By having these prices I had a lot more traffic."

When business picked up, she phased the closeouts out. "When it started to be difficult, I found that most of my customers had really cut down on expenses," she says. "They weren't having coffee in morning, and there was no more going out. But then things started to rebound because they had cut down on so many things on their list, but when it came to their eyeglasses they said, ‘I want the nice ones.’"