TOP 2013 BUSINESS TRENDS

An insider look into the optical market’s twists and turns for the new year

by Erinn Morgan

TREND #1: OPTIMISM

With good reason, ECPs just might be finally declaring a more positive economic outlook for the future.

While the economy continued to undulate around the world in 2012, the majority of eyecare professionals felt only a moderate (41 percent) or slight (36 percent) impact on their business, according to the Eyecare Business Market Trends 2012 Report. Just 16 percent said they felt a major impact.

Reason to celebrate? Perhaps.

The lion’s share of ECPs (50 percent) reported that sales were up in the first half of 2012 compared with the first half of 2011, according to the report. This is a slight increase over last year, when 48 percent reported that sales were up for the first half of 2011 compared with the same period in 2010. This year, just 21 percent said sales were down for the same period, and 29 percent said sales were flat.

Better business news has led to a heightened outlook for ECPs. According to the Market Trends 2012 Report, just 39 percent said the economy is their top business challenge (down from 58 percent in 2009), while a full 38 percent said that managed care is their top business challenge.

Impact of Recent Economic Slump on Optical Business

Comparison of Sales

Weary of the world’s lack of optimism and dearth of terms like “growth area“ and “sales boom”? Then this trend report for 2013, which is packed with good news, will lift your spirits. Culled from the Eyecare Business Market Trends 2012 Report, it also reveals the optical market’s strategic growth areas, including a few surprises, plus its key business trends.

Read on for a glimpse into the future of your business—and some targeted ideas on how to boost it. EB

The share of eyecare professionals who say the economy is among the top two business challenges has continued to decline and is now tied with managed care

TREND #2: ECONOMY-BUSTING STRATEGIES

Overcoming Business Challenges

Stressing customer service continues to be the leading way that eyecare professionals are attempting to overcome their business challenges

Overcoming Cost Objections

Moving to lower cost options and discounting continue to be the methods used most frequently to overcome cost objections

TREND #3: THE FUTURE’S BIGGEST GROWTH AREAS

Where will the industry’s new business come from? According to the results of the Eyecare Business Market Trends 2012 Report, the top area for growth is glasses, with 45 percent of respondents pointing to the frame-and-lens combo. Just 34 percent of optometrists said eyeglasses were a key growth area, while 55 percent of opticians pinned eyewear as their top growth opportunity.

What did ODs target as their sweet spots? Regular eye exams and primary care opportunities (e.g., allergy management and glaucoma) tied for optometrists’ number-one spot, with 54 percent of ODs pointing to these growth areas. Similarly, opticians cited eye exams (37 percent) and primary care opportunities (31 percent) as areas of opportunity.

ODs also said contact lenses (41 percent) and senior care (35 percent) will grow in 2013. For opticians, sun-wear (31 percent) and wavefront/free-form lenses (31 percent) offer growth.

Respondents noted their future focus on the efforts that influence consumer purchasing, such as the doctor’s recommendation, which 27 percent reported as a factor that affects sales, while 19 percent said the same of the optician’s or salesperson’s recommendation. Price was a key decider, cited by 18 percent.

Near Future Growth Areas

Eyecare professionals say that primary care opportunities, regular exams, and eyeglasses offer the most opportunity for growth. There is considerable variation across optometrists and opticians

Perceived Influences on Consumer Purchasing

Eyecare professionals perceive that doctor recommendations most influence consumer purchases of eyewear. On a second tier are optician/sales rep recommendations and price

How are ECPs planning to overcome economic challenges? Two words—“customer service.” According to the Eyecare Business Market Trends 2012 Report, 72 percent of responding eyecare professionals point to customer service as the way they are attempting to overcome business tribulations. Just 37 percent of ECPs said they were re-assessing inventory mix to reflect their changing customer base and 24 percent said they were offering more promotions.

Another 22 percent of report respondents said they were increasing their advertising efforts to overcome their business challenges, 23 percent said they were opting for quality over quantity, and the same amount said they were planning to invest in money- and time-saving equipment and new technology.

Of those ECPs faced with cost objections from customers, 38 percent plan to move to lower-cost dispensary options. The next best strategy? A full 30 percent reported using discounting to overcome cost resistance. Interestingly, just seven percent of ECPs said they were using Buy One Get One (BOGO) promotions to overcome cost objections.

TREND #4: SHIFTING PURCHASING POWER

Who does the buying today—and who will do it in the future? According to the EB Market Trends 2012 Report, optometrists are definitely taking on more responsibility on this front, especially in some specific areas.

From 2011 to 2012, ODs took on more purchasing power with finishing equipment (up to 38 percent from 33 percent in 2011), displays and furniture (up to 61 percent from 57 percent in 2011), contact lenses (up to 88 percent from 86 percent), and spectacle lenses (up to 77 percent from 76 percent).

Optometrists were also more involved in choosing lab partners in 2012, with 55 percent of ODs saying they are involved in this choice compared with 50 percent who said the same in 2011.

Some of this shift is transitioning purchasing power from opticians participating in our survey, who reported a decrease in buying decisions they were involved in during 2012. For example, 71 percent of opticians were involved in purchasing sunwear in 2012 compared with 82 percent in 2011. Similarly, 67 percent were involved in purchasing accessories in 2012, while 77 percent helped buy this category in 2011. In addition, while 45 percent of opticians were involved in purchasing finishing equipment in 2011, just 35 percent did the same in 2012.

While some of the purchasing power shifts were due to an increase in OD purchasing in certain categories, not all categories saw a direct correlation.

Purchasing Power

Optometrists and opticians participate in a wide variety of purchases. Compared with the last wave of the study, optometrists are more involved in purchasing decisions

TREND #5: NET LOSSES

For a variety of reasons, ECPs continue to shy away from selling their products online. Leaving this business to the likes of Warby Parker, the majority of ECPs (59 percent) reported that they use their own website to get out information on their business but do not use it to sell products online, according to the Eyecare Business Market Trends 2012 Report. This focus is similar to what ECPs reported in the 2011 edition of the study. About 80 percent of ECPs reported that they do have a website either for strictly informational purposes or information and e-commerce purposes. In addition, ECPs say they have no wide-sweeping plans to break into online sales. Of those who do not currently sell online, more than two thirds do not plan to start doing so within the next two years. Of those who do sell products via their websites, 55 percent sell contact lenses. A distant second, just 13 percent of ECPs selling online sold plano sunwear and 13 percent sold prescription eyewear. Products Practices Sell Online Among eyecare professionals in practices that sell online, most report that they sell contact lenses Use of Website

TREND #6: INCREASING SOCIAL MEDIA

Do you tweet? The majority of ECPs say they use social media for professional purposes, according to the Eyecare Business Market Trends 2012 Report. Six out of 10 ECPs use social media, while about half of eyecare professionals report that their business has a Facebook page or Twitter account.

Still, only a small number (five percent) post updates every day to Facebook or Twitter—but a large number (47 percent) post at least once a week or occasionally. A full 42 percent of ECPs say that their practice/business does not use Facebook or Twitter at all.

While ECPs say they believe that their social media efforts work to boost their business, most agree that they need help with their web efforts. Over a third of ECPs reported that they feel they need help creating a professional website and/or a social media effort.

Use of Facebook and Twitter

TREND #7: A BUYER’S MARKET

When it comes to equipment, ECPs say they have plans to buy new items to save money and be more efficient. According to the Eyecare Business Market Trends 2012 Report, a full 60 percent said efficiency improvement and cost savings are the main reasons for making an equipment purchase. In addition, 45 percent said they buy new equipment mainly to replace old equipment—this number increased by 10 percent from the 35 percent who said the same in 2011. Of note is that about one third of eyecare professionals plan to make an equipment purchase within the next three years.

The most popular equipment category to be purchased? Edging equipment—which 21 percent of ECPs said they plan to buy in the next three years. The runner-up was AR coating equipment, which five percent of ECPs plan to bring into the fold. After that, ECPs cited polishing (four percent) and tinting (four percent) equipment as the next items of interest for purchase within the next three years. Wavefront/free-form systems also made the cut, with three percent of ECPs saying they’d likely be purchasing equipment in this category in the coming years.

The vast majority of eyecare professionals (94 percent) report that they are at least somewhat satisfied with their current equipment operations. More than half (59 percent) report that they are very satisfied with their equipment operations—this number is up from 51 percent who felt the same in 2011.

Purchase Plans

Reasons for Purchase

Current Equipment Satisfaction

TREND #8: BEING GREEN

Who’s the greenest of them all? ECPs can feel good about looking in the mirror—the majority say they are contributing to the “green” effort in some way. A large number (74 percent) say they are accepting old frames and lenses to distribute to charitable organizations, according to the Eyecare Business Market Trends 2012 Report.

Other green efforts cited by ECPs include recycling where possible (62 percent), reducing paper usage (61 percent), and replacing light fixtures with more energy efficient options (52 percent). A smaller number of ECPs took on additional green charges, such as stocking greener frame options and encouraging staff to carpool.

ECPs also agree that it’s important to be eco-conscious on the equipment front. In fact, 23 percent said it was very important to their business to run green equipment; 61 percent said this effort was somewhat important to their business. Only 16 percent said this effort was not important.

Running Green Equipment

Contribution to the “Green” Effort

TREND #9: LENS SALES BOOM

There is a noticeable uptick in the amount of lens pairs and lens treatments being sold per day by ECPs, according to the Eyecare Business Market Trends 2012 Report. In fact, those eyecare professionals selling between 31 and 40 lens pairs per day increased from zero percent in 2011 to six percent in 2012. Those selling more than 50 pairs per day jumped from four percent in 2011 to seven percent in 2012. ECPs selling between 21 and 30 pairs per day bumped up from five percent to seven percent.

At the same time, those selling fewer pairs per day declined. Those selling between six and 10 pairs each day decreased significantly from 47 percent in 2011 to 38 percent in 2012.

Where is new lens business coming from? Looking to the future, eyecare professionals expect growth to come primarily from six areas—free-form/digitally surfaced lenses, photochromics, polarized lenses, computer lenses, PALs, and AR.

Lens Pairs Sold Per Day

Anticipated Growth Rates

TREND #10: FRAMING MODERATE PRICING

Distribution of Frames by Class

Pricing Strategy for Frames

In response to customer uncertainties created by the economy, ECPs say that mid-level pricing has been a major area of focus in the dispensary—a large number report they carry the majority of their frame inventory in the moderate price range.

About 50 percent of ECPs say the lion’s share of their frames were in the mid range for 2012, compared with 48 percent in 2011, according to the Eyecare Business Market Trends 2012 Report. That being said, however, while the amount who stock the majority of their frames in the value range remained stable at 24 percent for 2012 and the previous three years, those ECPs who carry most of their frames in the highend range actually increased from 29 percent in 2011 to 32 percent in 2012.

Looking to the future, ECPs are planning on keeping pricing stable over the next year. A full 85 percent said they plan to keep prices stable while just nine percent said they would mark products up more. A mere six percent said they planned to offer more discounts in the coming year.

TREND #11: Rx SUNWEAR SUCCESS

Looking for the next big thing? Look no further than Rx sunwear, the category that ECPs say is a key to future growth. According to the Eyecare Business Market Trends 2012 Report, prescription sunwear is cited as the fastest-growing category in the dispensary. A full 38 percent of ECPs pinned it as their fastest-growing category, and it also happens to lead by a comfortable margin—the next category ECPs pointed to as their fastest-growing was children’s eyewear (15 percent).

The median ECP reports carrying five lines of sunwear. They also report that prescription sunwear accounts for a larger share of their frame assortment than any other type of specialty eyewear, even over kids’ frames, plano sunwear, and clip-on sunwear.

The good news is that Rx sunwear is usually a second-pair sale, a fact that will boost future business for ECPs who put a focus on prescription sun sales. Of the sunwear sold as a second pair in conjunction with an Rx eyewear purchase, prescription sunwear was sold 23 percent of the time by ECPs, while clip-ons were only sold 10 percent of the time and plano sunwear nine percent of the time.

Not surprisingly, ECPs point to Rx sunwear lens growth in polarized lenses and photochromic lenses. According to the report, 71 percent of ECPs report polarized lens sales have grown over the past two years while 55 percent report photochromic lens sales have risen.

Fastest Growing Products

Rank of Specialty Products

Sunwear Offerings

Average percent of sunwear types sold in conjunction with Rx eyewear purchases 23% Prescription 10% Clip-on 9% Piano 5% Over Rx

Number of sunwear lines carried: mean = 8.1; median = 5.0

Changes in Sales of Sunwear Lenses

TREND #12: APPEALING TO THE NEW CONSUMER

The new normal in the dispensary? Recession-weary customers are no longer the exception. According to the Eyecare Business Market Trends 2012 Report, 64 percent of eyecare professionals believe the economic slump has created a new brand of cautious consumers that necessitate a new selling story. This number is up from 61 percent from those ECPs who felt the same in 2011.

What is this new selling story? As reported earlier, some ECPs are looking to increase their more moderately priced frames as a strategy to appeal to today’s consumers. Others are looking to bring in more unique, specialty frame products. In fact, compared with the past few years, ECPs report that the frequency of customers asking for specific designer brands when shopping for eyeglasses has decreased.

Pricing Strategy and Perceptions of Consumers

Whether Recent Recession Has Created a New Brand of Cautious Consumer and a Specific Selling Story

TREND #13: EDUCATION IS KEY

While a wealth of ECPs say education is very or somewhat important to their business, most agree that training and education-based knowledge is something they’re getting less of today. The number of eyecare professionals that say they provide training to their staff is down notably from 2009, according to the Eyecare Business Market Trends 2012 Report.

Those who provide in-house training for new employees slid down from 62 percent in 2009 to 52 percent in 2011. The number of those who hold regularly scheduled training for existing employees is down from 27 percent in 2009 and 2011 to 22 percent in 2012. The number of ECPs who say their business provides no training whatsoever climbed from 17 percent in 2009 to 28 percent in 2012. While ECPs say less education is being offered internally, they note they feel rep-offered education is key. But, according to the report, they’re getting less of this benefit, as well. Those ECPs who say they provide training to their staff through periodic seminars given by frame vendors dropped significantly from 43 percent in 2009 to 26 percent in 2012.

Will training move more into the digital world? Perhaps. Almost 60 percent of ECPs say they would attend a live webinar to learn about new frame styles and new technologies.

Staff Training

Ways of Providing Staff With Frame Training (% of ECPs)

Anticipated Attendance of a Live Webinar