AMERICAN DEMOGRAPHICS 2015

American DEMOGRAPHICS 2015

Welcome to the seventh annual Eyecare Business report, a close-up look at the state of retail in the United States focusing on opticals and beyond. This year the overall theme is cautious optimism—things are looking up, somewhat, say the respondents to our national survey as well as retail industry experts and economists.

RETAIL REALITIES

Like in the optical world, within the retail universe overall there is also a better picture being painted. Jack Kleinhenz, chief economist at the National Retail Federation (NRF) notes, “Until recently we have either received mixed or disappointing economic data. However, there is good reason to believe that the economy will pick up speed over the remainder of this year.”

What’s bringing the upswing along? Kleinhenz notes the following.

LABOR: The ongoing strength in the labor market is a key factor for optimism. “With job growth continuing to average above 200,000 a month and wage growth increasing, personal income should maintain its recent momentum and support household spending,” Kleinhenz says.

STRONGER DOLLAR: “Lower import prices reduce inflation and raise household purchasing power,” he notes. “With consumer spending representing about 70% of the economy, its pace will continue to be a key determinant of GDP (gross domestic product) growth going forward.”

CONSUMER CONFIDENCE: Shoppers are helping improve the picture overall, notes Lynn Franco, director of economic indicators at The Conference Board. “What we’ve seen over the course of the past year has been an improvement in consumers’ confidence levels across the board.” Noting improvements in employment, housing prices, and stock values, she adds, “all three of those have contributed to the increases in the past year.”

FASHION FOCUS: Trends are expanding to a wider market, bringing a new view to shoppers. “Department stores are starting to buy more globally minded when it comes to trends,” says Roseanne Morrison, fashion director at Doneger Group, a New York City-based trend forecasting service. “Retailers have to think less about their specific stores and more about global trends.”

RETAIL REAL ESTATE

With alternative shopping locations challenging mall retail, commercial real estate vacancy rates are still on their way down, notes Ryan Severino, CFA, senior economist, Reis, Inc.

SLOW AND CENTRAL: There has been slow improvement, Severino says. “Overall it’s still kind of a tepid pace of improvement save for some pockets. Partially economic, median wages are barely keeping pace with growth, centers with high end are performing well, centers at low end are doing well. Middle ground is where not a lot is going on.”

ALTERNATIVE LOCATIONS: Impacting the retail rental scene are alternatives for shopping like e-commerce, but also non-mall real estate. “All these relatively new concepts that have proliferated, like lifestyle and outlet centers, have fractured demand a little bit. In the ’60s, ’70s, and ’80s, the majority of shopping was done at street-level retail and malls. It’s a very different world for retail than in ’80s and ’90s, [when people] went to the mall,” adds Severino.

NOT SO E-FAST: Brick and mortar is still the shopping king. “[There’s a] misconception that a lot of retail is being affected by the Internet,” he adds, “but that is still a really small percentage of overall sales.”

INTO 2016: It might be time to save your pennies and plan for more rent hikes to come, Severino warns. “I think over the next two to three years we will see vacancy rates go down and rents go up. This is a slower recovery than in times past. By the time we get to the next recession, we will probably still be mired in high single-digit vacancy rates.”

OPTICAL OUTLOOK

Within the optical industry, the respondents to EB’s survey—including O.D.s in solo and group practices as well as dispensing opticians and other eyecare professionals—2014-2015 has been better year over year compared to 2013-2014, with the majority of respondents experiencing overall increases.

LENSES: No doubt taking advantage of what technology is offering to provide more personalized lenses with less distortion and smoother transitions, ECPs are continuing to increase their sales of free-form/digitally surfaced lenses. This year we cracked the halfway point, with ECPs reporting that an average of 56% of their lens sales is free-form. That’s a huge increase (16%) over last year’s national numbers, and the largest increase to date. What region is enjoying the most success with this category? It’s a tie between the South and Midwest, with ECPs in each region reporting digital/free-form as an average of 62% of their lens sales.

Polycarbonate continues its dominance across the states as the most-used lens material. AR is the number one most-sold “extra,” reported by 82% of ECPs to be the first and foremost extra. AR is followed by photochromics, polarization, and tints (in that order, though all three are distant followers).

FRAMES: Traditional looks in non-traditional materials, finishes, and weights are ruling the style roost these days. Folks are still loving the aviator in sunglasses, and in ophthalmic eyewear the deepish rectangle is a sturdy go-to for men, while women are still enjoying a touch of sweep with cat-eye corners that have been slightly rounded for a more subtle sensation. Regardless of the shape, the eyewear is likely to be plastic, which leads the nation in reported sales with 71%, another big jump for the material (from 60% last year). Plastic is particularly powerful in the West, where 76% of wearers go for non-metal or combination styles.

When it’s time for a new Rx, the eyewear is likely to be new, too, our respondents say, particularly in the Midwest, where a whopping 97% of respondents opt for the latest style rather than a refill. Overall, the refill vs. new rate remains the same as last year—89% new vs. 11% refill.

In terms of second pairs—watch out sunglasses! We may very well be seeing the rise of computer eyewear. While sunwear still leads the category by a very healthy margin, 72%, that figure is flat from 2014, while computer eyewear is up another point to 19% with a powerful leap to 28% in the Northeast. Clips cling to their 2% pair share, while casual eyewear dips from 9% to 7%.

FINISHING: It’s a slight, slow growth…but it’s growth nonetheless. The percentage of respondents with an in-house lab grew by 2% over last year’s survey, as 54% of ECPs reported doing at least some of their edging work in-office. This is the highest percentage of a steadily growing (sans 2013) number of respondents with in-house labs­­—52% in 2014, 44% in 2013, 47% in 2012, and 46% in 2011.

The Northeast is reporting the most in-house labs (59%) followed closely by the South (58%). The future outlook looks good, too, as 12% of respondents indicate a desire to begin edging within the next three years (3% say in one year).

ECPs who do their own finishing are experiencing a slight uptick in business, too. Though the largest percentage (27%) ECPs who have edging equipment report doing the same amount of work as last year, there is a slight uptick in the number of ECPs who say they are doing more edging than last year (19% vs 17% last year).

As for surfacing, currently 13% of respondents nationwide say they have a surfacing or casting system in-house, with 6% declaring a plan to begin within three years.

SPECIALTY EYEWEAR: Optical experts are embracing sales of specialty eyewear. These extra offerings—including kids, sports, low vision, and digital/blue light—are having a solid year, with digital/blue light eyewear leading the pack with 36% of sales, including a blockbuster 40% in the Midwest.

It hasn’t been too bad a year for the kids’ category, either—it is also up this year, to 33% with the Midwest and West at the head of the class at 35%. Low vision had a blip of a rally, rising one percentage point this year to 4%, while sports has more than doubled its score this year, jumping from 11% to 27%. The winner in the sports category, regionally, is the South with 32% of specialty sales.