Editoral Series | BRAND OUTLOOK

Building blocks REMIXED

Part 2 of our series explores how proprietary brands are reconstructing the market

BY AMY SPIEZIO

In today’s world, consumers are different than ever before. What moves them to buy is a totally new set of expectations, one that doesn’t necessarily include brand names. In part one of our series on brands in optical, we spoke with industry executives about the state of licensed brands. For this installation of the series, we speak with them about another, growing side of frame portfolios: proprietary brands.

Proprietary brands used to be no-name discount options, but that’s changing as these non-licensed collections increase in quality—and profile. This shift is impacting manufacturing, and will impact retailers and consumers as well. Proprietary brands can serve as a strong foundation for ECPs’ inventory in a way that the product couldn’t have in the past. These frames offer greater variety, higher quality, and a level of brand support that marks a change in the way these products traditionally come to market.

“Contrary to the previous mindset of private label management, this approach does not commoditize the manufacturers’ brands by offering a comparable product at a significantly lower price point,” says Meera Mullick-Kanwar, author of “The Evolution of Private Branding.” “This would undermine the value inherent in the whole category and lower margins overall.”

New Construction

There is a growing trend in the industry to re-jigger brand structures to have more business building blocks come from proprietary brands, evening out the house-to-licensed ratio of products, and matching the direction of the retail market overall.

“More private label ranges are being treated as ‘real’ brands, as the quality rises and the trust that consumers have in the retail brand translates into confidence to buy private label across food and non-food categories,” notes Tim Eales, director of strategic insights for IRI in the report, “Private Label: Balancing Quality and Value.”

Rather than depending on name brand only, he notes, consumers are thinking more about how products meet their needs. “In the United States, consumers have settled into a new normal, where they are buying the mix of national and private label brands that provides the best value for their own unique needs,” he says.

Building Lessons

In optical, the rise of proprietary brands makes good sense for frame manufacturers, as they invest deeply in product lines that will never hop to other companies at the end of a licensing agreement.

In fact, the way license owners are changing their own distribution policies, looking to handle all retail contact with consumers, is leading frame companies to reconsider their business methods.

“Since 2010, retailers have been moving toward omni-channel retailing, which is aimed at providing a seamless customer experience, integrated across all channels both domestically and internationally,” says Lois Herzeca and Howard Hogan in “Fashion Law and Business: Brands and Retailers.”

As a result, some frame companies are weighing options. “When eyewear companies see brand owners such as Kering (which owns Gucci, Bottega Veneta, Saint Laurent, and Puma, among others) announce they will build their own eyewear distribution company and take their brands back from their licensees, it gets everyone’s attention,” says Mike Hundert, CEO, Rem Eyewear.

Hundert predicts “a fundamental shift in the historical notion that eyewear is nearly always licensed to professional eyewear companies. Among the considerations in response is the wisdom of building house-named proprietary brands that an eyewear company owns, which cannot therefore be taken away after having invested millions of dollars building its roots and reputation in the eyewear category.”

In fact, he expects frame companies, his own included, to increasingly embrace the proprietary philosophy. “I anticipate an acceleration of building and marketing house brands throughout our industry.”

Further development of proprietary brands will drive a fuller spectrum of in-house attention to these collections in a way that has been more typical for licensed collections. “I believe we will see further development of proprietary brands among companies,” says Peter Friedfeld, executive vice president of ClearVision Optical. “This means that the energy and resources once devoted to building licensed brands will be put in other areas, such as product and marketing, crucial for building great house brands that have a purpose in the market. People do respond to and need great product and great design.”

And it’s not just support for today. “We are approaching our proprietary brands with a long-term, systemic brand-building strategy,” says Safilo CEO Luisa Delgado, “We are developing, one-by-one, brand-building platforms and distinctive marketing campaign ideas, product, and commercial strategies, and five year roll-out plans with top and bottom line objectives and clear building blocks.”

To move into its future without Gucci and other Kering brands, Safilo has created a new, multifunctional global brand management organization for brands, as well as a new corporate marketing function rooted in consumer understanding and brand-building agency partnership management.

Delgado notes, “these are new capabilities for Safilo because our core strength has been licensed brand management, equally demanding but different in nature.”

Stacking Up Privately

Some companies stay out of the name game entirely, opting to be their own brand builders. “There are some frames that are house brands and there are some that are just optical brands—a Silhouette, a Lafont. These are optical brands, you can’t classify them as house brands,” says Mike Suliteanu, president of WestGroupe.

“For Silhouette, I don’t see a big change precipitated by these changes because Silhouette stands on its own right now with the Silhouette name,” says Jan Cory, president of Silhouette USA. “There is a quest out there in the marketplace for original eyewear brands with a really limited distribution, that has character, that is really authentic.

“Proprietary is a good word for us,” Cory adds, “and that leads to a product that ECPs see as very different and special, but also that is very backed up by our service.”

A Big Block in the Stack

Gone are the days of house brands being a fill-in factor for frame companies and something to provide a low-price alternative to fill frame boards. Look at Ray-Ban—the biggest eyewear brand in the world—and the largest house brand in optical.

“We have always had a very balanced portfolio approach at Luxottica,” says Holly Rush, president, Luxottica Wholesale North America. “An exceptionally strong proprietary offering of the best-known brands in eyewear such as Ray-Ban, Oakley, Oliver Peoples, and Persol, complimented by the most iconic and relevant fashion and luxury brands, gives us the best possible advantage to leverage on both tradition and trend and fully meet the needs of our customers and the end consumer.”

UNDER CONSTRUCTION: Rebuilding Brand Structures

The are a number of factors forming the building blocks of change in the world of licensed vs. proprietary brands.

BLOCK 1: RESPONSIVENESS FACTORS

When creating their own brands, frame companies can determine what goes into those brands without concerns about licensor approval, which can create an environment that’s responsive to the needs of dispensers and their patients first.

“Clearly, with proprietary brands, we can work faster and may be more responsive to the real market needs, as there is one less level involved,” says Peter Friedfeld, executive vice president at ClearVision Optical. “So while that may be an advantage, we still need to create the market for our house brands, and make the same investments that we do for a licensed brand.”

The direct connection between frame company and retailer can also help in terms of adding technology that is needed in the dispensary but is a total mystery to a fashion licensor. “What the market can expect from private brands is the capability to be more and more in touch with the technical requests of the market first of all,” says Giovanni Zoppas, CEO of Marcolin.

Christopher Shyer, president of Zyloware, notes that while his company is mostly focused on licensed brands, it does have proprietary collections based on meeting specific niches that don’t necessarily have a license option but do have a group of potential wearers. “If the opportunity is so much of a niche that it wouldn’t justify a whole license brand opportunity, or if the product is so technically different that it would be too narrow for a brand, then we’ll consider a proprietary brand,” he says.

BLOCK 2: CONSUMER FACTORS

Instead of finding a brand that represents them, today’s shoppers prefer the product fit them, regardless of the name. “In the United States, consumers are not so concerned as to whether a product is private label or brand. They seek the product portfolio that will cover their specific needs,” notes Tim Eales, director of strategic insights for IRI, in the report, “Private Label: Balancing Quality and Value.”

Indeed, a growing segment of consumers is rejecting the big names for the craftsmanship and small-batch appeal of non-name brands. “House brands are the biggest growth engine for the optical industry,” says Joseph Tallier, CEO of Ogi Eyewear. “The end consumer is recognizing the high quality of house brands as opposed to being victims of licensed names.”

In addition to the demand for independent style, some buyers also object to spending money for a name. ClearVision’s Friedfeld says, “I do see a change in the adoption rate of house brands in the market. Today’s consumers are very savvy, and some just don’t want to pay for the ‘designer’ label. What they want today is great design, great quality, as well as a relatable concept. The Internet, along with the speed and accessibility of information, customization, and the ‘individualization of the consumer,’ has contributed to this change in attitude. As consumers become more accepting of designed product as opposed to being driven by licensed brand names, the market will follow.”

BLOCK 3: REBALANCING FACTORS

The growth of the Internet as a shopping destination and the growth of the omni-channel corporate sales philosophy have created a situation that cuts the independent retailer out of the loop as well as the independent frame maker getting pushed out by brand owners.

“It is only the proprietary brands, exclusively available at a specific retailer, that can be a magnet to draw people into its store versus others, and accrue direct meaning and loyalty to the over-arching banner,” says Meera Mullick-Kanwar, marketer and author of “The Evolution of Private Branding.”

“I think most of my competitors are going to try to balance—have some licensed and not-so-licensed, or some licensed and some optical brands that they are going to try to develop,” says Mike Suliteanu, president of WestGroupe.

“We have begun our journey to double the sales of our existing proprietary brands, profitably, in the coming five years,” says Safilo CEO Luisa Delgado. “Our goal is to reach a healthy and long-term sustainable balance between our proprietary brands and licensed brands businesses. In total, proprietary brands can, by 2020, represent about 40% to 45% of our total sales.”

“Our house brand business is 35% of our gross revenue and we are looking to increase to at least 50% over the next two to three years,” says Stephen Rappoport, president of L’Amy US.

BLOCK 4: SELF RELIANCE & GROWTH

Having a solid foundation of proprietary brands provides security for the future as an anchor. ”We always make sure that our house brand business is quite a large percentage of our overall company,” says Rappoport. “We have a very strong house brand business that is growing and we will continue to invest in our own brands to grow to make sure that our overall percentage of our gross revenues are satisfactory and so we are not so reliant on one or two particular brands.”

It’s also a way to retain freedom of creativity, and that creates the option of growing a company’s own products in the directions proven successful in the field and with innovations created by their own experts.

“It’s pretty scary to rely on a name,” says Suliteanu. “I wouldn’t want to change the way we make frames to satisfy someone else’s opinion because you have to get everything approved. As soon as you sign a license, that complete freedom of creativity is restricted just because of that brand’s values and approval process. So it would be a difficult decision [to add licensed brands].”

And Luxottica isn’t the only company with a significant stake in the proprietary brand game already. “House brands are very important to ClearVision,” says Friedfeld. “In fact, one of our largest brands today is the ClearVision brand, which will celebrate 50 years this year.”

ClearVision and other frame manufacturers use these collections to meet the desires of an increasingly demanding buying public with specific needs.

Big private brands will continue, but those that drill down to special interests are critical, Eales adds. “So, while pockets of private label and national brand growth exist, those pockets are defined by unique needs and wants at a very intimate level. Marketers must invest to understand these micro-level opportunities and tailor their marketing story accordingly.”

Strategic Additions

ClearVision has created a collection of proprietary brands, “each a strategic addition to our portfolio, from pediatric frames in our Dilli Dalli collection, to our new high-tech/contemporary brand, Aspire,” Friedfeld says. “As such, propriety brands have become more important based on today’s market needs.”

The investment in this business has provided healthy returns for many companies. “Marchon has always approached its proprietary brands as an integral part of our overall business strategy,” says Claudio Gottardi, CEO, Marchon.

He notes that the company’s Global Collections have grown tremendously. “And we look forward to continue investing/growing these compelling opportunities. All offer unique and different value propositions, and each brand continues to deliver profitability to the bottom line.” In fact, this year, Marchon will beef up Flexon, Gottardi adds, launching a new sunglass capsule for 2015.

Some companies are not as invested in this approach, but they see its value. “We at Marcolin have more than one private brand, but the most important one in our portfolio is Web,” says Giovanni Zoppas, CEO of Marcolin.

“Web comes from a heritage of technology. It was launched the same year as Roberto Cavalli and was a great success.” As that brand expands through Europe and Asia and into the U.S., the company plans to continue looking at and going more deeply into niche-driven proprietary brands, he notes.

“We absolutely know that having at least one private brand in the portfolio is very important,” Zoppas adds. “If there would be opportunity either to buy or make another private brand grow up, we would pursue that because we believe that’s also something important for the industry.”

In the end, proprietary brands may very well end up taking frame products to the next level of quality and creativity as frame manufacturers strive to catch shoppers’ attention. “Because I don’t have that name to drive it, I do need that extra little something on my frame,” Suliteanu says. “I want someone to open up the sample bag or their new pair of glasses, and I want a smile on their face to say, ‘yeah, this is great, this is refreshing.’”

Next month, Part 3 of this exclusive Eyecare Business series looks at how license changes in the frame universe are going to impact daily life in the dispensary.