Divergence was the theme of 2024. Spending in the eyecare industry rose, outstripping growth in the service sector, while traditional markets slowed and interest rate-sensitive markets contracted. Mid-to-upper-income earners and those benefiting from high home and stock valuations drove record-high retail activity as lower-income earners struggled with high prices. Looking forward to 2025, leading indicators foreshadow a gradually improving macroeconomic landscape. The aging demographic bodes well for eyecare demand. Let’s look at some major themes for 2025 and how to plan.

Lower Interest Rates

Monetary policy has been putting a damper on many segments of the economy, but the Federal Reserve began cutting short-term interest rates in September. Rate changes take time to impact markets, so do not expect an immediate boost but rather a gradual improvement. Interest rates are unlikely to return to the abnormal lows of the early 2020s; consider taking advantage of slightly lower rates to invest in your business.

Easing Inflation, But Lingering Price Sensitivity

Easing inflation (the rate of price rise) has been a welcome relief, but it does not erase the cumulative rise in prices of recent years. Expect some price sensitivity ahead; although, this may be less pronounced in the eyecare industry due to the increasing number of people insured by vision or eyewear plans, and both the necessity and style factor of eyewear. Emphasize value offerings in your marketing toward middle-income earners or consider targeting more affluent consumers who are less price sensitive. Honing your competitive advantages will help you avoid competing on price.

Tight Labor Market 

The labor market, which lags the economy, will slow in growth, but demographic trends suggest labor will remain relatively tight. Record levels of employment will support rising incomes and higher consumer spending, a positive for the eyecare industry. However, from a business perspective, this also means labor costs will rise. The combination of rising labor costs and consumer price sensitivity could mean some margin squeeze in the coming year. Look for ways to reduce your dependence on labor or augment current productivity levels through the application of artificial intelligence or other technologies. Take an active approach to managing employee morale and retention; otherwise, your growth in 2025 to 2026 could be throttled by labor challenges. 

U.S. eyeglasses and contact lenses personal consumption expenditures in the 12 months through August averaged a record $47.1 billion, coming in 7.6% above the same period a year ago. Personal consumption trends are closely tied to gross domestic product and retail sales, both of which will grow in 2025 at relatively mild rates. We anticipate that GDP will post an average growth rate of 2.3% in 2025, while retail sales will rise by around 3.8%. Leading indicators support that upcoming macroeconomic growth—though it will be sluggish at first. The aging population puts the eyecare industry in a slightly stronger position than the macroeconomy. Providers that are well-positioned as participants in insurance plans or those able to accept alternative payment plans may be at an advantage. Eyecare providers should be prepared for rise ahead in 2025, but a mild rate-of-growth environment will mean less forgiving circumstances than prior, more robust cycles.

The new year is an ideal time to future-proof your business. Be on top of technological changes. Look for ways to harness AI, but also be aware of the potential for increased security risks and ensure that your employees are well-trained “human firewalls.” Economic protectionism is on the rise. Pay attention to where your inputs are sourced; consider building in redundancy and minimizing exposure to Chinese sources. Along with protectionism comes higher costs, so look for ways to protect your margins.

While the outlook for the second half of the decade appears relatively positive, your longer-term plans should factor in more challenging times in the 2030s. At this point, though, you have plenty of time to prepare.