TREND REPORT

Ten Top Business Trends

What’s in store for the optical market this year? Find out with these key business trends you need to know

BY ERINN MORGAN

DO YOU FEEL challenged in your business today? If words like Warby Parker, healthcare reform, and economic uncertainty send a chill down your spine, you’re not alone. But, with good news (seemingly) here to stay, you’ll get warm and fuzzy reading our positive list of 10 of the top business trends for 2014, culled from the Eyecare Business Annual Market Trends Study.

Packed with information, tips, and insights that will benefit your business strategy for 2014 and beyond, this list will help get words like growth, smart business strategies, and opportunity back into your vocabulary.

No. 1 GROWTH

Perhaps this list’s most important trend is continued business recovery. Nearly half (48 percent) of eyecare professionals reported that first-half sales for 2013 were up compared with 2012, according to the Eyecare Business Market Trends Study. In addition, a full 56 percent said their sales were up in 2012 over 2011, indicating a continuation of the growth in the market that has been happening for the past three years.

And, as sales rise, so does ECPs’ optimism. More than 58 percent expect revenues for eyewear sales and services to increase in 2014; 55 percent expect revenues to increase for eyecare and exams.

MARKET WISDOM: “Pretty much every category except elective refractive surgery is seeing growth. The eye exam market is up close to four percent, the lens market is probably up five percent with growth coming from digitally surfaced lenses and progressives, and frames are up about three percent (though people are reusing frames). There’s also been a real bump in sunglass sales—about a 5.5 percent increase in dollars. If you look at the whole market, it’s up around 3.5 to 3.9 for the year.”
— Ed Greene, chief executive officer, The Vision Council

{COOL STAT}

2.8% the annualized growth rate estimated for the U.S. in Q3 2013

No. 2 YOUR BIGGEST CHALLENGE

What are you concerned about for your business this year? According to our Market Trends Study, ECPs across the country point to healthcare reform as their biggest concern. More than half (54 percent) say they believe healthcare reform will decrease profit margins.

Other business challenges pinpointed by ECPs include managed care (33 percent), a stagnant economy (28 percent), plus overhead costs and hiring good people (both 20 percent). That’s a change from 2012, when the main business challenge was a stagnant economy (39 percent), followed closely by managed care (38 percent).

MARKET WISDOM: “Healthcare reform is but one element of an increasingly competitive and complex eyecare marketplace. No one knows what will actually result from with healthcare reform. What is known is that pricing will be driven downward and eyecare and eyewear will have to be delivered with increased efficiency and effectiveness in order to remain competitive. Practices will need to restructure and practice leaders will have to modify their investment strategies toward improved hiring practices and ongoing training investment at all levels.”
— Al Cleinman, founder and president, Cleinman Performance Partners

{COOL STAT}

36% the number of ECPs who say healthcare reform is their leading business challenge

No. 3 PRIMARY CARE OPPORTUNITIES REMAIN

While eyeglasses moved to front position in areas ECPs currently target for growth, primary care opportunities remain a strong contender. In all, 53 percent of ECPs regard primary care as offering the most opportunity.

On the whole, patient exams account for 30 percent of total revenues—31 percent for ODs and 28 percent for opticians surveyed in 2013. These numbers have shifted from 2012, when 36 percent of revenue for optometrists and 24 percent of revenue for opticians came from patient exams.

MARKET WISDOM: “Top performers understand a critical element of future success will be the ability to separate their ‘brand’ from that of their competition, whether brick and mortar or online. As the device side of the industry continues to effectively commoditize eyewear through ongoing discounting messaging, savvy leaders understand that expanded scope optometry provides virtually limitless opportunity for brand differentiation.”
—Al Cleinman, founder and president, Cleinman Performance Partners

{COOL STAT}

30% the amount of total revenues generated by patient exams for eyecare businesses

No. 4 BUYING INTO EFFICIENCY

Compared with five years ago, eyecare professionals are ramping up their in-house lab capabilities. According to our Market Trends Study, nearly half of ECPs finish lenses in house, and a full 20 percent of eyecare businesses do more than 75 percent of their lab work in house. Additionally, those with in-house labs handle 36 jobs per week and generate an average of nearly $40,000 annually from in-house edging.

As such, it’s no surprise that 44 percent of eyecare professionals plan to make an equipment purchase within the next three years, a number that is up significantly from the approximately 33 percent that planned for the same in 2012.

The leading reason for making an equipment purchase? The focus is on efficiency and cost savings, with more than 60 percent of ECPs noting this reason for purchasing equipment.

Still, more than half of ECPs still choose to work with an outside lab to fulfill their lens processing needs. In fact, 70 percent of ECPs who are not currently finishing lenses do not plan to do so in the near future.

MARKET WISDOM: “For better or worse, today’s edgers are so technologically driven, you don’t need a lab rat to run the machine. You don’t have to take someone’s valuable time off the selling floor. You can hire somebody, even for part-time, and train them (on the finishing equipment). You’ve got to be willing to move up to better, faster, and more sophisticated [in-house finishing equipment]. Don’t be afraid. Not only is it good for the patients, it’s good for your practice as well.”
— Carl Spear, OD, FAAO, Sight and Sun Eye-works, four locations around Pensacola, FL

{COOL STAT}

44% the amount of ECPs who plan to make an equipment purchase in the next three years

No. 5 SEEKING EDUCATION

Training and education is a significant area of interest for eyecare professionals, according to the EB Market Trends Study. In fact, the vast majority of ECPs consider the education offered by their vendors to be “very” or “somewhat” important to their practice/business. Specifically, 68 percent of respondents said they would like to know more about the technical aspects of the lenses they dispense. Also, ECPs ranked education as the third-most important factor they consider when choosing a wholesale optical lab.

MARKET WISDOM: “We do all kinds of education at the Vision Expo trade shows, including practice management education. We also see a lot of our members (vendors), big buying groups, and labs providing education, including online continuing education.”
— Ed Greene, chief executive officer, The Vision Council

{COOL STAT}

55% the amount of ECP revenues generated by frame sales in 2013

No. 6 EYEGLASSES BOOM

ECPs say eyeglasses are the ultimate opportunity in today’s market, with a full 60 percent noting this area as their biggest growth category, according to the Market Trends Study. This is a marked increase over the 45 percent of ECPs that saw eyeglasses as a key growth opportunity in 2012.

This upswing is not surprising, however, as eyewear (frames and lenses) accounted for a full 55 percent of ECPs’ revenues in 2013.

A slight difference was noted in 2013 between optometrists (59 percent) and opticians (66 percent) who say eyeglasses are a key growth opportunity. In 2012, those numbers were different, with 34 percent of ODs and 55 percent of opticians saying the same. This shift for optometrists may be occurring as other areas become less profitable.

When it comes to buying, the 2013 Eyecare Business Market Trends Study finds 94 percent of opticians say they are responsible for purchasing frames (up from 81 percent in 2012) and 79 percent of ODs say they do the same (up from 69 percent in 2012). In the spectacle lens arena, 86 percent of opticians (compared with 77 percent in 2012) said they are involved in purchasing decisions, while 79 percent of ODs (compared with 77 percent in 2012) said the same.

MARKET WISDOM: “At our locations in higher-end areas, people are still spending money on high-end products. In a place like upstate New York, we sell more mid-range product. We’ve also had strong growth with contact lenses, but they are a lower-margin product. You’re going to make the most money with eyeglasses—and you’re going to make the most money with the lenses you put into the frames.”
—Glenn Spina, president and CEO, Emerging Vision Inc.

{COOL STAT}

60% the amount of time business owners should spend on training their best performers, according to Success Coaching (Sue Clement.com). In addition, 30 percent of time should be spent on the high-potential staff, and 10 percent on the low performers.

No. 7 A LEAP FOR LENSES

Today, lenses are an eyecare business’ best friend, with more premium lens options, more technology, and more customer appeal than ever. According to the Eyecare Business Market Trends Study, eyecare professionals reported selling more pairs of lenses per day in 2013 than two years ago in 2011.

Not surprisingly, performance is the leading criterion for patients in determining the spectacle lens brand they will purchase. In fact, a full 61 percent of ECPs say their patients request specific brands.

Where will future growth come from in this area? A notable 81 percent of eyecare professionals expect an increase in progressive lens sales over the next two years. In addition, 78 percent see free-form lens sales increasing—nearly half (44.6 percent) expect an 11 to 25 percent boost in this high-tech lens arena.

MARKET WISDOM: “2014 is going to be a fantastic year for growth in digital lenses. I’m really big on prescribing from the exam chair and explaining to patients why they need to go digital. I also see big growth in computer lenses. I prescribe a lot of computer glasses with [photochromic] lenses and anti-glare coating—this is preventative eyecare.”
— Eric White, OD, Complete Family Vision Care, San Diego

{COOL STAT}

500,000 the number of pairs of eyeglasses three-year-old Warby Parker has donated to people in need; the online retailer donates one pair for every pair of glasses it sells

No. 8 LEAVING THE WEB TO WARBY

According to EB’s Market Trends Study, the majority of eyecare professionals are staying the course, focusing on what they know (and excel at)—brick-and-mortar retail—and leaving the Internet-based commerce to companies (like WarbyParker.com) that make online sales their primary focus.

While 82 percent of ECPs report having a website, 57 percent of sites are for business information only. Nearly a quarter of eyecare professionals (24 percent), however, say their website is designed to both deliver key business information and also sell optical goods—mostly contacts—online.

In fact, nearly 82 percent of those selling online say they sell contact lenses. And, almost 30 percent sell plano sunwear.

Of those who are not currently selling online, 16 percent plan to enter the e-commerce arena within the next year. Another quarter (23 percent) say they never plan to sell online, and 62 percent just aren’t sure.

MARKET WISDOM: “It’s not an easy business to be in, I will tell you that. I don’t think it’s for everybody. It’s expensive to play in the game, and it’s a tremendous amount of daily work, plus you see almost a 30 percent return rate. But, I love it and I wouldn’t want to do it any other way.”
— Brad Childs, chief operating officer, Eyetique.com and Eyetique, 11 brick-and-mortar locations in Pittsburgh

{COOL STAT}

78% the amount of ECPs who expect free-form lens sales to increase

No. 9 SERVICE AS SALVATION

How are eyecare professionals combating their demons? According to EB’s Market Trends Study, 67 percent of ECPs say that stressing customer service is, by far, the leading way they are working to overcome business challenges. A not-so-close second is reassessing inventory mix to reflect customer base (43 percent).

MARKET WISDOM: “We are 12 stores with approximately 48 employees, and we’ve spent an incredible amount of time and energy training staff on providing excellent service. We’ve even taken our managers for training to the St. Regis Hotel, and the staff there explained what high-quality service is all about.”
— Ed Beiner, president, Edward Beiner Purveyor of Fine Eyewear

{COOL STAT}

86% the number of buyers who say they will pay more for a better customer experience, according to a Customer Experience Impact (CEI) Survey

No. 10 THE SWEET SPOT FOR FRAMES

The average percentage of ophthalmic frames as a part of dispensary sales (64 percent) has not increased in the past two years. The news in this arena is, however, that ECPs are seeing patients buying more less-expensive frames (51.6 percent, up from 48 percent in 2012) to suit their economy-battered budgets, according to the EB Market Trends Study.

As such, eyecare professionals still put the lion’s share of their assortment into midrange product (52 percent). Still, nearly 30 percent focus on high-end frame products, while less than 20 percent spotlight value-priced product. The fastest-growing product categories in frames today? The inspired line-up includes Rx sunwear (43 percent, up from 33 percent in 2010) and technology/computer vision (17 percent).

MARKET WISDOM: “It’s not about the pricepoint; it’s really about carrying the right frame brands with the right style, look, and focus. You can find something great for $200 [retail] and also at $600. Today, people are spending a couple more dollars than they did the last few years, and I’d say we are out of the woods.”
— Ed Beiner, president, Edward Beiner Purveyor of Fine Eyewear

{COOL STAT}

$1,500 the cost of the Google Glass prototype to 10,000 test wearers prior to the product launch in 2014