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HomemistoryThe Good, the Bad & the Opportunity

The Good, the Bad & the Opportunity

The Global Financial Crisis (GFC) has taken a huge toll of most Western economies. For Australia, the GFC has had a much smaller impact with unemployment hovering at just a little more than five per cent, the Aussie dollar booming and our resources exports still in high demand from China. The business of eye care in Australia has also shown great resilience. We asked a number of industry experts to sum up their thoughts on the immediate past and future of the local industry. Whilst some are predicting good times ahead, others are advising caution.

Confidence and Growth

“In the broader retail space last year could be viewed in three segments, the first showing an ‘inflated’ view of consumer confidence, fuelled by the stimulus package; the second, with consumers tightening their spending, concerned about the economic outlook, job security and interest rates – the sector showed signs of consumers really spending predominantly on essential and household items. We’re now seeing a shift in confidence across the broader retail industry,” says Chris Beer, CEO of Luxottica Asia Pacific, Greater China and South Africa.

He reports that in 2009, Luxottica’s optical division – OPSM, Laubman & Pank and Budget Eyewear – remained strong for Australia, New Zealand and across the region. The sunglass sector of the business – Sunglass Hut and Bright Eyes – also displayed significant growth and both parts of the business are expanding into new markets across Asia.

Luxottica’s major competitor in the optical retail space in Australia and New Zealand, Specsavers, reported very strong growth in 2009 both in terms of signing up franchisees and retail revenue and are bullish about 2010.

With every disaster come opportunities. Eye care professionals need to learn from these times, and use them to make their business model stronger

“We will see Specsavers stores go to their next level in terms of trading volumes with a further 100 stores due to open and a growing presence in regional areas,” said Peter Larsen, Managing Director of Specsavers.

Larsen believes the catalyst for the fast growth of Specsavers is due to the company’s “clear and certain direction”.

The largest buying groups Provision and Eyecare Plus, report that despite the GFC and competitive pressures, 2009 was a highly successful year in the business of eye care.

“For the 160 practices that joined our comprehensive program in March 2009, as a group, retail sales have been up every month,” says Cam Battaglia, CEO of ProVision. “Many have achieved record levels of turnover and profitability in what is purported to be the toughest economic conditions in twenty years.”

Michael Jacobs, CEO of Eyecare Plus agrees saying: “the strong performance of our members and the group is proof that independent optometrists can not only survive, but in fact prosper in the toughest of conditions without resorting to ‘hard selling’ techniques.”

In the last couple of years the Australian optical industry has undergone interesting changes with the addition of a number of optical chains into the marketplace.

Richard Grills, Managing Director, Designs for Vision, believes the consumer advertising done by these groups has “raised awareness of the need of eye care in the marketplace.

“Other programs such as generated by Vision 20/20 with the Australian Government, the Macula Degeneration Foundation and the JULEYE campaign have also increased the awareness of good eye care in our market.

“This concentration on eye care awareness has benefited most practices in Australia and will continue to do so in 2010,” says Grills.

Jacque Katsieris, Managing Director of ProOptics says that for a new company such as hers, starting during such a poor economic time was fraught with fear and trepidation, not only with the GFC, but also with the continuing corporatisation of optometry.

“I have been very excited with the support and commitment from optometrists to the industry and its members. The majority of businesses have supported local wholesalers and hopefully will continue to do so. Most have cemented their place as strong businesses and maintained their integrity in these times of change,” said Katsieris.

Jimmy Hendriks, Sales Manager of RX, Oakley South Pacific, says that as our population ages, the requirement for effective eye care will continue in an upward trend and believes consumers will return to branded eyewear.

“The worst of the global crisis may well be behind us, but the public has become more circumspect with its dollars. The sales of disposable non-branded eyewear, may well have peaked, as consumers return to the brands they trust. Legitimate brands that communicate quality, engineering and style will continue to flourish as the public seek to embrace products with which they feel an emotional connection.”

The relatively sedate subspecialty of Ophthalmology found itself the centre of a political storm last year as it resisted the Federal Government’s attempts to reduce the Medicare reimbursement for cataracts. This story will continue to unfold in 2010.

Ophthalmologist Dr. Gerard Sutton raises his concern at the increased pressure government changes will have on patient numbers. He says: “the key public health issue remains the increased patient load that will inevitably result from the reduction in the rebate. The public health system in NSW is already critically underfunded and will not cope with an increased workload.”

“The ageing population will mean that the newer treatments for ARMD will continue to be in high demand and the outcomes will continue to improve. If indeed our economic recovery continues and consumer sentiment improves, refractive surgery will once more flourish. New technologies in intraocular lenses will provide an ever increasing number of options to our patients.”

The Flip Side

Michael Fazzolari, Finance Consultant at Investec Experien says: “For many Australians, 2009 was a challenging year. With cash flow always being of primary concern, there was a lot of cautious decision-making around spending hard earned cash. In my experience, practices that remained focused on their core specialties, specifically eye testing and serviceability for optometrists, sustained their practice backbones, which in turn fed retail sales.”

Managing Director of Carl Zeiss Vision, Tony Gray and Mark Overton, Managing Director, Ideology Consulting agree that it is a challenging but exciting time in the eye care industry with increased competition for market share as the focus shifts from location growth and establishment to marketing.

Says Mr. Gray: “The current competitive environment is forcing retailers to review their mid and long term strategies and it is sharpening the focus all players in the industry have on their winning formulas for long term growth.”

Mr. Overton expressed concern that the economic crisis may not yet be over, and increasing interest rates and living costs could trim consumers’ discretionary spending. “We may be in danger of losing some smaller independent practices as the pressure on profit margins increases along with competitor numbers. Poorly differentiated practices and product suppliers are likely to find the going tough in a consolidating market.

Greg Johnson, CEO of Optometrists Association Australia, Queensland Division, used the association’s annual congress as a barometer and said 2009 had a negative affect on the optometry industry. He points out that 14 companies withdrew from the QV 2009 Exhibition Hall, most citing other reasons, but it was apparent that the real reason was economic. However, he points out that many of those companies have signed up for 2010 and enquiries about sponsorship are unprecedented.

“On the flip side, delegate numbers were unchanged and no reports were received from practitioners that they were doing it tough. The area in which we received most complaints from members was the alleged ‘tacky’ advertising by chains. Independent members who feel they are at a disadvantage in terms of marketing should contact ProVision which was set up for that purpose,” said Mr. Johnson.

The Opportunities

In a more competitive retail environment, education of the optometrist to better educate the customer is the key to business growth.

Pascal Toneatti, CEO of Essilor says: “it is appropriate to continuously seek improvements in the way we help people see better and protect their vision. We know the most effective way to inform people about eye health is directly through their optometrist. Thanks to the high level of qualification in this country, people rightly have high confidence in their optometrist.

“Unfortunately, it is not uncommon that patients are not always informed of the comprehensive solutions available to address their correction needs. Nowadays an optometrist has a huge choice of eyeglass solutions to address his patient needs, yet mostly patients just have been told about one.”

According to Luxottica CEO, Chris Beer, as consumer confidence continually increases, so too will spending on both discretionary and non-discretionary items. “Customers will be looking for a different kind of ‘value’. 2009 was largely driven by price. 2010 will be more about quality but simplistic quality. Quality in optometry service and in the products offered. The store experience will play a key role for customers in 2010,” he says.

“I do believe we are through the worst of the GFC and we are certainly seeing the increased consumer confidence through increased spending in our stores… Australia has proved to be pretty resilient throughout the GFC. Perhaps from being cautious, consumers are likely to become more demanding as to what they want by way of eye care and services. Retailers will need to be in tune with customers’ needs more than ever, as the consumer profile re-defines the way they want to shop and what they want for the dollars, on the back of the GFC.”

Mr. Beer predicts 2010 will be a big year for the regional optical industry pointing out that the Asian economies are playing a bigger role. As the Chinese economy de-couples from the U.S.; Asia, and particularly China, has enormous potential for growth. “It will also be a big year for Australia and New Zealand”, he says. The economy is growing rapidly and with it, people’s demands for quality products and health services. Consumers have money and want to spend it. They are looking after their health and subsequently becoming more aware of eye health.

According to optometrist Jim Papas, 2010 will see modest sales growth in the eye care industry, as consumers will be affected by rising borrowing costs and slower wage growth which will impact the amount the average person will spend. “On top of this it remains to be seen what will occur for the economy as the government stimulus runs out. The run up to the next election will provide an opportunity for the industry to ensure that eye care becomes an important part of the health care system. How it will be renumerated in the future will ultimately determine its direction.”

Mr. Battaglia of Provision is not as cautious as Mr Papas. He says he is confident that independent optometry has a great future and those practitioners who have a clear strategy and are able to combine clinical excellence with sound business methodologies will thrive regardless of the economic conditions.

Pascal Toneatti, CEO of Essilor, expresses a similar conviction. He believes that while the economic environment still carries its share of uncertainties, the outlook is bright overall. “For a number of people, whose income depends largely on the performance of financial markets or who have lost their jobs, indeed times haven’t been tougher and it will take some time for the effects of that to disappear.

“However the opportunity in our industry remains very significant, as the need for visual correction continues to grow within Australia with the growing and ageing of the population. As such, we are expecting growth activity to continue and remain sustained in the long term.”

Expert Advice For 2010

Don’t Let the Competition Distract You

Managing Director of Carl Zeiss Vision, Tony Gray: “It’s important in periods of great change to remain focused on what you want your business to be and to work on doing it very well. It’s easy to be distracted by the activities of competition and to take your eye off of what the core values and strategies are for your own business.”

Structure Your Finances

Michael Fazzolari, Finance Consultant at Investec Experien encourages all practitioners to “continue to structure their finances appropriately, with regard to cash flow and tax. With every disaster comes opportunities. Eye care professionals need to learn from these times, and use them to make their business model stronger.”

Have a Plan

Michael Jacobs from Eyecare Plus says it is important that all independent eye care businesses have a firm and credible plan for 2010 and beyond in order to be competitive in the market. “If you studied optometry with a view to making a difference in people’s lives through improved vision, don’t let this be the year that you sacrifice your dream. Sixty per cent of all optometry practices are still independent, some more successfully than others. Study your options carefully, get independent advice, but act now.”

Focus on What Your Customers Want

Mr. Grunseit, Sunshades Eyewear CEO, warns retailers to protect their businesses by carrying only stock brands with good sell-through. “Do not be sucked in to offers of consignment that only tie up your available space for good, fast-turning products that create customer loyalty and repeat business.

“Ask yourself why companies offer consignment or surprisingly good deals – does their product not sell? Scriptable sunglasses are an important part of the future of eye care. Optometrists should be promoting this. Just focus on what your customer and general consumers want.”

Provide the Best Value

“If customers cannot clearly see why you are different they will always go to the larger supplier who can add value. All businesses should now have their best game faces on and going flat out to improve their positions. This is always true but particularly so now,” says Rodney Grunseit, CEO of Sunshades Eyewear. He says that companies are in a position now where they need to put on their ‘game face” and focus on looking after the end customer with a brand they feel good wearing. Thus, as the economy lifts, so too will growth.

Capitalise on Existing Customer Base

According to ODMA’s Chief Executive Fiona Carey, “there are lots of useful tips in ODMA’s Optical Retail Guide but if there is one factor which comes out time and again in our research that is critical to increasing revenue it is managing recalls effectively. My tip to independents for 2010 is capitalise on the asset of your existing customer base, aim to increase revenue per customer, deliver superior service and let the competition worry about you!”

Adopt a Best Practice Philosophy

Jimmy Hendriks, Sales Manager of RX, Oakley South Pacific says “the market is more competitive than ever: be it retail or wholesale and unless a best practice philosophy permeates your business you will lose market share because we are dealing with an ever more informed and discerning public.”

U.S. Optical Retailers Optimistic

After Tough Year The Global Financial Crisis (GFC) probably hit the United States harder than most countries and eye care retailers were no different.To track the results and confidence levels of U.S. retailers, eye care website Vision Monday surveyed the local industry and issued their results late last year.

In its sixth annual survey of eye care professionals headlined ‘Better or Worse? ECPs/ Dispensers Make Adjustments in a Tough Year’, Vision Monday reported: “optimism prevails – with 47.8 per cent saying they anticipate sales will be better in the first half of 2010 compared to the first half of 2009, 38 per cent say they think sales will be the same and just 12.2 per cent indicate they think things will be worse.”