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Tackling Online Retailing

In a recent report Australia emerged as the leading nation of internet shoppers when compared to 10 other countries. In August, mivision explored how the internet is affecting retail optometry in Australia. This month, specialist optical business consultant, Dr. Gary Gerber, looks at strategies and insights from overseas to help you compete effectively alongside online optical retailers.

Like most other business segments, Australian optometry faces an increasing challenge from online retailing. Australian consumers – long known as early adopters of technology – are becoming more comfortable buying online. The recent surge in the Australian dollar has driven an increase in online purchasing from overseas retailers for items such as electronics, clothing and other durable goods. In fact, a report from Swinburne University of Technology in Melbourne suggests that Australians may be the world’s most avid online shoppers with 57 per cent of Australians searching the internet for something to buy at least once a week and more than half buying something online every month.

The trend towards online purchasing of eye care products is clearly here to stay. Recent estimates show up to 20 per cent of contact lens purchases are made online, and the online market for sunglasses and glasses is growing dramatically. So what can eye care professionals do to ensure they remain competitive? What lessons can be learned from markets like the United States where online contact lens sales account for about 18 per cent of sales and online spectacles are about two per cent and growing?

Surveys consistently show there are two main reasons customers buy online: convenience and price. The internet offers a wide variety of products, with excellent online marketing and delivery to your home without having to fight traffic to get to a practice. Plus, without the overheads of high rents, labour and equipment, so-called ‘e-tailers’ are able to work off slim margins, undercutting traditional eye care practices significantly on price. Talking with many optometrists in Australia, we see a variety of strategies for dealing with this growing threat.

Recent estimates show up to 20 per cent of contact lens purchases are made online, and the online market for sunglasses and glasses is growing dramatically

Strategy 1: Join

One strategy optical retailers are employing is going online themselves. An online search for ‘glasses’ or ‘contact lenses’ reveals a slew of optical retailers and sponsored links. OPSM, Specsavers and The Optical Superstore all featured prominently in several searches. In addition, many smaller optical practices have a strong online presence.

But is this strategy right for you? Any business, especially a smaller one, needs to have a clear positioning in the market. Do you want to be known for your clinical competence, fashion brands, service or specialty care such as low vision?

Certainly offering an easy way for customers to buy from you can help address convenience concerns. This could be through your own website, but equally can be achieved through services like contact lens delivery to patients’ home or work, extended or weekend hours to make collection simple or giving patients the option to order by email.

Some contact lens manufacturers now offer automatic replenishment services so products can be shipped at regular intervals – either to the practice or directly to the patients – offering a similar convenience to the internet. In the U.S., savvy practitioners have discovered one effective approach is to dispense 12 months of lenses directly from a carefully configured and stocked in-practice inventory.

Emmanuel Calligeros, who operates a busy practice specialising in contact lenses in Newtown, in Sydney’s inner west, highlights concern for the “join” approach, saying pricing must be “very aggressive” to be competitive online.

“Once you are online you either need to sell at that price to all your patients or create a two tier pricing model which risks upsetting your practice’s patients,” he said.

Having your own web presence can certainly be beneficial, but it needs to be consistent with your business strategy and positioning.

Strategy 2: Match

Recent price wars between major optical retailers show another strategy some traditional retailers are taking – compete on price. Offering ‘2 for XXX’ deals, free contact lens exams and ‘no gap’ glasses helps reduce the price gap with online retailers and keep people coming into the store. This model can be successful if you have the marketing muscle to generate the volume required to work off smaller margins. But even this strategy is vulnerable to online ‘e-tailing’.

Recently, Clearly Contacts (www.clearlycontacts.com.au) ran an online promotion for the first 1,000 Sydney residents to sign up and get a free pair of prescription glasses. The process was easy and took 15 minutes online to complete, and within 10 days a new pair of glasses arrived from overseas. Though promoting themselves as contact lens sites, many of these online retailers are expanding rapidly into sunglasses and glasses, as these markets represent significant opportunity.

Mark Koszek, who practices at Eyecare Plus in the southern Sydney suburb of Ramsgate, suggests that, “for a smaller optical business, trying to match online pricing is a very dangerous game as the margin requirements are significantly different. It’s important to focus on eye care and educating patients about the clinical aspects of contact lenses, not just price.”

Strategy 3: Defend

An increasing trend for optical retailers, particularly in contact lenses, is moving into ‘home branding’. Taking known national brands and changing the label can make it harder for customers to repurchase online or at other retailers. Specsavers have a range of ‘easyvision’ products, Luxottica have ‘Activize’ and many other groups have their own label. This strategy may allow you to keep your prices higher as your customer will find it harder to repurchase elsewhere short term.

This was a common strategy in the United States years ago, but faced challenges when online retailers wised up and starting promoting the national brand as being substitutable for the ‘home brand’. In fact, U.S. legislation now requires practitioners who prescribe so called ‘private label’ lenses to also denote the national brand, thus making this strategy ineffective. Already in Australia some online sites are starting to promote their products as ‘same as’ some home brands such as ‘ProVision’. While perhaps effective short term, online retailers are quickly making this strategy obsolete as a ‘defence’.

Strategy 4: Play Your Own Game

So if a retailer doesn’t want to ‘join them’, can’t ‘match them’ and can only ‘defend against them’ for so long, what strategy works? While there is not one answer for every retailer, there are some consistent strategies that work and insights from overseas that can be applied.

1. Clearly define your business strategy.

What do you want to be known for? Without this, any strategy you employ is likely to fail. Once you choose that strategy, stick to it and don’t waver.

2. Ensure your customers see the value in everything you do.

If you only provide a product, online retailers or your competitor around the corner can always match the product at a better price. When patients purchase lenses from you, do you stand behind them if they have problems? Will you exchange unopened boxes if their prescription changes? Can they come to see you if they have any issues with their lenses? Let patients know about those and any other services you provide.

3. Charge appropriately for your professional time.

The old model of marking up product to offset low fees is not sustainable for most optical practices. Review your actual costs and charge fees for your services, which will allow you to reduce your mark up on products to be more competitive. This has been one of the best ways U.S. practitioners have combated online retailers and remained profitable.

4. Monitor pricing and sales volume and adjust pricing as necessary.

While trying to match ‘e-tailer’ pricing is usually unrealistic, ensuring reasonable margins will help maintain your competitiveness. Look at your pricing as a fluid, not static, item and revisit it at least quarterly.

5. Be proactive.

Ensure you have an effective recall system and communicate regularly and effectively with your patients. Contacting your customers frequently will encourage them to keep coming back to you rather than being swayed by the latest offer from someone else.

6. Recommend new technology products and services.

You have the opportunity to offer new products and services face to face, something online retailers can’t do. Take advantage of this to ensure your customers hear about new offerings from you, and recognise the benefits you offer them.

7. Keep an inventory of your most commonly prescribed lenses.

Then, take an initiative to dispense an annual supply of contact lenses and consider offering tiered pricing for annual supplies. Doing so pulls the patient out of the market (internet or otherwise). Present annual supplies to patients as a bonus and avoid using the word ‘boxes’ in your presentation to patients. For example, instead of saying, ‘eight boxes of lenses will cost $XX’, say ‘your yearly supply of lenses is $XX’.

8. Be easy to do business with.

Set up a direct debit payment system to make it easy and affordable for patients. By spreading the cost of lenses over 12 months, direct debit can make contact lenses more accessible and keep patients purchasing from you. Combining a direct debit service with delivering lenses directly to your patients’ home or work provides a high level of convenience and has been very successful at both limiting loss of patients to the internet and reducing the number of people dropping out of contact lenses in the United Kingdom.

Given the amount of coverage online retailing has seen in the optical press and as much angst as it’s caused, it’s helpful to look at a historical perspective in the United States.

Internet dispensing of contact lenses is nothing new in the U.S., yet after more than 15 years of being available, it has consistently hovered at 18 per cent of sales. Of course, practitioners wish it was zero per cent, but the key point is that it has not taken over the contact lens market and its growth has been flat. That is even the case after the two biggest forces, 1-800-Contacts and Walmart, joined together.

Online retailers are obviously here to stay. Practitioners who are well positioned in the marketplace and have the patient as the centrepiece of their strategy will be in the best position to compete and thrive alongside the online optical retailers.

Dr. Gary Gerber is a very successful practicing optometrist and the founder and president of The Power Practice, a practice building and consulting company whose mission is to make doctors more profitable and efficient. Dr. Gerber is also a prolific writer and speaker as well as an accomplished mentalist and magician who uses illusions to help illustrate his key learning points as well as entertain his audiences. He has authored hundreds of articles, given more than 500 presentations and is also the publisher of www.optometricincome.com.