The average optical retailer made a net profit of around just AUD$10,000 (or 3.1 per cent of total sales over and above all salaries) for the 2011–12 financial year, down from 5.2 per cent in 2010–11, according to the 2012 Eye Talk Annual Survey, published last month (September).
The report reveals that decreasing income from fees and consultations, compounded by escalating operating costs, resulted in Australian optical retailers suffering a year of poor financial performance.
The Eye Talk Annual Survey has been published each year for the past 10 years. This year it consulted with 276 practices.
On average, the practices surveyed employed 1.79 full time equivalent staff, comprising 0.64 optometrists and 1.15 support staff. The average number of optometry consultations conducted by optical retailers was 1,297 per year which represented about 27 per week or less than five consultations per day for a six day working week. The average number of consultations conducted by an individual full-time optometrist per year was reported to be 2,027.
These changes mean that ACT optometrists who are therapeutically endorsed may now prescribe from the full Optometry Board list
The 2012 Survey highlighted that the average revenue per practice generated for the year to 30 June 2012 was AUD$357,582, down 4.3 per cent from the previous year’s average revenue of AUD$373,649.
As low as these figures seem, Dr. Tony Hanks, OAM, practicing optometrist, owner of several practices and a partner of Eye Talk, said the figures are representative of Australia’s optical retailers.
“The sample size of 276 practices is large, and although some of the responses could have come from individual Specsavers and Luxottica practices, most respondents are independents. Statistically, it gives a fairly accurate indication of the market,” said Dr. Hanks.
“The Australian practitioners I talk to around the country say (a downturn of) 4.3 per cent is about what they experienced last year – it’s a factor of the economy, the global financial crisis, increased competition and the uncertainty caused by our hung parliament.
“For so many years we had a country operating on negative savings but that’s turned around – Australians are now saving money. Patients who used to buy three frames at one time will now have the lenses replaced on two frames and buy one new frame,” said Dr. Hanks.
Amalgamation Inevitable
Andrew McKinnon, Chief Executive Officer of the Optometrists Association of Australia’s NSW division said there’s no doubt the current economic climate has significantly impacted optical retailing. “We’re in a really tight market at the moment and although it will get better, we’ll be coming off a low base. Consumer sentiment has probably shifted irrevocably – and I think it’s going to be a while before they get back to spending money just to feel good.”
He said optometrists need to consider reducing overheads in an effort to survive.
“Results from the past few years have shown that returns on investment have been consistently sliding – it’s a downhill drift. This year’s Eye Talk Survey is most concerning – a return of 3 per cent is extraordinarily tight in any business – it’s absolutely wafer thin. My guess is that at some point practices are going to have to look at amalgamating to get their overheads under control because if they don’t, they’re on a hiding to nothing,” said Mr. McKinnon.
He recommended optometrists find a niche in which to operate.
“You don’t want to get into a discounting war with the big guys in an effort to attract new customers – they’ll kill you. It’s important to create something unique for your practice – be different – but also make sure you focus on getting those overheads under control, otherwise you’re going to have serious trouble.”
Tough but Still Confident
Emmanuel Calligeros at Eyecee in Newtown Sydney has created a niche for his practice at the high end of the market and he said despite the tough retail environment, he remains confident.
“The figures aren’t encouraging and you can see why optometrists might be tempted to sell into a chain or buy into a franchise so they can earn a regular income without the stress of running their own business,” said Mr. Calligeros.
“But I think it is possible to survive and to do well as an independent. You just have to focus on taking the time to provide customers with premium eye health services and educating them about how you – and the equipment you use – are making the difference to their eye health.
“You also need to find a niche that works within the area you’re operating in. At eyecee we sell eyewear you can’t buy online. It’s premium quality and it’s priced accordingly. Sure, people can go down the road and pay less for their frames and their clinical treatment but in the end, I’d rather charge more, spend more time with each customer and know that what I’m giving them is the best. They’re working that out too.
“I work on a busy street – there’s no parking or air conditioned shopping centre to walk through – so I have to go out of my way to create an experience that will entice people in.”
Frame Sales Up
Dr. Hanks said research conducted by Eye Talk has identified that patients are spending less on their frames. “Although revenue generated from frame sales declined, the number of individual frames sold increased,” he said.
The average retail price of Rx frames in the surveyed period was AUD$166. This is comparable with America, where according to an annual market survey conducted by Vision Watch, the average amount spent on a frame was USD$124.68 in the 12 months ending December 2011.
In America, despite an ailing economy and the uncertainty of looming elections, optical sales increased over the past financial year. Dollars spent at independent optical retailers in the US were up 3.3 per cent year on year to December 2011. Optical purchases from ‘all retail outlets’ in the same period represented a 2.8 per cent increase over dollars spent in the previous year.
There was USD$28,430 billion spent on vision care products and services at optical retail locations. Sunglass sales, which make up a tiny proportion of the overall market increased by 5.3 per cent, while sales of frames increased by 2.8 per cent and lenses by 0.9 per cent. However, the value of contact lenses sold through optical retailers declined year on year by 1.6 per cent.
In Australia, the break-down of category sales is unclear, however, fees charged for spectacle lenses were down 1.7 per cent from the recommended fee published by Eye Talk and the fee charged for contact lenses was down a significant 6.7 per cent.
Dr. Hanks said greater political certainty is needed to stimulate the Australian market. “I keep thinking things are going to turn around but that’s wishful thinking. If we had an election and there was a decisive outcome that would be good for the market and the country – I’m not referring to which way the politics takes us, we just need the uncertainty to be removed and for decisions to stay decided,” said Dr. Hanks.
ACT New Prescribing Rights
ACT Government Health has announced that, effective immediately, therapeutics endorsed optometrists can prescribe all Schedule 4 (prescription only) medicines specified on the National List.
Prior to the announcement, endorsed optometrists in the ACT were authorised to prescribe certain medicines and general optometrists were authorised to administer certain medicines listed in the ACT Medicines, Poisons and Therapeutic Goods Regulation 2008 (MPTGR). The lists published in the MPTGR were previously not consistent with the National List, which resulted in a lack of consistency in optometry practice between the ACT and other States and Territories (most noticeably between the ACT and NSW).
Under the MPTGR amendment, endorsed optometrists are authorised to prescribe prescription only medicines from the National List to the extent necessary to practise optometry. Additionally, optometrists holding general registration are authorised to administer certain medicines during consultations
to the extent necessary to practise optometry.
“These changes mean that ACT optometrists who are therapeutically endorsed may now prescribe from the full Optometry Board list,” said Andrew McKinnon, Chief Executive Officer of OAA NSW.
“This is great news and our thanks go to Genevieve Quilty, Jane Duffy and Vivien Bevan from ACT Health for their work in getting this important change through.”