Buying into the Benefits

For a while there was talk that the optical giants Luxottica and Specsavers – with their huge reach and advertising revenues – combined with the cut price offers available from internet retailers would lead to the death of the independent optical retailer.

There’s no doubt that the optical landscape has changed substantially, but reports of the death of independents – in the words of Mark Twain – have been greatly exaggerated.

Indeed, in its annual investigative review of Australia’s optical profession, mivision last month revealed that independents – both unaligned and those in buying groups – held more than 42 per cent of total market share and accounted for almost 65 per cent of total ‘optical doors’.

There’s no doubt that the optical landscape has changed substantially, but reports of the death of independents – in the words of Mark Twain – have been greatly exaggerated

Safety in Numbers

Buying groups have been around since the early 1900s, but began to emerge in the Australian optical industry in the late 1980s, with the establishment of ProVision in 1989, and Optipro the following year.

There are now five major optical buying groups in Australia. Whether by design or chance, or perhaps simply the result of commercial evolution, their names are remarkably similar.

ProVision is the largest buying group with 371 member practices; Optovision, which started in 2005, estimates it has about 130 members representing 220 practices; Eyecare Plus, established in 2000, has 170 practices; the Eyeplus Group, which morphed into a formal group in 2009 after an informal beginning has about 95 members with nearly 100 optical doors; and Optipro has 48 members with 50 optical doors.

Provision, Optovision, Optipro, Eyecare Plus and the Eyeplus Group, you’d have to agree, the commonalities invite confusion and must make it hard for any one individual buying group to stand out from the rest. But, as we analyse the packages provided by the various buying groups, they quickly fall into very distinct categories.

Buying Group Models

At one end of the scale is Optovision – a straight-forward buying group that uses its numbers to negotiate group discounts. There are no fees, no rebranding, no training or marketing programs on offer, and members are free to join other buying groups.

At the other end of the scale are ProVision and Eyecare Plus, which provide buying power but also provide extensive assistance with training and marketing. Eyecare Plus, in some instances, also has some obligations around branding (or co-branding) for practices that choose a branded licence option rather than unbranded.

Optipro and the Eyeplus Group lie somewhere in the middle – in addition to buying power, limited business assistance or marketing collaboration is available on request and display of the group logo is optional.

By necessity, this article will devote greater space to those buying groups offering additional benefits.

Operating structures

ProVision

Wholly owned by Optometrists Association of Australia (OAA), operating under a Board of Directors (ProVision optometrists) appointed by the OAA via its National Executive Council. ProVision has its head office in Melbourne.

Eyecare Plus
Eyecare Plus Ltd is a public unlisted company owned by its shareholders, who must be members. The national office is in Port Macquarie, New South Wales.

Optovision
Directed by a board, and managed by a secretariat, Optovision is headquartered in Melbourne.

Eyeplus Group
The Eyeplus Group is owned and operated by directors Ken Rogers and Matt Garratt, both Melbourne based dispensers. The group is run “by the members to benefit the members” and has members Australia-wide.

Optipro
A public limited company, with board of directors. Optipro’s main office is in Sydney.

Fee Structures
mivision asked representatives of each of the buying groups to detail joining fees, any ongoing fees and any percentage of turnover charged. If no fees were charged, we wanted to know how the group was funded. We also wanted to know if there were any penalties for leaving the group – and how difficult that process was.

ProVision
ProVision has a two tiered fee structure and Marketing Manager Sarah O’Connor said members’ costs are “offset by substantial preferred supplier discounts and the level of services utilised”. She says the group is wholly funded through member fees and preferred supplier rebates.

ProVision’s Comprehensive Program: Monthly service fee of one per cent of turnover, with 75 per cent of total product purchases through preferred suppliers OR monthly service fee of 1.5 per cent of turnover, with 50 per cent of total product purchase through preferred suppliers.

ProVision’s Essentials Program: A service fee of between zero and three per cent on total preferred supplier purchases, based on purchase volume. An annual membership fee of AUD$1,000 per practice will apply if prior year supplier purchases are less than AUD$12,500 per month. If a membership fee is charged, the member receives a AUD$1,000 service credit, redeemable on education courses and graphic design.

To leave the group, one month’s written notice is required. Ms. O’Connor says exit fees may apply to Comprehensive members who have not met their three-year initial term due to the high investment associated with the program.

Eyecare Plus
No joining fees. An annual licence fee of 0.5 per cent of practice turnover is charged, which the group’s National Business Development Manager Philip Rose says “can be offset by the available loyalty bonuses and advertising subsidies”. Mr. Rose says Eyecare Plus is funded by licence fees and supplier rebates. “As the group is member owned, all income (after expenses) is distributed to the members as either a member benefit, like free window display units, as dividend on their share-holding or re-invested for future programs.”

Eyecare Plus members have the option of buying shares in direct proportion to the size of their practice. These shares can be bought back by Eyecare Plus should the member resign.

Leaving the group is just a matter of giving 90 days notice with “no fines or fees”, said Mr. Rose.

Optovision
No joining or ongoing fees and charges and the exit strategy is just as straight-forward. Optovision Chairman Tom Moore says that “informing the group by any means will allow you to exit”. Optovision is funded by commission on purchases.

Eyeplus Group
The Eyeplus Group promotes itself with the slogan “no joining fees (ever), no annual fees (ever), no percentage or turnover fee (ever)”.

“We believe joining and being involved shouldn’t cost you a cent. The group is funded by our suppliers under a rebate scheme with a percentage of rebate going to our members. Rebate amounts are confidential. Under the arrangements with our suppliers we do not know our members’ turnover and receive a rebate on the total spend, thus ensuring the confidentiality of individual business’ turnover. Eyeplus does not mark up,” said Eyeplus Group co-founder Mr. Rogers.

He said members “can exit at any time if they are unhappy but as yet no one has exited”. There are no exit fees.

Optipro
Optipro offers two tiers of membership. As a non-shareholder member, there are no joining or ongoing fees. Optipro founder George Nasser says the group is funded by “minimal supplier rebate” and opting out is simply a matter of providing three months written notice “so suppliers can be notified”.

“Over 75 per cent of members are non-shareholder members. This is the growth area as there are no costs involved and all members receive the same buying power,” said Mr. Nasser.

Shareholder members of Optipro must purchase 3,000 shares for AUD$1 each. The company’s website indicates “there are no further membership fees, however if an optometrist owns more than one qualifying business, he/she may purchase 3,000 shares for each of those businesses. The funds collected from share purchases are held in a trust and shares are fully redeemable should a member choose to cancel his/her membership with the group”.

Shareholder members receive an annual dividend, based on 50 per cent of Optipro’s profits. Funds are distributed according to the number of shares held, and purchases made during the year.

Who Can Join?

ProVision

ProVision has the most comprehensive requirements. The criteria for membership is as follows:

• The optometrist(s) must own a majority share in the practice(s)
• Optometrist(s) must be OAA members
• The practice(s) must be full scope (offering consulting and dispensing services)
• The practice(s) cannot be a member of any other optometry management, marketing or buying groups
• ProVision Board approval required.

Additional criteria applies to Comprehensive Membership:

• Mandatory (confidential) reporting of selected retail data and key performance indicators to ProVision for key performance analysis and benchmarking
• Minimum annual practice turnover of circa AUD$400,000, excluding GST
• Membership term initially three years, then renewable annually.

ProVision has no branding or signage requirements, saying it supports members’ “individual brand positioning and highly valued independence”.

Eyecare Plus
At Eyecare Plus, the prerequisite for membership is a new full scope optometry practice (that is, a practice offering consulting and dispensing services), or an existing full scope practice, with a minimum turnover of AUD$300,000. New members must be approved by the Board and existing members. Members cannot join other buying or marketing groups.

Eyecare Plus says there are no obligations on branding, unless the practice is a branded member, in which case, the use of the Eyecare Plus branding, together with the existing practice name, must be approved. Optometrists must be members of OAA.

Optovision, the Eyeplus Group and Optipro have few requirements for membership.

Optovision
Optovision has no prerequisites for membership.

Eyeplus Group
At Eyeplus Group, membership is open to any independent optical outlet and the group’s co-founder Ken Rogers says members are normally owners/operators who are both dispensers and optometrists. “But going forward, small chains will be considered on a case by case basis,” Mr. Rogers said.

Optipro
Optipro membership is open to any independent optometrist who owns the business, subject to Optipro approval. Shareholder members must be full-scope optometrists.

Optipro and Optovision allow their members to join other buying groups. At the Eyeplus Group, members are not allowed to be in other groups.

True to its minimalist approach Optovision has no obligations relating to branding and signage.

The Eyeplus Group and Optipro have recommendations relating to signs and branding, and group logos are – or will be, in the case of the Eyeplus Group – available for use, but there are no obligations imposed. Optipro says members have access to branded uniforms, stationery, a web link and brochures and can co-brand shop fronts.

Primary Benefits

mivision asked each of the buying groups to describe the main benefits of the group over other buying groups or models – the perfect opportunity for self-promotion.

In line with the more comprehensive structures offered by Eyecare Plus and ProVision, the answers were more detailed.

ProVision
“ProVision leads independent optometrists with the most comprehensive level of business support available in Australia today. So much more than a buying group, our breadth and quality of professional services are what sets us clearly apart from any other model.

“We offer extensive expertise, market leading advice and resources across key practice management areas including business management, finance and planning, human resources, retail operations, national and local area marketing, education, in-store training, merchandise and now IT… the largest preferred supplier network of any other buying group… numerous opportunities to network…” said Ms. O’Connor, ProVision.

Eyecare Plus
“Eyecare Plus helps good optometrists become good business owners. Eyecare Plus is member owned. There is no ‘claw back’ of any supplier discounts, independent practices are unified behind a common brand, without removing the identity of the owner/optometrists. Marketing support, member and staff training, business development, supplier relationships, special promotions group emails for easy peer-to-peer advice and the low or no cost of membership are further benefits,” said Mr. Rose, Eyecare Plus.

Optovision
“Optovision uses its large membership to negotiate group discounts. We work on a low cost model and allow our members to run their businesses as they see fit,” said Mr. Moore.

Eyeplus Group
“Our group is free to join and delivers instant savings to members. Store owners don’t have to rebrand and thus avoid further costs,” said Mr Rogers, Eyeplus Group.

Optipro
“Simple, flexible offers and savings with no hidden costs,” said Mr. Nasser, Optipro.

Training and Marketing

Training and marketing are key facets of the Eyecare Plus and ProVision models.

ProVision
“ProVision delivers industry-leading education … over 60 days of face-to-face training was offered in 2012 across 10 different courses, with many offering CPD points. ProVision’s online learning campus also provides basic optical theory and concepts, as well as a detailed induction program… ProVision is now offering a heavily subsidised Certificate IV Optical Dispensing course with RMIT… comprehensive members also receive personalised in-store staff training and coaching… essentials members can access the same on a user-pays basis.

“All members can access advice and planning in relation to their local marketing… a range of local area marketing templates and resources are available for customisation… a rolling calendar of six exclusive consumer campaigns are offered annually… graphic design and a range of ProVision branded packaging and accessories at a low cost,” said Ms. O’Connor.

ProVision says its comprehensive members receive national marketing campaign packs (available to essentials members on a cost recovery basis) and complimentary use of a large promotional media screen, with visual content developed by ProVision.

Eyecare Plus
“We regularly hold business development workshops; regional member meetings; staff training, support and co-ordination; quarterly marketing campaigns; local area marketing support and advice; production of generic and tailored marketing materials and campaigns.

“There is no compulsion to participate in training and marketing campaigns, but incentives to participate are always offered. After supplier or national office subsidies, costs (for training and marketing) are kept to a minimum for the members, especially as we are member owned. For example, a six hour training workshop costs AUD$55 per attendee and is held in the area of the individual practices,” said Mr. Rose.

Optovision
Optovision does not involve itself in training and marketing, leaving it to members to run their own businesses as they see fit.

The Eyeplus Group
The Eyeplus Group does not offer training, but told mivision that “our suppliers are free to support our members by a marketing contribution,” said Mr. Rogers.

Optipro
Optipro indicates training and marketing assistance is available “on request” and that members are presented with “opportunities to participate in regional marketing groups to develop shared campaigns that cost effectively target (their) local area”. As noted above, Optipro assists with marketing materials such as stationery and brochures.

Buying with Buying Groups
So what of the products available through buying groups. It is, after all, the primary focus of a buying group. Who chooses the suppliers? How transparent is the tender process? And can you buy outside the group?

Again, the answers vary dramatically.

ProVision
ProVision provided a list of 24 preferred suppliers to mivision. Its website lists its exclusive brands and has a state-based brand search function (www.provision.com.au and select the menu tab ‘Eyewear’). ProVision says there are “no minimum orders required with any supplier” and members can buy outside the network however “comprehensive members must meet a minimum percentage of total purchases across any selection of preferred suppliers”, said Ms. O’Connor.

“With a 50 to 75 per cent minimum preferred supplier purchases arrangement for comprehensive members (depending on the program), there is significant opportunity for members to make the choices that best meet the needs of their clientele”.

“Preferred suppliers are chosen based on a combination of factors including the level and trend of member purchasing support, brand potential and differentiation, strategic alignment with ProVision’s goals (e.g, Private Label and exclusive brand offers), trading term benefits (e.g. warranty support and rotation policies) as well as net pricing advantages,” said Ms. O’Connor.

She said suppliers were typically locked in for two years, with member surveys providing “critical input into the review process”.

Eyecare Plus
Eyecare Plus also makes no secret of its strategic partners and provided mivision with a full list – a selection of the brands carried is also displayed on the Eyecare Plus website (www.eyecareplus.com.au and follow the menu link to ‘Frames and Lenses’ to see brands in each category).

Again, members are not required to place minimum orders and are free to buy from other suppliers outside the group. Eyecare Plus provides its members with all of the suppliers’ tenders every two years and then the members vote on who they wish to include based on discounts, exclusive product offers, stock rotation or warranty policies, as well as marketing support from the individual supplier. The members’ decision is final. Suppliers are usually locked in for two, and occasionally four, years.

Optovision
Optovision cites Carl Zeiss as its foundation partner and a strong supporter of the buying group. But Mr. Moore says there are “other frame and contact lens suppliers involved” and several of these are listed on the main page of the group’s website (www.optovision.com.au). Arrangements with suppliers are negotiated between the Board and the supplier, and usually reviewed annually. Mr. Moore said Optovision members are surveyed regularly about suppliers, and any suggestions are followed up by the Board. There are no minimum orders and members are free to buy from suppliers not associated with the group.

The Eyeplus Group
The Eyeplus Group lists and promotes its suppliers on its website (www.eyeplusgroup.com.au and choose ‘Suppliers’ on the menu bar). There is no minimum purchase, and suppliers are “chosen by members by voting or directors’ discretion,” said Mr. Rogers.

“Our members are free to use other suppliers as our group embraces members from different demographics and can tail the use of suppliers to complete their stock”, he told mivision. While Mr. Rogers said agreements with suppliers were confidential, they were “open to review by both parties at any time”.

Optipro
Over at Optipro George Nasser is more circumspect, citing confidentiality in refusing to divulge either the group’s main suppliers, its strategic partners, or the process for choosing them. But suppliers aren’t locked into contracts, with Mr. Nasser saying “we work on trust and our reputation in the optical industry with optical suppliers”. Asked whether members have any input on choosing suppliers, he told mivision that “all comments are considered and evaluated”.

At Optipro, there are no minimum order requirements and members are free to buy from other suppliers not associated with the group.

Conclusion

There are a range of other factors that you may need to consider before choosing a buying group. For example, territory protection – for some buying groups, particularly those involving branding or co-branding, it is an issue; for others it is irrelevant or subject to negotiation.

You must also consider whether you are willing to provide the group access to your turnover figures.

In the end, the decision really comes down to what it is you are looking for – a straight buying group with few, if any, frills will be the option that suits some practices. Others will flourish with a more comprehensive support network.

The one thing all buying groups have in common is the desire and ability to support independent optical practices to compete on level terms with the optical giants.