With new online retailers putting pressure on the price of eyewear, the traditional optical retail outlet looks set for change, writes Tzvi Balbin.
Let me begin with a short anecdote. I’ve been wearing glasses since primary school and this year when it came time for the customary ‘visual upgrade’ I visited my local independent Melbourne optometrist. Currently, my brand of choice is Ray Ban and I knew they stocked a comprehensive range.
It was a refreshing experience. Sales staff were helpful and insightful. They expertly matched my face ‘type’ to an acceptable style and I left happy with my choice. Parting with $600 – including lenses – was easy.
I lie. I need to tell you the truth.
I did enjoy a fantastic experience, and the sales staff were amazing. They did match my face type and I was happy with the chosen pair. However, I’m from a different generation. I pulled out my iPhone, did a price comparison, negotiated a little and subsequently handed over $280 (including lenses) for the same pair of Ray Ban glasses to an offshore retailer (using a slick optimised mobile site).
Increasingly, this will become an all too common occurrence. Try locally and buy online. E-commerce facilitates an open global market place chock full of information and potentially stymies the profitability of traditionally strong bricks and mortar verticals.
Globally a company called Luxottica dominates the optical industry. Once Prada commissions a design, Luxottica controls the manufacturing, logistics and distribution process, end to end. Increasingly they also supply online retailers who have the advantage of being able to sell at lower prices than a small retailer due to reduced overheads and cash flow. In one sense, they can be seen to be competing with their traditional partners and killing their own business from within. To add to this morass, the levels of ‘grey market’ designer brands that are entering into the market over the past few years is growing exponentially. Not everybody is discerning; labels talk.
The traditional ‘corner shop’ optical store faces a serious challenge. They invest their money into floor stock and as a bi-product virtually create a pop-up shop for online retailers. Try in store and buy online.
Immovable stock quickly ossifies from an asset to a liability. The reality of readily available stock provides impetus for customers to negotiate on margin or purchasing online from online retailers.
The Inevitable End of Luxottica and What That Means for Retail
At some point when the designer brands realise that in 2013 they can sell to their customers without relinquishing control of the manufacturing, logistics and distribution process, they will. It’s about margins and profit. Increasingly we see brands retake complete control of their own destiny. Why wouldn’t I buy Ray Ban from RayBan.com.au at a better price than the local store or for that matter from an online retailer? Ray Ban wouldn’t have to share their margins with Luxottica and could pass on savings as well as re-invest their profits wisely. Keeping global control on pricing would emerge as a realistic option. In the meantime, cutting out Luxottica from the value chain may be the first step in that process. Should this occur I believe both bricks and mortar will feel a pinch.
So what’s the solution? Is there a solution? In my mind, there is no easy answer, but here are a few salient options:
If I were Luxottica I would alleviate the cost that a small retailer had to pay for floor stock and help them compete with the e-commerce players. 3D-printed models would look and function as a real pair of glasses would, they would cost almost nothing to manufacture and allow a local optometrist to better manage cash flow and profitability. Their inherent value would be worthless. After all, they aren’t authentic Ray Bans.
Additionally, removing the model number from the frames would be trivial, giving the consumer less opportunity to price compare and more opportunity to try on without distraction.
Finally, virtual fittings are becoming commonplace. You take a picture of your face, glasses are placed accordingly, and you choose the one which is ‘you’. You need to fit this in somewhere? Why not use the same technology many online retailers are using in-store?
Stop Selling Designer Brands and Compete Online
Take more control by manufacturing custom designer frames, keeps all the margins and builds a business. Harder said than done, but this space is definitely heating up. Sneaking Duck, Warby Parker and many others come to mind, as other examples. Be brave, build some identity online. At the same time, manufacturing has its own risks. You need to cost these carefully and decide whether you will outsource, and if you outsource to the unscrupulous, who have no Intellectual Property laws, you could be destroyed surreptitiously by your manufacturer.
Fusion Eyewear Ranges – Sustainable Business Models
The fusion of an exclusive designer range together with a bespoke range gives the consumer very little opportunity to try in store and buy online. Not one item in their inventory can be price compared. This stems back to a company’s unique value proposition and is a sure fire method in maintaining a sustainable business model. SpecSavers exemplifies this model; launching their own range of eyewear as well as exclusively distributing (and perhaps even manufacturing) brands like Alex Perry and Gok Wan.
In conclusion, the outlook for independent optical retailers looks challenging. Either Luxottica will continue to damage those businesses and in turn their own, or other brands will step in and fill the void. Like all good things in life, they must come to an end. The epoch of e-commerce is upon us. Retailers need to react decisively or risk being swept away by the wave of reality.