The New Emerging Eye Care Industry: Breaking All The Rules
When I started working for Lenscrafters as a Lab Technician back in 2001, the eye care industry was in the midst of a Darwinist evolution. A survival of the fittest, if you will. Luxottica, Lenscrafters parent company and world’s largest eyewear manufacturer, had just acquired the sunglasses division of Bausch & Lomb for $640 million, through which they gained ownership of RayBan. That same year they launch EyeMed Vision Care, currently the second largest vision insurance provider in the U.S.
Such dominance had never been seen before, and Luxottica was just getting started. In 2001 Luxottica acquired Sunglass Hut International for $462 million, making Luxottica the world’s leading eyewear retailer. In 2004, Luxottica purchased Cole National Corporation for $401 million, the parent company of Pearle Vision, merging the two largest optical chains in the nation. Then, in 2007 Luxottica compounded its dominance by taking over Oakley sunglasses for $2.1 billion.
It was a time of polarizing opinions. Either you held an extreme dislike for Luxottica’s monopoly or you enjoyed their rise to deity status. Eventually, the madness settled down and there was relative peace. Not to say everyone approved of the state of the eye care industry, it was just something that was dealt with.
From a consumers perspective, everything seems unified and harmonious, but that couldn’t be further from the truth.
On one side you have the big box retail stores like Lenscrafters, Target Optical, Pearle Vision, Costco and Walmart. They can accept a variety of vision insurance plans but EyeMed is the umbrella most of them fall under. Their frame provisions are 98% from Luxottica Group so you’ll find RayBan, Oakley and Vogue (to name a few) in just about every store.
Then you have the world’s largest vision insurance providers, Vision Service Plan (VSP Global), which primarily serves independent Optometrists and Ophthalmologists. In 2008, VSP, already owners of Altair Eyewear, acquired Marchon Eyewear for $735 million, giving them licensing ownership over brands like Nike, DVF, Nine West and Salvatore Ferragamo. 4 years later, Marchon would acquire Dragon Alliance eyewear (Purchase price was not disclosed).
Though independent doctors’ offices are not obligated to strictly carry Marchon and Altair brands, it is estimated that roughly 30-50% of the eyewear selection will be VSP owned. This leaves a bit of room for independent eyewear brands to make their way onto the shelves of VSP doctors’ offices.
A much smaller, but still vital part of the eyewear industry, are the independent opticians. An increasingly rare class of professionals that have their own stores, with the freedom to sell whatever they want, regardless of who makes it. Historically, they have had the most difficult time staying competitive, and in turn, staying in business.
The only nonpartisan manufacturers across the entire eye care landscape are contact lens manufacturers. Legacy brands like Johnson & Johnson’s Acuvue, Cooper Vision, Alcon’s Ciba Vision and Bausch & Lomb sell their products anywhere and everywhere. If you have a doctor’s prescription, you can choose from an unlimited set of options.
The only loyalty or favoritism contact lens manufacturers have is towards the doctors that fit patients with their products. Since Optometrists are in retail stores and independent offices alike, contact lens manufacturers serve them just about equally. I say “just about” because private offices are given exclusive mail-in rebates to offer their patients. This allows private offices to remain competitive with big box retail stores and online retailers that can offer contacts at a significantly lower price.
Divided, yet strangely symbiotic is how the eye care industry functioned for decades. The big got bigger and the rich got richer. New products were released regularly but they were manufactured and distributed through the same traditional channels.
In 2010, a flicker of change was seen. A new segment of the eye care industry started to emerge. Initially thought to be a hipster fad and a passing trend, one that would crack beneath the weight of the existing eye care infrastructure, independent online brands are now a fundamental part of the eyewear and eye care business.
No, buying glasses and contacts online was nothing new in 2010. Companies like 1800Contacts and EyeBuyDirect had been selling online for a couple years, but they sold the same merchandise everyone else did. It was a new way to sell existing products and nothing more.
When Warby Parker launched in 2010, perhaps unknowingly, they laid out a blueprint that would reshape the eye care industry forever. While establishments that were decades old stood and waited for customers to come to their stores, to see their doctors and to buy their frames, Warby Parker chased down their customers and opened their eyes to a new option.
It’s not commonly known, but Warby Parker’s four founders had no previous eye care industry experience. In hindsight, this innocence did them a service. A fresh perspective was needed to persevere and succeed, to stick to the mission and eventually manifest the vision that there must be another way people could buy prescription glasses without paying hundreds of dollars.
The wheel wasn’t reinvented, there was no true innovation in the product itself, and in all honesty, this coming from an optician, you could certainly find a superior product elsewhere. But this didn’t matter. The frame and lens quality was good enough and their target demographic was unlikely to tell the difference. Who was their ideal customer? The social media hungry, Amazon shopping, smartphone wielding millennials that some might say prioritized convenience over price, and sometimes, quality.
It took a few years, and they had to overcome quite a few obstacles along the way, but Warby Parker has had plenty of success. In 2015 Warby Parker was valued at $1.2 billion (USD) and in March of 2018 that valuation jumped to $1.7 billion (USD).
At first only selling online or via their mobile app, they have now opened nearly 100 retail stores in cities across the U.S. Not bad for a prescription eyewear company that only sells Warby Parker brand frames (no RayBan here folks), considered out-of-network by the two major vision insurance providers, and when online, providing no vision exam services.
With Warby Parker’s success in the prescription eyewear sector, it was just a matter of time before a pesky startup came around to irritate the contact lens and eye exam service industry. Take a look at this spreadsheet we put together.
With the exception of Zenni Optical, all the top online eye care companies were founded after 2010. Collectively, they have raised over $400 million (USD) and they are trailblazers in the new emerging eye care industry.
It’s no coincidence that new eye care companies were springing up so rapidly between 2010 and 2016. Consumer trust in online shopping was growing each year, more than half of all Americans owned a smartphone, bloggers and YouTube influencers were driving consumers to at least try an alternative product, and of course… lower prices certainly helped.
Interestingly, with exception to companies like EyeNetra and Visibly, there is no real innovation going on. As I mentioned with Warby Parker, their frames are nothing out of the ordinary. In fact, they didn’t even manufacture their own frames or own their own lab (to cut and mount prescription lenses ) for the first 5 years. Everything was outsourced. I will say that things are much different now. Warby Parker has collaborated with various artists and designers on limited edition frames over the past few years.
With exception to Aveo, who owns their contact lens factory in Malaysia, everyone else outsources their products, and in most cases, they're using decade old technology.
This use of old materials and technology (as it relates to the products) is the most criticized component of these new eye care companies. There are superior frames, higher quality lenses, more durable lens coatings, more advanced contact lens polymers, and for the average price of an online exam ($50), you could get a complete eye exam performed by an Optometrist. This is not an opinion, this is supported by mountains of data.
So how have emerging companies prospered? Simply put, through masterful marketing and customer engagement.
As you can see in the Google Trends Report above, “prescription glasses” is consistently trending up in the U.S. This is thanks to strategic investments in Brand Marketing by companies like Warby Parker, Zenni Optical, Hubble Contacts and more.
If you're not paying close attention you're going to miss the beauty of today's ingenious brand marketing strategies. Warby Parker's team has set the standard here. They've collaborated with fashion designers on limited edition frames. As they open new stores they bring in local artists to paint murals. They have a signature #warbyblue that fills their social media image galleries, and this doesn't touch on the intricacies of their remarketing ads.
Another contributing factor are the ever-present founders, Dave Gilboa and Neil Blumenthal. At least one of them seems to be at each new store opening, they give lectures at business schools, they are very active on social media and if you’re like me, you’ll find them on a Tony Robins podcast talking about their journey to success.
This may seem unnecessary, but every great company of the 21st century had a human element to drive the story of the brand into consumers minds. Steve Jobs did that for Apple, Bill Gates for Microsoft, Mark Zuckerberg for Facebook, Larry Page and Sergey Brin for Google, and now Warby Parker has Dave and Neil.
Everything contributes to long term success. It’s no wonder that out of all the new emerging eye care companies, Warby Parker has raised the most money ($291M) and they are valued the highest ($1.7B). Everyone should take note. Especially the hierarchy of the eye care industry.
Taking a deeper look into the social media statistics of eye care brands, once again we see how far along the emerging companies are compared to older establishments like Lenscrafters and Acuvue. Warby Parker alone has more Instagram followers than Lenscrafters (owned by Luxottica), GlassesUSA, Glasses.com (owned by Luxottica), Acuvue and Cooper Vision combined. This doesn’t mean that the emerging companies are selling more units or reaching a higher yearly gross revenue at this point, but it does show that they understand the importance of brand awareness with millennial's.
Why does this matter? 62% of millennial's say that if a brand engages with them on social media, they are more likely to convert into a customer. Given that millennial's now have the highest spending power of any previous generation, a companies social media footprint matters a lot.
It’s clear that old and new eye care companies alike are investing in social media advertising. The most obvious indicator is the amount of YouTube views relative to subscriber count on a company's channels. How does the channel of GlassesUSA have 82 million views without having a single subscriber? Paid video ads.
Each time you see a video ad for Lenscrafters, GlassesUSA or Zenni Optical before a YouTube video, that video is getting counted as a “view”. I would estimate the average Google Ads budget for these companies to be around 100k a month. This could easily double during peak season.
I believe that we’ll see an even greater shift in power over the next 5 years. The emerging companies will continue to leverage technology advancements to make buying glasses from a mobile device as simple as ordering a pizza. Warby Parker is leading the way with their newly launched augmented reality “virtual try-on”.
Many smartphone's already come with iris scanners, give it a few more years and you’ll be able to buy an inexpensive gadget from Amazon or the Apple store which will allow you to accurately measure your prescription for glasses and contacts. The Smart Vision Labs SVone already does this using an iPhone 5s, imagine what the iPhone 11 will be capable of.
Let’s get something straight before we finish. The emerging eye care companies’ accomplishments are fantastic, but don’t think for one moment that Luxottica or VSP are going anywhere. Luxottica is currently valued at $26.67 Billion, and by far the worlds largest eyewear manufacturer and retailer. Some things will always remain. This doesn’t mean they haven’t noticed a crack in their foundation.
In 2011 VSP launched Eyeconic, an online store for VSP members. In 2014 Luxottica acquired Glasses.com. Then in 2017, RayBan.com started selling prescription eyeglasses directly from their website. So, I think it’s fair to say that everyone knows by now that online prescription glasses is not a passing trend, eCommerce is an important element of consumer spending.
The emerging eye care market is only going to improve with time. Though they currently offer products that are slightly below the quality levels of newer products offered by such companies like Acuvue, Essilor, Zeiss and more, it’s just a matter of time before an emerging company develops proprietary materials and sets themselves apart with a unique product.
The future of the eye care industry is here. Let’s embrace the evolution and look forward to what’s to come.
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