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Wal-Mart, 1-800 CONTACTS Deal: Is Opportunity Knocking?

February 13, 2008 3:00 PM

By Marge Axelrad
Editorial Director

NEW YORK--In the wake of Wal-Mart’s announcement that it had forged an agreement with 1-800 CONTACTS to offer a new contact lens program for patients this fall, optical retailers and major contact lens distributors told Vision Monday they view the alliance as a major opportunity for ECPs and other retailers to revisit how they provide lenses and replacement lenses to their own patients and are emphasizing they have the tools to help them do it.

In January, Wal-Mart Stores Inc. (NYSE: WMT) announced an alliance of nearly 3,000 Wal-Mart and Sam’s Clubs and 1-800 CONTACTS for a program which “will create efficiencies across their call centers, Web sites, purchasing, and distribution efforts--resulting in customer savings the companies estimate could reach $400 million over the next three years," the companies said in a joint statement, noting the alliance "could save these customers nearly 20 percent on their contact lenses." The companies expect to integrate store, Web, and phone service this fall.
   

Through ODG’s Net Results, accounts can control info and patients can see reorder capabilities on their ECP’s site.



Stated Angel Alvarez, CEO of ABB/Con-Cise, “As a stand-alone company, ABB/Con-Cise is the second largest mail order company in the country, but we are doing mail order on behalf of 14,000 eyecare independents--another way to look at it is that what 1-800 is to Wal-Mart, the distributors are for independents and optical retailers. 1-800 has a distribution center that Wal-Mart will leverage; we have a $30 million inventory in contact lenses and the capabilities for ECPs to leverage to allow them to retain their control of patients but be more efficient in servicing them.”

He added, “Independents are still responsible for 70 percent of the new fits in contact lenses. Wal-Mart understands costs; ECPs need to better understand costs and we are a major assistance here. Our Your Lens program is a turnkey one which enables us to customize and embed our system into the doctor’s site, so they have a major service advantage with their patients, earn their usual gross margin on lens reorders and not lose sales to a third party.”

Alvarez added, “The alliance does nothing to alter loyal relationships between independents and patients, which are based on personalized, enduring care that retailers have greater difficulty delivering. The best defense, actually ‘offense,’ for independents is to present annual supply packages to contact lens patients, using manufacturer rebates, during the annual exam visit. Most ECPs accept this concept, but do not routinely execute it well. Most lens transactions continue to be two boxes, not four or eight. We also encourage doctors to reduce their own per box price when annual supplies are purchased and to quote this price [after manufacturer rebate] to respond to price inquiries from patients. Independents should also add contact lens re-order functionality to their Web sites, neutralizing the convenience of 24/7 re-ordering with no office visit provided by the Internet sellers.”

Independent ECP Soft Lens Retail Pricing
vs. Wal-Mart and 1-800 Contacts: 4Q
(unweighted average price per box of 22 leading brands)
 
 Source: ABB Retail Price Monitor 4Q 2007
Commented Jeff Rems, president of Westchester, NY-based Optical Distributors Group, “We’re not overreacting to this alliance as we view it as an expansion of the existing doctor network for 1-800 and referral service. We have been and continue to take a proactive approach with practitioners relative to their interaction with their CL patients.

“We analyze purchase data from the ECP/ customer to determine fitting patterns (types of products dispensed and quantity initially dispensed versus total year, number of multipacks dispensed per patient). We take this historical information in many cases to show ECP that they are currently losing patient CL repurchases to alternate outlets (1-800, Costco or Wal-Mart) and that now is the time to secure these patients locking them into their practice. By doing more annual quantity dispenses, either at initial visit or on auto replenishment program like we offer through our online e-commerce solution [ODG Net Results], ECPs can maximize the number of multipacks dispensed to their patients. The result will be increased patient retention, better patient compliance and improved patient/doctor relationships. The other benefit is obvious--increased revenue and profitability for the contact lens practice.”

Steve Baker, president of Eyefinity, said, “Ironically, the big guys see now what we saw a few years ago. The consumer wants choice, ease of access and convenience. It could be easy for independents to overreact to this deal, but they have companies like ours that are lined up and ready to help them compete. Eyefinity’s Reorder Contacts is specifically built for a doctor to manage their patients, allow patients to reorder lenses and keep control.”

 

 Eyefinity’s ReorderContacts.com creates options for patients and ECPs.

Reflecting on the growing interest in ECPs’ participation in systems, Baker said, “We have data that show when doctors choose to compete, they can do so effectively: In 2007, between 55,000 and 60,000 patients have been registered by the practices of the ECPs who’ve chosen to use ReorderContacts.com, that’s nearly 50 percent more than the prior year when we launched it.” Robert S. Hammond, OD, who owns and practices at three locations and acts as product manager overseeing contact lens business at Doctor’s Vision Center/Eye America’s 58 locations in North Carolina, offered a similar outlook. “Our contact lens business is an integral part of our patient care. We offer all phases of eyecare from primary to tertiary care. Our offices are always looking for new cutting edge products and we fit many specialty lenses. Contact lens patients are educated on the need for annual examinations to assess their eye health and are mostly compliant. Our strategy is to fit mainly monthly replacement lenses, because we think they provide the best fit, comfort, acuity and value for the money especially if they purchase an annual supply. Our contact lens business has grown as expected last year.

“Our philosophy is to sell an annual supply to our patients at the time of their examination. We count on our ability to bundle professional services to strengthen our relationship with each patient providing the best value for money for all services and products related to a contact lens wearer. We also continue to look for innovative cutting edge products that can enhance the unique contact lens needs of our patients and actively communicate these innovations ‘one to one’ via mail and email messages. We don’t feel that we have to match our competitor’s prices because of the added services we provide to our patients. I do not think we will be doing things any differently after the merger takes place as we continually stress our programs in our offices.”

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