NEW YORK—With the U.S. economy lagging and pundits predicting that business conditions may get worse in the next few months before turning upward again, many of the nation’s optical retailers and independent optometrists are finding that consumers are holding onto their disposable income more tightly these days.

How bad is the business climate in general? As Ben Bernanke, chairman of the Federal Reserve Board, said on Feb. 14 while testifying before the Senate Banking Committee, “The outlook for the economy has worsened in recent months, and the downside risks to growth have increased.” In his testimony, Bernake acknowledged that short-term economic prospects had worsened, saying he was still expecting the economy to grow at a “sluggish” pace in the next few months, then pick up speed later in the year.

Other economic experts agree, noting that consumers seem to be spending money on essential items only so far this year. For example, National Retail Federation (NRF) date indicates retail industry sales in January (excluding automobiles, gas stations and restaurants) rose 2 percent over last year and just 0.1 percent seasonally adjusted from December. And January retail sales compiled by the U.S. Commerce Department show total retail sales (including such items as autos, gas stations and restaurants) increased 0.3 percent seasonally adjusted over December and 4.6 percent unadjusted year-over-year.

“The January numbers are indicative of the issues consumers are facing, including the housing slump, a sluggish employment sector and high energy prices,” said the NRF’s chief economist, Rosalind Wells. “We expect to see marginal improvements in the second half of the year once consumers begin to receive their rebate checks.”

Those “economic stimulus” checks, approved by President George Bush on Feb. 13, are expected to start hitting U.S. homes in May; designed as a spur to consumer spending, it remains to be seen whether Americans will use them to pay off outstanding bills or go out on a shopping spree.

In the meantime, ODs and eyewear retailers—both national and regional chains and independents—are doing what they can to keep their bottom lines healthy. Several told VM they finished 2007 with improved comparable-store sales, and are working hard to keep their first-quarter comp sales on the positive side.

On a national level, Reade Fahs, chief executive officer and president of National Vision—whose retail locations include leased optical departments in Wal-Mart and Fred Meyer discount stores as well as the everyday low price America’s Best Contacts & Eyeglasses superopticals—said, “National Vision is pessimistic about the state of the economy for a long while to come—at least a year or more. But we are optimistic about our ability to do well when consumers are thinking carefully about every purchase and seeking out the lowest price and the best value every time they open their wallets. We think this sort of consumer sensitivity and buying pattern plays to the strength of our America’s Best, Wal-Mart, Fred Meyer and military-base retail offerings, which have always offered low cost and high value to the consumer.”

Added Fahs, “Internally, we are, however, spending our money very cautiously and redoubling our efforts to keep our costs down and to operate as efficiently as possible, as this seems only prudent given how the economy is evolving. We are pleased that our comparable sales continue to be positive and healthy, and have spent more of this year cursing the weather than we have bemoaning the economy. We are hopeful that some of the tax rebates from the stimulus package will go toward eye exams, glasses and contacts in our stores.”

In Utah, the Standard Optical chain finished January with an 8.7 percent hike in total comp-store sales, according to vice president Aaron Schubach, who said his stores have “typically done well in recessionary times.” Said Schubach, “Our patients do not seem to be concerned about the economic downturn.” As evidence, he pointed to a 10 percent increase in the regional chain’s average ticket for complete eyeglasses, up to $254; contact lens sales are up 8 percent, he noted, while sales of safety eyewear have climbed by 30 percent. At the same time, the number of eye exams performed at Standard Optical’s locations are flat to up only slightly, he noted.

To keep the business moving in a positive direction, the chain plans to increase its total advertising spending this year by about 12 percent, representing roughly 6.5 percent to 6.8 percent of total revenues. “The two biggest mistakes companies make in economic downturn situations are reducing their workforce [eliminating larger salaries, which are typically your better people] and reducing advertising—I will do neither in 2008.” Schubach said.

For Bruce Kolkmann, optician/owner at Raymond Opticians in Mt. Kisco, N.Y., new technology offers a way out of the recessionary pinch. “This market area [Westchester County, N.Y.] isn’t having trouble with mortgage foreclosures and things like that, but I do think the fear of what that could do to the economy and investments makes people think about how they’re spending their discretionary money. You’d think eyewear purchases would be a necessary thing, but people who want a higher quality product or more fashion-forward eyeglasses might start thinking, ‘Should I spend those discretionary monies?’ It’s a generalized anxiety.

“More than anything else, I’d have to say competition has a very large impact on my market. “You can’t get into a negative mindset set, though—you just have to be more proactive and creative in finding more niche customers and more ways to enhance the business by offering different products and services from the national chains.
“My approach to the tightening competitive market has always been to utilize technology to enhance the image of my business,” Kolkmann told VM. “Six months ago, I installed a Zeiss Eye Terminal, a tool I use to more precisely take measurements for the new free-form progressive designs. Even for standard design PALs, it gives me a little more accurate information. “In addition, I’m able to accurately produce a wrapped sunglass by using the information I get off the Eye Terminal. I do a lot of steep base work in prescriptions that five years ago I’d have had to tell customers I couldn’t do. I also just put in the Santinell ME-1000 system, so I can offer my patients the ability to customize rimless eyewear.

“Once you put somebody in the chair and start using high tech-equipment to produce their glasses, it gives them a sense that you’re providing the very best eyecare.”

Another optical retail with a positive attitude toward the coming year is Lance Snarr, chief executive officer of 22-store Thoma & Sutton Eye Care Professionals, based in Cincinnati. Thoma & Sutton finished last year up 6 percent over 2006 with the same number of stores, with stronger gains coming in the second half of 2007; last month, the regional chain added two more optometric locations.

Snarr said that although the chain’s stores in the Cleveland, Ohio, area are finding business tougher to get because of that city’s economic problems, its locations in greater Cincinnati and northern Kentucky—drawing from a base of international corporations located in the region—have done quite well in recent months.

“Over the years, we’ve seen that eyecare is not too affected by consumers’ economic fears,” Snarr explained. “They may pull back on buying big-ticket items, such as cars or big-screen TV sets, but when it comes to their vision, they may even spend a little more on a nice pair of glasses because they’re not spending on something else—they want to treat themselves.”

On the other hand, he pointed out, “It’s a long time since this country experienced a serious recession. If we reach a point where a lot of people are losing jobs, it might be a different story—but hopefully that won’t happen.”

Two eyecare professionals in Michigan, among the areas hardest hit by the current economic doldrums, are seeing the impact of that kind of job loss.

Bill Fortney, president of Fortney Eyecare, with five locations in the metro Detroit area, commented, “We have definitely been affected by the slowdown in the economy, mostly from our repeat, yearly clients who have delayed purchases—they are opting to re-use a frame instead of purchasing a new one. However, some of that downturn has been offset by new patients.”

Fortney said his company is relying primarily on internal marketing and word of mouth to bring those new patients in. But the local economic woes are having an effect: “As people lose their jobs, those making $70,000 are being replaced by employees making $40,000, and that is an issue. In addition, the auto companies in the Detroit area are not offering new hires benefits right away because there is a waiting period to become eligible, so that’s having an affect on business as well.”

Added Fortney, “Even though we do a lot of managed vision care, there are still out-of-pocket expenses for people.”

David A. Dueweke, OD, owner of Dobbs Optical in Kalamazoo, Mich., told VM he sees some light at the end of the economic tunnel. “Michigan’s economy has been in a downturn that preceded the remainder of the country,” Dueweke said. “We’ve felt the impact of a decline in economy in advance of the rest of the country—we’ve been in that mode for a couple of years. But now we’re seeing a bit of a reversal in that trend. Our revenue and schedules have been better in the last 12 months than in preceding 12.”

Why the change? “The fact that there’s considerable economic development in downtown Kalamazoo, which is where we’re located, is partly responsible,” he said. “That’s part of the national trend in which there’s renewed interest in developing small urban downtown areas. We hope there’s some continuation of that trend.”

Noted Dueweke, “We’re expecting similar increases in sales, from a percentage standpoint, to what we had in 2007, which is somewhere around 5 percent growth. The nature of our business is high-end, niche product. We rely heavily on word of mouth; that’s why we have an involvement in the community. We’re targeting a specific segment of the market—we’re selling art for the eyes, so we try to plug into the local arts community. For example, we’re sponsoring an event at the upcoming Gilmore International Keyboard Festival, which features a variety of different music from classical to offbeat, funky jazz.”

Another optical retailer who said business is improving is optician Anita Mizrachi, executive director of optical affairs at Dr. Melman’s Eyeland in Voorhees, N.J., an affluent suburb of Philadelphia. Said Mizrachi, “I was marveling at how stable January was in terms of sales and patient flow, and February has been altogether great. People talk about economic conditions, and I see a lot of credit card usage, but the sale of premium product does not seem to be affected.”

Overall, she said, “the current economic slowdown is not affecting our sales at the moment. We have established a loyal base and active referrals from happy customers, in addition to accepting vision plans that allow patients to choose what they want—all that has kept the office full and economically advancing.”

Summed up Mizrachi, “Our forecast is optimistic. We keep our eye on the ball, which means we expand on what we do right: quality care, personalized service, attention to detail. And when a problem occurs, we come up with a way to have a win/win situation in the end—all this seem to matter to our customers more than the price.” —VM Staff Report