NEW YORK—Despite news reports that the economy is on its way toward recovery, many companies are keeping a closer eye on their business than ever before due to the changing economic climate of the past year, the current state of the retail environment, and the subsequent changes in consumer spending habits.
Vision Monday explores how this shift has affected the ECP landscape and how it’s creating an increased demand for branded product at a more attractive price point while still conveying a solid message of quality. We spoke to several retailing industry veterans to discuss whether or not they have adjusted the price point selection in their stores, what they’re now stocking in response to consumer demand and how they are conveying these messages to their staffs and customers. According to these retailers, price points have changed but are not necessarily down, real quality is paramount and loyalty to vendors, staff and clientele is more important than ever.
A New Good, Better, Best?
As consumers’ values and behaviors have changed it has motivated optical retailers to take a more magnified look at the price and selection of the frames they offer.
“We had to realize who we are in our market and who the patients we are reaching are,” said Jack Schaeffer, OD, of Schaeffer Eye Center with 13 locations in Alabama. “We are looking at products that we can buy for a slightly lower amount so that our patients will feel better about what they buy. We have picked some lower price name brand products as well as brought in some private label products to accommodate these patients.”
Rachel Sivi of Real Optics, owners of 20 locations under the Vogue Vision Centers, Eye Mart Optical, One Hour Optical and Younker Vision Centers brand names in Des Moines, Iowa added, “Because we have a variety of stores ranging from budget outlets to more high-end optical stores, the price point I am now more mindful of can vary from $99 to $175. Especially for my middle- to high-end stores the $150 to $175 price point is very desirable and clearly one that has been moving in larger numbers these days. In the past 12 to 18 months, I have not revised price points per se but I definitely keep my eyes open for lower price point options that still offer fashion and current trends.”
Retail price points that really affect the behavior of the consumer generally start around $300, according to Schaeffer. “At $400 and above you really see a change in consumer behavior. We’ve seen a difference in those patients spending between $250 and $500 because if they were an individual that was already stretching to buy that product they’re definitely rethinking that amount and even if they can afford it they’re also questioning it, so we’ve had to rethink all products that we have in our office,” he added.
“It’s certainly important to be mindful of the price,” agreed Aaron Schubach of Standard Optical with 17 retail locations in the Salt Lake City area. “However, we believe that deteriorating or reducing the middle-high category may potentially be a huge mistake. We are mindful of the price points that maximize managed-care reimbursements, and will continue to look at the $149 to $199 as our ‘sweet spot.’”
But identifying and providing a large selection of frame offerings in a retail location’s “sweet spot” is not eliminating the need to give the customers who desire higher end product a compelling selection of options.
“Product that was branded needed to come down in price and for the most part it did, but when you are talking about exclusive and more boutique items the price is not much different,” stated Edward Beiner, owner of nine Edward Beiner Purveyors of Fine Eyewear retail stores. “We have some new items in the entry price point but we’ve also gone up in price point. We’re putting more emphasis on craftsmanship, uniqueness and exclusivity. These qualities are so much more relevant for long term customers, so as not to lose them.”
“At the majority of my stores which carry moderate to high end frames I generally don’t like going above $300 to $350,” explained Sivi. “But if our top was a Chanel frame or a Tag Heuer then generally we know we won’t be seeing daily sales of these frames anyway and they’re still holding steady.”
“The top price point is not the issue today,” agreed Schaeffer. “The type of individual that was going to buy an $800 or $1,200 frame is still there and is still prepared to buy those frames. These consumers know what they want, can afford what they want, and the economy hasn’t been an issue.”
The Quality vs. Quantity Issue
All of the retailers VM spoke to also agreed that though price is often a consideration for customers it isn’t the definitive deciding factor for many. However, it has become more necessary to justify a higher price with a strong message of quality forcing retailers to look at their inventories with a more critical eye and cull those brands and vendors that are not up to snuff.
“‘Luxury’ had become ‘luxury mass’ and we all bought into it,” stated Beiner. “But now I look for handmade, unique and different styles. Frames from Italy or Denmark and not stuff from factories pumping out frames like a lot of these brands did when price point was less of a concern. Prices now need to reflect quality and not just a brand name. You need to be able to explain why the frames justify the price.”
Cindy Keil, senior buyer for 19 Eye Care Associate locations in Raleigh-Durham, S.C. agreed, “We are actually adding more luxury brands this year. Patients don’t necessarily want the least expensive eyewear that they can find; they want to know that the money they are spending is going toward quality eyewear that will last. We won’t compromise the patient experience and expectations.”
“In today’s eyecare environment, it’s imperative to not only offer a value message, but to actively concentrate on the actual dollars that a frame, or line is netting you,” explained Schubach. “With big box retail and managed-care prohibiting any price inflation, the only way to accurately manage your product mix is to conduct what we at Standard Optical call a ‘full-scope autopsy.’ The aim is to reduce costs of goods sold (COGS) and still offer exceptional quality. We are running at a slightly lower inventory level from a dollar standpoint, but because of managed-care demands and consumer perception of selection, it’s important for us to keep our number of SKUs relatively the same.”
Beiner agreed, “We’ve never looked at inventory as tightly as we are now. We are carrying more depth in our lines and less breadth, more of fewer items. It helps keep returns down and makes sure we offer our customers proven sellers.”
“We manage inventory dollars closely and have a disciplined approach to reorders and replenishment,” added Keil. “It is important that we always have our best selling styles and brands available for our patients to purchase or they will go elsewhere to find it. All of our distributors are aware of the need for more aggressive pricing and creative programs. The economy is forcing the distributors to ‘re-package’ themselves.”
“Learning from my father, I was definitely conservative in how much inventory we carried before this bad economy hit, so overall, I’ve remained consistent in the way I purchase and stock,” said Real Optics’ Sivi. But she also raised the topic of closeouts and how they provide another option for retailers looking to offer consumers quality products at reasonable prices.
“Closeouts have always been a big part of our Eyemart Optical Outlet locations. In the past, I tried not to mix closeouts into my mid- to high-range stores, but I have been sending more closeouts to some of these locations recently for BOGO frame offers,” she concluded.
Standard Optical’s Schubach agreed on the importance of closeouts. “We will continue to take advantage of close-out opportunities and expect this to increase. Many large vendors are sitting on good/sellable stock and we are a great outlet. We would prefer that a vendor only sell close-outs to customers who purchase from the current collections as well. We believe that if we are a good ‘in-line’ buyer, we should be afforded the special programs that other clients shouldn’t get. This strategy also allows for a nice retail price range mix within a brand or category that is appealing to many patients,” Schubach said.
Loyalty, Home & Away
Schubach makes a point about loyalty and the importance of forming solid relationships, both between the retailer and the vendor and the retailer and their staffs and customers.
“I think it’s important in this environment to remain extremely loyal to your key vendors,” said Schaeffer. “Most practices haven’t experienced large increases in sales so looking to bring in a new vendor while your sales are flat with your current vendors does not make sense. Stick with the vendors with whom you have developed a close relationship. I think you should be able to find what you need from just about any one of your key vendors.”
“Some mass distributors, the big boys, realized their product was slightly on the higher end and responded quickly to adjust their price points and have continued to do well,” declared Beiner. “But we prefer to work with vendors that we are committed to. Brands like Mikli, Stark, Barton Perreira, Oliver Peoples and ic! Berlin who are giving quality without pushing up their price points.”
Sivi at Real Optics has a whole laundry list of key vendors she can rely on. “Some of the companies I find very helpful for keeping low price points yet not skimping on fashion or popular styles are Modern Optical with their Genevieve and BMEC lines, Detari’s Adin Thomas collection, I-deal Optics’ Haggar and Casino brands, Capri’s DiCaprio line and Eight to Eighty with Serafina.”
While at Standard Optical there are definite criteria that must be met to be added to their stores, Schubach said, “We have replaced some vendors with those that offer a more compelling COGS structure and also design and import nearly 25 percent of the high-end frame offerings in our locations. We will only add brands that are from companies who are Optiport members, are our own direct imports or private label or can offer a 6 percent to 8 percent cost of goods net.
“Companies such as Viva and ClearVision in the designer category have responded correctly. Other vendors like Zimco, Capri and Visual-Eyes have also made a significant impact in our mix because of their quality and pricing.”
Clearly, it is a strategy working well for Schubach at Standard Optical as they experienced record growth of 14 percent overall in 2009. Schubach, however, also credits his staff and the training they receive on new technology as a vital component to the success of any new project.
At Edward Beiner, Purveyors of Fine Eyewear they also realize the importance of their employees. “In store, we’re addressing the issue of merchandising and have increased training for employees. We’ve had no layoffs. We have weekly manager meetings and training,” said Beiner. “We are trying to provide an environment that creates a unique experience. There is a new world coming, old roles no longer apply. I do believe we will come out of this. It’s those that know what they are doing who will survive.” ■