General Session Industry Panel: Strategies in a Digital Age

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General Session

Industry Panel: Strategies in a Digital Age

January 27, 2012

Facilitated by:
Mike Hundert

CEO, REM Eyewear

Executive Summit Program Committee Chairman
John Graham

Sr. Vice President & General Manager,

View Point: They grew into the prescription glasses market because customers on their 1-800-Contacts site were asking for it.
Scott MacGuffie

Vice President Operation, Smith Optics

View Point: Internet provides brands through key online providers. They’ve set up e-commerce direct buy in the past 18 months. They’re shipping more orders direct and selling direct into Canada, which they haven’t done before.
Howard Purcell, OD, FAAO, Dipl.

Vice President, Customer Development Group, Essilor of America

View Point: Ideally wishes everyone would dispense glasses one-on-one at a dispensary. Recognizes there’s a trade change and have to look at the Internet as another channel. Essilor looked to create a viable option for e-commerce for practitioners to offer patients both options – e-commerce and brick & mortar.
Mike Francesconi

Vice President, Katz & Klein Inc.

View Point: Independent optical lab that wishes things could stay the same for patients to go through a doctor/office. They recently started providing eyewear over the Internet though a 3rd party. E-commerce is another way to stay viable.
Aaron Magness

VP Marketing, Coastal Contacts Inc.

View Point: New to the industry and came from Zappos. He does not wear glasses or contacts, he does, however, know about Internet sales and marketing. He also knows about the importance of customer service and how it drives sales and wants to make sure that companies understand the opportunity to provide products to consumers and protect the brand.

Claudio Gottardi

CEO, Marchon Eyewear, Inc.

View Point: Urges others not to overlook the International aspect. The Internet does not recognize international barriers. The Internet will provide a way for consumers to get what they want. If we start thinking that way, and moving in that direction, we’ll find a huge opportunity in building our brands.
Dave Plogmann

SVP Optical Partnerships, Luxottica

View Point: Luxottica retail (Lenscrafters, Pearle, Sears, Target, etc.). On-line presence is limited to contact lenses. They continue to analyze and determine the best approach to online sales. Optical e-commerce shouldn’t be a stand alone. It should be based on an eye exam and care by an eye doctor. We can’t ignore customer demands. We need to evolve to meet customer needs to give them what they want, where they want it.
Joe E. Ellis, OD

Immediate Past President, American Optometric Association (AOA)

View Point: Private practitioner in rural Kentucky who prefers to guide patients to accurately choose frames and lenses. His questions center around “safety concerns” when you order online. What is the chance the prescription will be accurate? There was a study done by the AOA that showed 45% of online orders were inaccurate or didn’t meet industry standards. The fact that a study emerged at all should raise concerns for the industry. Would patients skip office visits and just order online? Many optometrists use online services. Guidelines are needed for what to offer patients when ordering online. We can’t rely on the government to regulate this because it can get out of hand well before anything is done.

Q: What is the forecast for Luxottica to sell glasses online?

A (Dave Plogmann): It is part of the business strategy moving forward. Optical e-commerce to Luxottica is a byproduct.

Q: We shouldn’t allow unsupervised shopping. How do we control it?

A (Joe E. Ellis, OD): It is important for doctors of optometry to educate their patients. The eye care industry needs to develop talking points and education on the pros and cons of e-commerce for optical sales. We need to leverage consumer reports to inform the public as they’re widely used by the public for information.

Q: John, your model involves a suggested retail price. How are your products’ prices on the Internet? While your business model is to sell at a suggested retail price, how do you meet the demand for someone who finds a cheaper product?

A (John Graham): You can work with brands that have control and monitor the inventory to avoid closeouts or product saturation.

Q: How do you protect the brand? What pressure do you have from brands to protect them?

A (Mike Francesconi): Need to protect the value of the brand. It’s easier to control with direct manufacturers, so you can control at the start with whom you work with. Play hardball in marketing products.

Q: What is VSP doing?

A (Claudio Gottardi): Make sure that companies provide to their customers the best service. There has been a problem mounting more over the years by not providing the service. Customers want this. We are trying to link doctors to the channel so that they don’t lose patients.

Q: Do you have a fear of the e-commerce?

A (Howard Purcell): We need to make sure that the industry is cleaned up. Not yet convinced the technology is good enough to sell all products. Then there’s the issue of pricing.

Q: With eyewear, it seems important for customers to try on. How do you see the value with the Zappos model at trying them on at home and being able to return them?

A (Aaron Magness): Not too long ago people didn’t think you could buy shoes online. We have a liberal return policy, even for try-on samples into which we have inserted prescription lenses. There has to be an understanding that the Internet is good as long as you’re doing what’s best for the customer. We encourage our clients to have good relationships with optometrists.

Q: Is Eyemed going in the same direction as VSP?

A (Dave Plogmann): It remains an ongoing conversation.

Q: How does REM decide on a brand distribution strategy?

A (Dave Plogmann): There is a list of criteria of what’s an appropriate retailer/e-tailer. Sometimes you find that a company claims to have your product but all they have is an image and they’re selling knock-offs of your product at a discount, which can damage your authorized distribution. This is what we seek to control in a free-wheeling market where control is elusive and constant diligence is essential.

Q: Do you require prescription verification?

A (John Graham): Yes, we follow the state laws on the length that a prescription is good for.

A (Aaron Magnes): Yes, same here. We don’t want to have a one-time customer. Want them to have a good experience.
Q: You want a consumer to have a better experience than in an optical shop. When you send customers multiple pairs of frames, do you include prescription lenses?

A (Aaron Magnes): Yes, for as many pairs of frames they order. We send them the glasses to try on at home and they send back what they don’t want. The downside for the customer is they have to pay upfront for every pair they order. You are refunded what you return, but it could take a few days to see the refund on a credit card.

Q: You hold a key in history to be a prognosticator in our industry. Shoes per capita are much higher than glasses. What can you tell us about the Zappos market share after the first decade as it relates to the overall shoe industry?

A (Aaron Magnes): U.S. Footwear is a $20 billion industry. As more legitimate retailers came on board, it raises awareness of the median to buy shoes online. Zappo’s captures 10% of the business in the U.S.

Q: What are the Internet sales of shoes sales overall?

A: (Aaron Magnes): Probably 15% is online.

Q: What happened to the market since online shoe sales started?

A: (Aaron Magnes): It’s become a stable market. More people can shop wherever they want to shop.

A: (Howard Purcell): I believe that the eyewear market will top out in 10 years to be 10%-15% online.

A: (Aaron Magnes): People will become more confident when more qualified sources are available.

Q: Are there barriers to selling progressive lenses online? Describe the profile of online customers.

A (Aaron Magnes): The marketplace is young at 1.5 years. You have to be proud of the ability of the lab you choose. They’re confident that they will be able to successfully deliver progressives as technology expands. The majority now is single vision. Customers are approaching the need for progressives. We have to consider a fast growing market of Internet users and age.

A (John Graham): Tends to be a young female in her early 30s who is married. Don’t offer multi-focal yet. Don’t feel that the product is good enough to deliver on expectations.
Q: With Internet sales expected to capture at least 10% of the market, what is AOA/TVC looking into doing about the perimeter of the industry?

A (Joe E. Ellis, OD): At this point, we have to decide what the facts are. The policy is we’d prefer customers get their glasses through brick & mortar. As ODs, we request to be able to communicate to the patients. At this point, there are un-reputable places that we can’t communicate with. We need to educate the doctors to educate the patients.

Q: Don’t the state/federal laws handle regulations or prescriptions?

A (Joe E. Ellis, OD): It’s hard to enforce in this space. Half the states have laws that state eyewear must be dispensed by an eye care professional.

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