Optometrists and Opticians
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Industry Overview
The retail optical industry in the US includes about 14,000 optician stores with combined annual revenue of $7 billion, and 16,000 offices of optometrists with combined annual revenue of $6 billion. Large opticians include Luxottica Retail (LensCrafters and Pearle Vision), Eye Care Centers of America, and US Vision. The optician segment of the market is fairly concentrated: the 50 largest chains hold about 60 percent of the market. The optometrist segment is highly fragmented.
Optometrists work mainly as solo practitioners or in small group practices. A typical group practice has less than $500,000 in annual revenue and four employees. About 1,000 practices have annual revenue over $1 million. Many optometrist practices include retail sales.
Competitive Landscape
Demand is driven by demographics, fashion, and changing healthcare practices. Most important is the aging US population, which is increasing demand for eye exams and glasses. The profitability of optometrist practices depends on efficient operations and whether they also sell glasses and contact lenses. There are few economies of scale in retail operations, except that large stores can offer a larger choice of product styles. Small retailers can often compete successfully with large chains by offering a different product mix. Eyeglass purchases are mildly cyclical with the economy, as many consumers view extra glasses as an expense that can be deferred.
Products, Operations & Technology
Optometrists perform routine eye examinations, mainly to write prescriptions for corrective lenses, and can treat some simple eye conditions. Complicated conditions like glaucoma, cataracts, or retinal detachments are referred to ophthalmologists. Optometric eye examinations are fairly standard, usually take less than 20 minutes, and are charged at a flat fee. Revenue from eye exams depends almost entirely on how many customers an optometrist can see. Both optometrists and ophthalmologists may also sell glasses and contact lenses directly from an office dispensary. Because of space constraints, retail sales in office practices are usually limited to contact lenses.
Opticians sell eyeglasses and contact lenses in retail stores based on prescriptions written by optometrists or ophthalmologists. Optometrists may also own and operate retail stores. Lenses ("ophthalmic lenses") and frames account for the bulk of store sales. Frames, which come in enormous variety and a wide range of prices, are often branded and can produce high markups, while contact lenses and lenses for glasses are mostly commodity items with fairly low margins. A typical store may hold an inventory of 500 frames in 100 different styles. Eye Care Centers of America carries 450 styles and 2,000 frames in some of its superstores. The price range of frames a store carries depends on the demographics of local shoppers. Opticians also sell non-prescription products like sunglasses and generic reading glasses (magnifiers). Average annual revenue per worker is close to $100,000.
Contact lenses come in hard or soft varieties, may be colored, and may allow extended wear or be disposable. The lenses for glasses also come in various colors and with various coatings and may contain areas of different correction (bi- or tri-focals). "Progressive" lenses are bifocals with the corrective areas smoothly blended into each other. Simple conditions, like near- or far-sightedness, can be corrected with either contact lenses or glasses, while some can best be corrected with glasses.
Because the lenses for glasses must be ground, coated, and shaped to fit a particular frame, some retail stores have an attached optical laboratory, while others send such work out to a company-owned or independent laboratory. Some stores with an attached lab can produce a finished pair of glasses in an hour, but the usual turnaround time is several days.
Lenses for glasses are made of plastic and are bought from a few large manufacturers like Sola. Frames are usually bought from a dozen manufacturers but may carry a large number of brand names. Contact lenses are made by companies like Bausch & Lomb, Johnson & Johnson, and CIBA.
Only ophthalmologists are allowed to perform LASIK surgery (laser-assisted in-situ keratomileusis) to correct vision defects. In LASIK surgery, the outer layer of the cornea is cut and folded back and a laser is used to precisely vaporize tissue in the middle layer, changing the shape of the cornea. The cost of LASIK surgery, generally between $1,000 and $2,000, isn't covered by most health insurance plans. Because of the high cost of the laser devices, ophthalmologists often lease the equipment or share it with other ophthalmologists in outpatient centers.
