E-Retail Strategy RE Frame Mark Up

[RKJ]

I believe it is time to re-think how we price our frames as e-retailers gain market share.

Successful companies will adapt to a changing marketplace: First, e-retailers have lower frame prices for similar products because they do not bundle service fees for frame selection, pre-adjustment, and dispensing into their fees for product. Second, consumers are learning to comparison shop frame prices using new portable aps.

As VSP pulls providers into e-Retail, VSP providers need to price their on-line frame and lens products in line with the way e-retail competitors price products - or VSP providers will lose every patient they recruit to online shopping.

One idea is to offer a bundled frame price that includes services, and the bundled fees should offer some savings over unbundled fees. In the office, we can sell frames the way we always have, but we invoice a frame product plus a frame service along with a bundled savings.

Furthermore, the unbundled services should be available and marketed to patients who elect to buy online. With this kind of strategy, patients are more likely to comparison shop apples to apples when they are enticed by e-retailers. Adapt early to keep patients in the office.

I'd love to hear other ideas, and I'd like to know who is implementing new frame pricing strategies successfully?

[drk]

Hi, Renee.

Why not just sell the glasses at our cost? Then we can say that it comes with a mandatory service package because as professionals we are obligated to perform professional care.

Kind of kidding, but it would clarify the situation.

Onliners "look good" on price because:
1. They're here today and gone tomorrow. Someone will always try to undersell and be the low bidder, but you can't survive long with that strategy. In an emerging "industry" (if we can call online frame and lens supply an industry), the first phase is every Tom, Dick, and Harry getting involved out of their basements. This too shall pass, as the "industry" matures.

2. They have absolutely no regulatory oversight. No degree. No license. No fire-code/fire-extinguishers. No liability insurance. No malpractice insurance.

3. No professional needs to be paid to transact. The consumer is their own professional. Professionals are somewhat expensive.

4. They sure save money on pupillometers and batteries.

5. I'm not sure, but they may not even have any inventory costs. Marchon, Luxottica et al. may be their warehouses. Downloading a few pixels probably requires some effort and I'd guess their servers are pretty schweet, though.

[Fezz]

Are you going to pay us for our consulting fee?

Why should we give you ideas or opinions for free when I assume that you are charging others for giving your info out?

[Jacqui]

Are you going to pay us for our consulting fee?

Why should we give you ideas or opinions for free when I assume that you are charging others for giving your info out?

I am no longer giving free advice If you want to know what I think, you get to pay me for it.

[Judy Canty]

Wow! Hostile bunch!

I know her, I'm collaborating with her on an article for ECP Mag. Dr. Jacobs is trying to help.

[Jacqui]

She should have said why she wants the info.

[Chris Ryser]

Wow! Hostile bunch!

I know her, I'm collaborating with her on anarticle for ECP Mag. Dr. Jacobs is trying to help.

I have seen it coming, that way as always when it comes up.

The on-line industry is here to stay. One of the largest few "FramesDirect", is wholly owned by "your largest supplier and dogooder" in the optical industry who plays both sides.

In the old days the USgovernment would have found a way to shut them down for mail fraud. Iinstitutetd a case of US mail fraud in 1983 and had the close a company and 3optical people go to jail for a couple of years in California in 1983 when the system stillworked. I guess they have no clause for e-mail fraud.

Embrace the power of the Web!
The MyOnlineOpticalservice is an advanced new service from Essilor. Theservice is dedicated to
independent USeye care professionals. Set up your own e-Commerce site in minutes and let your
patients place orders for all their vision needs. Increase your revenue,improve your capture rate,
and reach new patients. MyOnlineOptical will do the rest.

as from ----------------------> http://www.myonlineoptical.com/index.htm

The economy is still in the pits, jobs are gone , millions of houses are stillforeclosed, the cost of living has gone up dramatically mostly driven by highgaz prizes, whole industries that existed forever, are going into oblivion andI hear on OptiBoard that business is what it was forever.

Sell the most expensives frames and lenses and not feel the impact of theon-line opticals as I get the feel here on OptiBoard, when the issue come up.

The top on-line opticals, with their business tools, have overtaken the worldwide website ratings of optical companies like Luxottica who was the best andhighest rated one for the last few years. Most optical retail chains also lackfar behind. If these websites attract such huge website traffic they haveawakened the interest of the consumers that have to look for bargains in everyfield by sheer necessity. You can recheck this statement on my website whichlists website rankings at ----------------> http://optochemicals.com/web_listing.htm, (on-line opticals near the bottom of the page).

Most B&M opticals websites are nowhere in website rankings, because theyare administered with second or third degree knowhow and not much interest andmaybe updated once a year.

Onliners "look good" on price because:

1. They're here today and gone tomorrow. Someone will always try to underselland be the low bidder, but you can't survive long with that strategy. In anemerging "industry" (if we can call online frame and lens supply an industry),the first phase is every Tom, Dick, and Harry getting involved out of theirbasements. This too shall pass, as the "industry" matures.

2. They have absolutely no regulatory oversight. No degree. No license. Nofire-code/fire-extinguishers. No liability insurance. No malpractice insurance.

1) If the largest optical corporationwhich you still admire is betting on the future of on-line optical you arestill supporting them on a full scale .
I do not believe that Essilorwill be gone tomorrow the way it looks and they are just about the biggeston-line to consumer operator.

Coastal in Vancouverhas the full support of the BC government which has deregulated the opticalretail industry and has now over 300 employees and on and on. Information isavailable because they are a public corporation.


2) These companies are run by opticalprofessionals and backed by governments, who do not react to complaints ofwhatsoever on this subject.
Of the ones we have theinformation "Frames Direct" is run by Optometrists and "Coastal",the technical side by a former Essilor Executive. I believe that they do havefire extinguishers and insurance and a lot more brains than estimated here.
Their activities are widelyunderestimated by the current optical retail market, which still goes theirmerry way of bundled up retail prices as for the last few hundred years, whichyou can not find anymore in any other business or profession.
On-line optical's are nothingelse than optical labs that sell directly to consumers an unfinished productlike the others that deliver only to the optical retail trade.

The final solution is simple .............sell at closeto cost + charge for services if you can provide the needed quality service.

[Now I See]

The other day, I had a customer come in. He had been in about 3 months ago and found a frame he really liked, we wrote the info down...he came back in on a day that I wasn't here, saw the other employee and decided to come back when I was in...we pulled the frame, talked about and measured for lenses, etc. We start talking about pricing. We get all finished, and he says, 'well, you know the internet can be a good thing and a bad thing.' Then he pulls out the dreaded printout...yep, he had checked all over the internet and found the exact frame for $50 less than what I was selling it for...not a real shocker, but frustrating none-the-less. I will admit I was STUPID enough to match.....the.....price!!!! (or one could argue that I'm STUPID enough not to mark up in order to mark down and still make rent...I hate that sales model, but that's the way the consumer seems to like it best.) Why did I match that price?? Well, I guess it really doesn't matter why, more importantly, will I do it again?...most likely not...or at least not in the same way. I didn't take into consideration all the things RKJ mentions, like adjustments, guarantees, service.

I have toyed with the idea of drastically reducing my frame prices. The two problems I see are 1. Vision Insurance (if an office files insurance) and 2. An office has to make a certain amount of money just to function; and if you actually want to service the product you've sold (i.e. unconditional guarantee, etc.), and/or make a paycheck, well then your prices have to be a little higher...I know the "internet people" will say they have the same overhead...but that is not true...when you have a B&M store, you MUST have the store front, sign and decor, you MUST present your items with displays etc., you MUST follow your state's rules of Opticianry, you MUST have liability insurance, you MUST have at least one privilege license, and you MUST have inventory to see and touch for anyone who comes in.

So far the only strategy I've had is to keep my prices fairly low already, and search the internet for any new frames I get in, so that I'm not priced completely out of line, but can still afford to service the product and (one day) make a paycheck.

[MikeAurelius]

The other day, I had a customer come in. He had been in about 3 months ago and found a frame he really liked, we wrote the info down...he came back in on a day that I wasn't here, saw the other employee and decided to come back when I was in...we pulled the frame, talked about and measured for lenses, etc. We start talking about pricing. We get all finished, and he says, 'well, you know the internet can be a good thing and a bad thing.' Then he pulls out the dreaded printout...yep, he had checked all over the internet and found the exact frame for $50 less than what I was selling it for...not a real shocker, but frustrating none-the-less. I will admit I was STUPID enough to match.....the.....price!!!! (or one could argue that I'm STUPID enough not to mark up in order to mark down and still make rent...I hate that sales model, but that's the way the consumer seems to like it best.) Why did I match that price?? Well, I guess it really doesn't matter why, more importantly, will I do it again?...most likely not...or at least not in the same way. I didn't take into consideration all the things RKJ mentions, like adjustments, guarantees, service.

I have toyed with the idea of drastically reducing my frame prices. The two problems I see are 1. Vision Insurance (if an office files insurance) and 2. An office has to make a certain amount of money just to function; and if you actually want to service the product you've sold (i.e. unconditional guarantee, etc.), and/or make a paycheck, well then your prices have to be a little higher...I know the "internet people" will say they have the same overhead...but that is not true...when you have a B&M store, you MUST have the store front, sign and decor, you MUST present your items with displays etc., you MUST follow your state's rules of Opticianry, you MUST have liability insurance, you MUST have at least one privilege license, and you MUST have inventory to see and touch for anyone who comes in.

So far the only strategy I've had is to keep my prices fairly low already, and search the internet for any new frames I get in, so that I'm not priced completely out of line, but can still afford to service the product and (one day) make a paycheck.

I guess the question then becomes, why are you trying to compete with an internet "store"?

My dentist stopped taking Medicare because the state/feds were dictating who he HAD to take as patients (he still takes private insurance). If the cost of taking vision insurance is more than the cost of doing business, then why are you still taking accepting insurance patients?

[Now I See]

I guess the question then becomes, why are you trying to compete with an internet "store"?

My dentist stopped taking Medicare because the state/feds were dictating who he HAD to take as patients (he still takes private insurance). If the cost of taking vision insurance is more than the cost of doing business, then why are you still taking accepting insurance patients?

Well, if we're in business, then we are competing. Doesn't matter if it's the place down the street or the internet, we're competing to a degree. So it is wise for any business owner to take a look around and see what the competition has going on. And I agree with you, if taking vision insurance is a problem then the office should stop taking the insurance.

[RKJ]

Then he pulls out the dreaded printout...yep, he had checked all over the internet and found the exact frame for $50 less than what I was selling it for...not a real shocker, but frustrating none-the-less. I will admit I was STUPID enough to match.....the.....price!!!! (or one could argue that I'm STUPID enough not to mark up in order to mark down and still make rent...I hate that sales model, but that's the way the consumer seems to like it best.) Why did I match that price?? Well, I guess it really doesn't matter why, more importantly, will I do it again?...most likely not...or at least not in the same way. I didn't take into consideration all the things RKJ mentions, like adjustments, guarantees, service.

I have toyed with the idea of drastically reducing my frame prices. The two problems I see are 1. Vision Insurance (if an office files insurance) and 2. An office has to make a certain amount of money just to function; and if you actually want to service the product you've sold (i.e. unconditional guarantee, etc.), and/or make a paycheck, well then your prices have to be a little higher...I know the "internet people" will say they have the same overhead...but that is not true...when you have a B&M store, you MUST have the store front, sign and decor, you MUST present your items with displays etc., you MUST follow your state's rules of Opticianry, you MUST have liability insurance, you MUST have at least one privilege license, and you MUST have inventory to see and touch for anyone who comes in.

So far the only strategy I've had is to keep my prices fairly low already, and search the internet for any new frames I get in, so that I'm not priced completely out of line, but can still afford to service the product and (one day) make a paycheck.

Thank you for sharing! I think we need these testimonials because the reality of not adapting is expensive.

I can share three ideas:

First, you are different than e-retail because you provide services. Optometry Times recently published my article to help with unbundeling service fees: http://images2.advanstar.com/optomet...le_051512.html

Second, I've been thinking about pricing strategy. I just don't know any leaders or mentors, and I'm looking for them. Here is my thought: Price and sell, in your store, as you always have. However, implement a patient education strategy to teach patients about the value of services. And invoice itemized: Frame and Lens and Lens options and Service(s).

I think the bundled service fees should include a bundled service savings - and the fee for bundled services (after discount is applied) should be higher than any "dispensing fees" reported to vision plans.

Thinking of VSP specifically, if you look at the fee report you provide to VSP, all profit from basic materials is considered a "dispensing fee". For this reason, when you name your services, be certain they have descriptions like "limited". For example, "limited dispensing" includes lens alignment and frame adjustment for comfort, and verificiaton that the fininished Rx meets Ansi Standards. If VSP audits, they will see that your "limited dispensing" is well defined and different than the "dispensing fee" you reported to them. Make sure your bundled service fees, after discount, is higher than any fee reported to vision plans. Furthermore, when you report U&C, report the bundled fee including discount. Everything is transparent, true, without fraudulent intent. (I am not an attorney, and I don't represent VSP, so vet every idea carefully and confirm with appropriate authorities.)

Goal of strategy: 1. offer bundled fees in house, and show that bundled fees include a savings to patients. 2. keep fees for products and services, added together, at least as profitable as they have been in the past. 3. offer unbundled services (profitable and not discounted) that patients need if they elect to buy from competitors such as e-retailers. 4. invoice products so that 'in house' products appear competitive to like products patients might compare online. 5. educate patients about the value of optical services. 6. establish standards and quality control so that patients do experience amazing service and can explain it to their friends.

That's what I have so far. We need mentors, leaders, and sharing. We need both strategy and patient education tools that make implementation easy. Together we can figure this out.

Finally, there is one other thing I can share. I've seen a supporting member thread on odwire.

I think we can talk general strategy on opti-board, but should avoid all discussion regarding mark ups and so forth. Those discussions should be confined to well vetted private groups. I trust administrators to inform me if I crossed the line with this post. I'm pretty new. Perhaps opti-board has a place for private discussions about actual mark up strategies.

Cheers,
Renee

[MikeAurelius]

Well, if we're in business, then we are competing. Doesn't matter if it's the place down the street or the internet, we're competing to a degree. So it is wise for any business owner to take a look around and see what the competition has going on. And I agree with you, if taking vision insurance is a problem then the office should stop taking the insurance.

Actually, no, you are NOT competing. If you are allowing the internet "store" to guide your pricing, then you are merely being a lemming (no insult intended). You provide a service the internet business cannot provide: hands-on service. You need to be paid for that.

If someone comes in with a cheaper price than you, wish them luck! And hand them your price list for verifying the Rx, fitting the frame, etc. And tell them that YOUR price includes all of that free of charge.

[gmc]

I think we can talk general strategy on opti-board, but should avoid all discussion regarding mark ups and so forth. Those discussions should be confined to well vetted private groups. I trust administrators to inform me if I crossed the line with this post. I'm pretty new. Perhaps opti-board has a place for private discussions about actual mark up strategies.

Cheers,
Renee

There is such a forum on Optiboard, the Eyecare Professionals Only forum. It does require a nominal membership fee.

[sharpstick777]

RKJ,
I have heard one disaster looming after another since I have been in Optical. A long time ago it was B&L and AO were going to destroy us. Then it was Lenscrafters... followed by... online contacts sales, etc.

Interestingly, despite the commodity aspect of contacts (it doesn't matter how they look) online contact sales are only 18%. Online contacts flattened out one reason that 800-CONTACTS was pushing for a refracting machine last year.

I would be surprised if online eyewear sales ever pass 15% of eyewear sold on a per $ basis.
There a few reasons that Eyewear online is self limiting:

1) Ability to try on eyewear frames first-hand, and the need for expert advise on choosing a frame
2) The current trend toward high-end luxury eyewear brands away from fashion brands (Ie, toward LaFont and ProDesign and away from Prada and Ralph Lauren etc)
3) As the population continues to age, progressives will hold a larger share of the market, and progressives are far more difficult to purchase online
4) Increased consumer sophistication toward high end AR's and premium options such as Transitions and Free-form
5) The economic recovery is booming here in the Northwest, Robson St. is packed everytime I an in Vancouver BC, and its only a matter of time before everyone is feeling better. A recovery favors more brick and mortar sales.

So my advise to anyone interested in future proofing their business is to provide lavish knock your socks off customer service.

[optical24/7]

Actually, no, you are NOT competing. If you are allowing the internet "store" to guide your pricing, then you are merely being a lemming (no insult intended). You provide a service the internet business cannot provide: hands-on service. You need to be paid for that.

If someone comes in with a cheaper price than you, wish them luck! And hand them your price list for verifying the Rx, fitting the frame, etc. And tell them that YOUR price includes all of that free of charge.

This is the crux of these discussions: Are you/we to change our presentation structure due to the internet? Do you change what you do because a discounter moves next door? If you are loosing clients on price alone, you more than likely are loosing them to B&M discounters ( like 98-99% of the time according to i-net percentages, you're not loosing them to the internet.)

If you have a successful business model, are you going to change it for a 1-2% client loss? ( and those losses once again are already going to another B&M for numerous reasons). The net is your cheap competition just like the B&M down the street that sells cheap. If you want to go head to head, you better have deeper pockets than they do... Or, you can step up your product/service equation.

I've used this analogy (many times) before... Does Rick's Steak House go out of business because Mickey D's opens right next door? Neither go out of business. They cater to different tastes ( Literally ). They both thrive, why? Because they both cater to a different clientele. The food industry like the optical industry is huge, huge! There is room for all types of markets to cater too. It's up to you to decide who is your market and how to cater to that market.

I would caution against a knee-jerk reaction to the net. Our industry has had many times (perceived) threats. If the industry shifts, for whatever reason, we independents are best poised to make changes over night.

[Chris Ryser]

RKJ,
I have heard one disaster looming after another since I have been in Optical. A long time ago it was B&L and AO were going to destroy us. Then it was Lenscrafters... followed by... online contacts sales, etc.

Above statement is correct, but these disasters did happen and upset a peaceful profession as it has existed in Europe and other parts of the world where it is regulated. There is no continent on this globe where a trade is so messed up like North America. Part of it is regulated and the other is not, and it is all over a free for all. It is also a testing ground for the large corporations for all sorts of business tests.

One day you can be a street cleaner or garbage collector and the next day you have become a specialized optician at Lenscrafters or another optical retailer selling glasses with the most sophisticated lenses. Education and qualifications which in older days were a must, are barely existing and where needed qualifying exams are easy to do and a large portion of the tests are failed by a large percentage.

RJK has shown good intentions in proposing a start to a discussion on present problems, but there seems to be no problem and everyting is fine and dandy. The economy is booming again and nobody else than a small percentage of the population is looking for bargains on the web. The rest is happy with the status quo.

Most probably also this well meant thread will soon face the usual death like most of them that are meant to motivate and adapt to new challenges.

[MikeAurelius]

I would caution against a knee-jerk reaction to the net. Our industry has had many times (perceived) threats. If the industry shifts, for whatever reason, we independents are best poised to make changes over night.

EXACTLY!

The only competitors you have as a B&M are the other B&M's in your town.

People are going to shop on-line for a variety of reasons. Eyewear is just the newest reason. At the same time, the on-line purchasers need to be educated about the true costs of purchasing eyewear sight unseen (pun intended), hence my comment about handing them a sheet about your prices for servicing someone elses eyewear.

You (as a dispensing optician) need to be paid for your time, whether it is Rx verification, fittings and adjustments, nose pads and screws, whatever. You should not feel ashamed or feel the need to give this time (and supplies) away for free. And if the patient complains, then wish them well and send them on their way to someone else. Do you really need that kind of customer in your store?

[MikeAurelius]

Above statement is correct, but these disasters did happen and upset a peaceful profession as it has existed in Europe and other parts of the world where it is regulated. There is no continent on this globe where a trade is so messed up like North America. Part of it is regulated and the other is not, and it is all over a free for all. It is also a testing ground for the large corporations for all sorts of business tests.

One day you can be a street cleaner or garbage collector and the next day you have become a specialized optician at Lenscrafters or another optical retailer selling glasses with the most sophisticated lenses. Education and qualifications which in older days were a must, are barely existing and where needed qualifying exams are easy to do and a large portion of the tests are failed by a large percentage.

Ahhhh...the wonders and beauty of capitalism!!!

[eyechick1969]

The final solution is simple .............sell at closeto cost + charge for services if you can provide the needed quality service.

Close to cost

REALLY??

Our cost includes a nice hands on inventory, licensed opticians,rent, utilities, fire extinguishers, AC/Heat, nice carpet in our nice show room, our professional advice....Need I say more?!?

[Barry Santini]

drk: *knowledgeable and competant professional services: priceless!"

[peyes]

Set up online store at Eyeworld.onlineopticalstore.com yesterday. Very easy to do. So it is an alternative to our B&M locations. I don't think it will take away and may even generate extra income.