Thoughts on the economics of Interent Contact Lens distribution...

[Barry Santini]

The contact lens fitter in our office has shared with me his thoughts about CL distribution throught 1-800-Contacts, the internet, and the like...

Q: With internet/mail order distribution of CLs, does anyone think the average CL wearer is actually *buying/using/consuming* more CLs than if they purchased them onesey-twosey through their eyecare provider? And if one thinks they do consume more..just how much more (in units)...

5%...10%...15%...20%...25% (or more) units?

I think not.

So!...If only a modest increase in % of total units for *present* wearers are being realized, then where is the profit advantage for the CL manufactuere's (and incentive) to sell lenses in bulk,,,at significant discounts (15% to 30%, by my intuition) vs. the "practitioner fee"...to these mail order/internet companies?

It seems to my feeble mind that manufacturer profit *per pair* is definitely much lower, without an offsetting increase in unit sales from this type of distribution.

Please help this tired ol' brain figure this out!

Your thoughts, please...

Barry Santini, ABOM

[Ory]

By selling a large unit that would require little to no work from a sales rep they are reducing their overhead. They can decrease the number of order-takers answering the phones too. Who cares if the poor independent who wants to order 6 boxes has to sit on hold for 5 minutes?

Less paperwork, less accounting work (slightly), it all adds up.

[LENNY]

:D I wonder who will fit their lenses?
If we dont purchase their lenses we dont get trials!
If we dont get trials we are not going to fit patients.I think 1800 will fit patient over internet the same way they take PD and height for online purchases!
Good luck!
Then Chip can retire!:D

[For-Life]

Here are a few thoughts:

- 1800 has only had one profitable quarter or year. I forget what it is, but most of its years it has taken in loses.

- For the suppliers, they want to be with 1800 because of the volume sales. They will take in less per box, but at the same time they will sell that many more boxes.

- A bird in the hand is worth more that two in the bush. That means selling a thousand boxes at $10 is better than selling each box at $15 hoping that you will do the same volume. Now they got their money and are happy instead of hoping to get the money.

- $10 today can be better than $12 tomorrow. The company can use that money to finance its other ventures during the time it would have had to gain the extra $2.

[Framebender]

people buy contacts online. One is price, but the other is convienence. At my wife's office they match the 1-800 price including shipping and then ship them to the patient just like any online company would. They found that the convience was just as important as price. People didn't want to have to call in, wait for somebody to pull their file and then have to drive to the office to pick them up. To help with the convience factor there is now a place where you can order contacts on the office web site.

They have been doing this for about 6 months now and have found that not only are they losing less CL business, but it has also cut down on giving out trials because the client has torn their last contact.

I think non compliant people order more contacts online, but regular wearers purchase the same amount.

[mikeh]

Thoughts:

When you consider economics from the vendors perspective you must look at it like a manufacturer. If you’re not running at close to full capacity on your manufacturing lines the expense of additional units is minimal.

The large scale vendors, i.e. WM get a better price, not only because they buy in volume, but also because they “warehouse” the product and the vendor only has to ship to one address That’s a big saving for the manufacturer.

One or two “key accounts managers” move more lenses that 30-40 local reps and order takers. Another saving. Besides, that’s where many consumers want to buy them.

I have spoken to many consumers, including friend and relatives, about why they buy lenses on line. The #1 answer? “Going to the doctor’s office is a pain in the ***.”

As far as they are concerned they are seeing okay and not having any problems but the doctor “always wants to do an exam so they can get more money.” I know, I know. Occular health, patient awareness, etc, etc. But we’re not supposed to eat at Mc Donald’s either.

In some of the larger metro areas some docs are just doing cl exams, writing an Rx and letting patients buy them wherever they want. They tell me that most of the patients never come back for follow-ups anyway, and when they do, you end up with a lot of chair time and they don’t make any money on the lenses anyway.

I’m sure that many members will tell us about how they’ve handled these problems, but the root cause is that most contact lenses are not custom made and are easily reproducible. That makes them a commodity and driven by the laws of supply and demand not professional ethics.

[chip anderson]

Of course if they weren't labeled on the pkg and the box we wouldn't have this problem, when we had rigid lenses (which we marked with a dot for the right) and yearly or more use soft lenses and weren't stupid enough to give the patient the bottle everything worked well. Possibly 6pks with a label we removed and replace with a simple "R" or "L" would solve the problem entirely. No one but us would know the brand, fit, or strength.

Chip

[chm2023]

The manufacturer can justify a lower cost by 1) assuming he has already covered his fixed costs and that these added units therefore yield a higher marginal profit and 2) distribution/sales costs are significantly lower. Interesting question re the rate of consumption though.

Instinctly I would guess a slightly higher rate, maybe 5 to 10%, based on shrinkage, Rx change making some purchased lenses obsolete??? Just guessing.