Following the UK referendum decision to cease membership of the European Union the GfK Consumer Confidence Index measured an immediate and significant drop in economic sentiment during the following months of July and August as political and financial uncertainty reigned. In September the index results showed that consumer confidence had returned to the same level captured in June, immediately ahead of the referendum, and so in the short term at least appears to have recovered from any Brexit-related jitters. In this edition GfK looks at the performance of GB opticians over this unique Q3 2016.
While the optics product groups tracked by GfK have previously proved resilient to economic uncertainty, as shown by their robust performance over the 2008/09 recession in the UK, there has been a marked slowdown in value growth in Q3 2016. The rate of retail value growth at GB opticians for the four product groups combined (spectacle frames, contact lenses, contact lens care products and sunglasses) stood at +5.7% year on year in Q2 2016. In Q3 2016 the rate of growth has slowed to +2.3% – less than half the rate of value growth seen in the previous quarter. Breaking this figure down by the individual product groups tracked we see the strongest rate of growth achieved by sunglasses which have seen sales value increase by +10.9% compared to Q3 2015. Spectacle frames, the largest product group tracked by value sales, saw value growth slow from +5.0% in Q2 2016 to +0.7% in Q3 2016, a significant slowdown with spectacle purchases perhaps easier than contact lens purchases for patients to delay and/or economise on by opting for lower priced options. Contact lenses value growth was down by a much lesser extent than spectacle frames with the value growth rate of +7.1% achieved by GB opticians in Q2 2016 falling to +4.0% in Q3 2016. Growth of contact lens care products continues to track behind that of contact lenses, at +2.3% in Q3 2016, as an increasing proportion of contact lens patients opt for daily options and so require fewer of the associated care products.
Specifically looking at the growth of contact lenses, it appears the slowdown in value growth has affected independent opticians to a greater degree than the multiples. While value growth at the multiples has fallen from +7.2% in Q2 2016 to +5.9% in Q3 2016, at the independent opticians value growth has dropped from +6.6% in Q2 2016 to decline by -2.5% in Q3 2016.
Considering the above, how can independent opticians best protect themselves and their contact lens value sales both over times of economic uncertainty, as over the last quarter, and more generally with aggressive competition from both the multiples and online retailers?
The figures show that the fall into a value decline at the independents in Q3 2016 was driven largely by reusables with daily lenses remaining in value growth within the channel over the quarter. Indeed we see, and have seen, independents lead the market and be ahead of the overall trends achieving, more quickly a greater proportion of their sales via daily options, silicone hydrogel lenses, multifocal lenses and many newly launched lenses over time as the various innovations were launched to market.
Even in times of potential economic uncertainty the independents should stick with the strengths which their patients value – a major one of which is high quality, independent and tailored advice and expertise. Continuing to, and even increasing the rate at which independent patients are offered alternative and newer lens technologies as the various new lenses are launched is only likely to help retain patients within the channel and further in the patients mind the expertise and service quality of their optician experience. Of course this also has the potential to increase the value of each patient to the practice as newer lens brands are likely to hold a higher price point should the patient opt to switch lenses.
While persistently offering upgrades to new innovations at higher price points may seem slightly unnerving for some independent opticians, particularly if sales are under pressure, the alternative of retaining patients within the same lens over the long-term is surely playing into the hands of the multiples and internet retailers which often compete more aggressively on price.
Even if an independent optician’s patient was price sensitive if they are consistently recommended and end up wearing the same lens over time, with little or no offering of newer lenses providing perhaps a superior experience, the service difference perceived by the patient could become eroded over time. In this instance the idea of reordering online, or looking for a lower price elsewhere on the high street, rather than booking another appointment in practice may become more attractive.
Data quoted covers mainland GB only
Prepared by Paul York, senior account manager, Optics, paul.york@gfk.com, 020 7890 9513, gfk.