Going for growth

Andy Ferguson took the helm at Dollond & Aitchison just over a year ago. Here he talks to Chris Bennett about the market, personal responsibility and level playing fields

Fourteen months ago, Andy Ferguson became the chief executive of Dollond & Aitchison, the culmination of a nine-year career at the multiple during which he has had a variety of roles. He entered optics from Safeway where he worked with his predecessor in the top job at D&A, Russell Hardy.

'I'm a grocer,' he says. 'My background is all in grocery, I spent nine years at Safeway and worked with Russell there. Before that I was at Presto.'
Since joining D&A the firm has undergone a massive transformation which has seen the company change its lens supply, develop its own Styleyes treatment, institute a raft of training, service and career systems for its staff, and undergo a store rebranding and refit programme.

Despite the current tough trading conditions, Ferguson believes all this work has put D&A in a strong position. He sees a range of opportunities - franchising by moving into areas where independent practices are not offering customers good service, and organic growth using the momentum built up through the work D&A has done with its staff.

Feeling upbeat

'Genuinely, I feel very upbeat about the future because the changing demographics mean more people will need glasses. In 10 years' time 1.3 billion more people will need vision correction and a few of them are in the UK,' he jokes.
Ferguson says D&A has laid the foundations to participate in that growth.

'Nine years ago we had a lot to do,' he says with characteristic frankness. Using the supertanker analogy, he adds: 'We took five or six years just to stop the thing, spent a couple of years turning it around and now I am feeling better than I have ever felt about being able to grow.'
With such a pedigree in retailing, Ferguson is at home with the application of high street disciplines to optics. So does he think optical retailing has fully embraced the retailing credo?

'I guess a lot of the effort we have made in the last few years since I arrived has been about putting some of the good retail disciplines into optics. Superficially, I think that the retail part of optics is as good as any other retailer in terms of putting stuff on shelves and creating a retail environment, but we are almost completely different from every other retailer when it comes to service.

'It's the bit that customers are the most wary of, and understand the least. When they come into the market they know there are glasses of some description there for sale but they sort of know that you can't just go in and take one off the shelf.'
That makes optics different from retail, he explains. 'The bit they don't know is that whole service experience that I guess is the part that will differentiate the optical retailers over time.'

Hard time on the high street

'The market is very tough. I guess the most concerning thing, as a seasoned retailer, is that no one knows why.'
Ferguson's hypothesis is that interest rates, the equity homeowners have taken from their property, mixed with other general retail trends such as the internet could be contributing. He also thinks people are finding other ways to spend their money such as eating out and travelling.

'Generally, things can only get tougher for retailers. Property is expensive, salaries and pensions go up, but Far East [manufacturing] sources mean prices are coming down. That all makes for a tough mix. Applying that to optics, there are things that people don't have to buy and they are deferring.'

It is a matter of record that D&A sales were down 4 per cent and that 2005 was a tough year, but Ferguson says he has reason to be much more upbeat about the future.
'For us the differentiators will be very much on service against speed or price. We score better than anyone else among the multiples on service so we need to concentrate on that rather than a multitude of things and end up in that no man's land.'

Age has its advantages

Being a company that's 255 years old can be an advantage, but Ferguson says D&A also has to be careful not to be viewed as old-fashioned.
'We have rebranded the business, we have created a new logo, we are starting to refit the stores big time. We invested 4m in 2005 and we will invest 5m this year in new equipment and new store fit-outs.

' It is all about moving with the times and creating that kind of modernity, he adds.
Customer service is an issue that lies at the heart of much of the work in the systems and processes Ferguson has been working on in his previous roles, and since taking the helm at D&A.

'We have spent the last few years driving efficiency and developing retail systems and processes that gave us the opportunity to increase profitability.
'We continue to invest heavily and position ourselves on a service platform, but a lot of the attention over the last couple of years has been on implementing new processes and new systems.

'I wanted to get back to focusing on colleagues on the basis that if we can get the experience for colleagues right and they see D&A as being a great place to work and feeling good about themselves, it sounds clichd but, then that will rub off on customers.'
He admits that the company was not focused enough on customers and what customers really wanted. Much of the past year has been about increasing investment in research to help D&A understand what drives customers into stores.

'Why do you come for an eye examination? What do you expect? How do you want people to treat you? This has been through a number of initiatives.

'We have introduced the idea of colleagues taking personal responsibility and then taking personal feedback from customers. Not traditional customer service questionnaires about the whole store, but serious mystery shopping every month in every store. This gives individual optometrists and individual contact lens fitters, DOs and managers and OAs their personal feedback from their customers. Now that is powerful.

'It's always difficult to know as an individual how customers perceive you.' But personal feedback can't be ignored. 'Let's face it, it could be as simple as bad breath.'

To support this, D&A has doubled the number of area managers and increased the ratio so there is time for them to be in the stores all the time.
'The power of that service scoring has been a monumental breakthrough in terms of trying to get everyone engaged in what we are trying to do. It is creating individual priorities and puts the responsibility back into the stores. The work our staff do today will bring recommendations tomorrow. This is still a business where word of mouth counts for a hell of a lot.

'If you are 45 and haven't worn glasses you haven't a clue where to go. Our recommendation rates for the business are over 80 per cent. That's pretty powerful and sustains a rosy future.

'We will do marketing but there is also the potential to do a lot, in theory, without spending a penny above the line, by getting the guys at the sharp end to take more responsibility for getting customers to recommend us. You get into that virtuous circle where more people are coming back.'

Organic growth

This organic growth - added to new opportunities - is the way forward, he says pointing to the GOS review and the deal done in Scotland.
'That is pretty inspirational and congratulations to the guys involved. Suddenly there are a number of opportunities for us to grow on the clinical side of the business by taking some business from the hospital sector, primary care and GPs. That for D&A is all fantastic.'

Ferguson says he is not sure what exactly those opportunities will be but there's a lot of work to be done and he wants to take part in the review. 'We are actively thinking about how we can be involved.'
But there are other less welcome market dynamics such as competition in contact lens supply, the internet and supermarkets.

'Everyone says they welcome competition. But is it helpful to bring that deregulation to the market? Well, not really,' he adds with typical candour.
D&A has a great contact lens package, including aftercare, assessment, a trial period and including a substantial discount on eyewear. It is flexible and includes delivery to your door, he says. That is popular. It is also supported by a 150-strong call centre and not many people can claim that, says Ferguson.

'Decoupling the product is not credible for us as an optician.' A few calls have been taken from the supermarkets but he is not concerned. 'What does worry me is that it has created this unfair playing field in aftercare and general direction. Any law deliberately made vague is not good.'
It is not credible for Tesco, with 20 optical outlets around the country, to say it offers national aftercare, he says.

'As an optician with care and service at our heart we can't do that. I couldn't look my optometrists in the eye.' He says the legislation should be used in a more powerful way to make everyone play by the same rules. 'It is the unfairness factor that annoys me.'

Ferguson clearly believes the future battles will be fought in the high street on lenses, frames and service, areas in which he is confident.
'A lot of the market is dealing in what I would call unfinished lenses, and I don't use that term lightly, because they are cheap.

'We decided that if we worked with Nikon it got that quality message across.' The result he says is a complete range of quality lenses that have become the norm for D&A customers.

On frames, D&A has been using Styleyes since 1997, which is another way of serving the customer and being modern. 'We are owned by a fashion retailer and we have exclusive brands. Strategically, we are doing much more with De Rigo in terms of understanding fashion trends in advance, but it relates back to the service and the dispensing.

'We invest so much in getting people where we want them to be, so employing resources to retain them makes economic sense. Someone can go from being a summer school student to being a franchisee and, if that is their goal, that's fantastic.'

The Franchising business

Another opportunity is growing the franchising business. Four have been opened this year and next year the plan is for 20. 'Many independents are under-invested - this is a massive opportunity for D&A. Customers are still very willing to shop locally for optical needs. In small towns the rents are low and we can give good service and get profitable business very quickly.'

Ferguson says he doesn't look at what the other multiples are doing with envy, but readily admits that he has admiration for some of the good quality independents in the market. 'There are some good independents out there,' he says, a proportion he would put at one in three. 'The others aren't going to survive and that's a great opportunity for us.'

There are many ways this can be achieved by working with or without independent practices, but the arrival of D&A is welcomed in small towns, says Ferguson. 'It represents modernity to them: "We've got a D&A, we have arrived".

'I have no doubt that this company can continue to grow. We are very positive about what the future holds and I am very excited <2212> we can make it happen.'