Optical industry

Part
01
of three
Part
01

Market Share - Optical Industry: Top Five Players

The top five players in the US optical industry by market share are Vision Source L.P., Luxottica Retail, Walmart Inc., National Vision Holdings, Inc., and Costco Wholesale. Below is an overview of the findings.

Defining the premise for top ranking of optical players

  • The most extensive and the only regular listing available for top 50 optical players in the United States is published by Vision Monday. The 2019 list has not yet been published and is due to get published any time this month.
  • The latest listings available are those for 2018 which were published on 15th of May 2018 and provided data for the 2017 top players.
  • The list denotes itself as 'VM's Top 50 U.S. Optical Retailers' as well as 'Key Optical Players' of the US ranked by the revenue of a specific year.
  • Moreover, as far as the jurisdiction of these rankings is concerned, they take into account all revenues that a company derives from optical products and services through locations in the U.S. and Puerto Rico.
  • To go into details, this includes "total revenues, including sales from both company-owned and franchised stores (if applicable), managed vision care revenues, online sales, and any share of affiliated doctors’ fees or laser-surgery fees that companies receive."
  • Given the extensive coverage in terms of types of products and services these rankings take into account, and given the fact that no other publicly available documents had more extensive coverage of the US optical industry, these rankings have been used to locate the top five players in the US optical industry by market share, as provided below.

Top 5 Players

#1. Vision Source L.P.

  • Name: Vision Source L.P.
  • Website
  • The market share in the US (2017): 7.86% (see calculations below)
  • Publicly available revenue (2017): $2,733.0 million
  • Growth of the Market Share:
    • The market share in US 2017: 7.86% (see calculations below)
    • The market share in US 2014: 6.80% (see calculations below)
    • Therefore, the market share for Vision Source L.P. grew by 1.06% between 2014 and 2017. (see calculations below)

#2. Luxottica Retail

  • Name: Luxottica Retail
  • Website
  • The market share in the US (2017): 7.03% (see calculations below)
  • Publicly available revenue (2017): $2,445.0 million
  • Growth of the Market Share:
    • The market share in US 2017: 7.03% (see calculations below)
    • The market share in US 2014: 7.12% (see calculations below)
    • Therefore, the market share for Luxottica Retail declined by 0.09% between 2014 and 2017. (see calculations below)

#3. Walmart Inc.

  • Name: Walmart Inc.
  • Website
  • The market share in the US (2017): 4.86% (see calculations below)
  • Publicly available revenue (2017) : $1,692.0 million
  • Growth of the Market Share:
    • The market share in US 2017: 4.86% (see calculations below)
    • The market share in US 2014: 4.67% (see calculations below)
    • Therefore, the market share for Walmart increased by 0.19% between 2014 and 2017. (see calculations below)

#4. National Vision Holdings, Inc.

  • Name: National Vision Holdings, Inc.
  • Website
  • The market share in the US (2017): 3.95% (see calculations below)
  • Publicly available revenue (2017): $1,375.0 million
  • Growth of the Market Share:
    • The market share in US 2017: 3.95% (see calculations below)
    • The market share in US 2014: 2.73% (see calculations below)
    • Therefore, the market share for Walmart increased by 1.22 % between 2014 and 2017. (see calculations below)

#5. CostcO Wholesale

  • Name: Costco Wholesale
  • Website
  • The market share in the US (2017): 3.06% (see calculations below)
  • Publicly available revenue (2017): $1,064.9 million
  • Growth of the Market Share:
    • The market share in US 2017: 3.06% (see calculations below)
    • The market share in US 2014: 2.56% (see calculations below)
    • Therefore, the market share for Walmart increased by 0.50% between 2014 and 2017. (see calculations below)

Number of players in the optical industry AND THEIR historical growth

  • In the US Optical Industry retail store count between 2007 and 2016 increased from 38,830 to 42,637 in total as per the latest available report published by the Federal Trade Commission in 2018.
  • According to distribution channels:
    • The number of retail stores increased by 2,500 or by 9.6% between 2007 and 2016.
    • The Number of conventional chains increased by 700 or by 9.5% between 2007 and 2016.
    • The number of mass stores increased by 715 or by 22.6% between 2007 and 2016.
    • The number of club stores increased by 270 or by 27% between 2007 and 2016.
    • The number of departmental stores decreased by 378 or by 29.8% between 2007 and 2016.

Research Strategy

To determine the top five players in the US optical industry we first searched for readily available information in a diversity of reports. We searched for overall market reports published by reputable consultancies (such as McKinsey, Deloitte, E&Y, Bain BCG), market size and market analysis reports (such as those published by Grandview Research, GMInsights, Market research, Markets and Markets, IBIS World), industry reports (such as those published by Vision Council, Vision Monday), press releases (such as PRNewswire, Globe Newswire, Businesswire), statistical databases (such as Statista), and academic reports (such as those found on Academia, Researchgate).

From reports which were not beyond a paywall and could be accessed, almost all the coverage included fragments of the industry such as Eyecare, Eye Glasses, Contact Lenses, Eyewear, Vision Care. Only the Vision Council included a report titled 'Optical Market Data and Trends' which could be accessed only by the members of Vision Council.

A report by Vision Monday provided data for 'Key Optical Players As Per Revenue' and also the yearly market size for years the years 2014, 2015, 2016, 2017. It was noted that although the list denoted itself as 'VM's Top 50 U.S. Optical Retailers' as well as 'Key Optical Players' of US ranked by the revenue of a specific year, it took into account all revenues that a company derived from optical products and services through locations in the U.S. and Puerto Rico. On a granular level, it included ' 'total revenues, including sales from both company-owned and franchised stores (if applicable), managed vision care revenues, online sales, and any share of affiliated doctors’ fees or laser-surgery fees that companies receive.' It could be reasonably inferred that the rankings included all areas of the optical industry that an optical company operates in. Moreover, in these rankings, the player which ranked second, i.e. Luxottica (7.03% market share for 2017), acknowledged their share to be less than 10% in the optical industry when they published a note in Forbes in 2017 saying 'we are in no way a monopoly. In reality, the optical industry is very competitive and fragmented. Of the close to 1 billion pairs of glasses sold worldwide last year, only 93 million of them were produced by Luxotticaless than 10%.' Therefore, these rankings were reasonably used to locate the top five players in the US optical industry by market share.

Calculation for Market Share

The formula used: Revenue of the player for the year / Total market size for the year
Total Market Size 2017: $34,782 million
Total Market Size 2014: $32,551 million

(Following revenue and market size numbers are in millions)

2017: Vision Source L.P. = $2,733.0/ $34,782 = 7.8575 or 7.86%
2014: Vision Source L.P. = $2,212.9 / $32,551.0 = 6.7982 or 6.80%
Growth of market share (2014-2017) = 7.86% - 6.80%= 1.06%
2017: Luxottica Retail = $2,445.0/ $34,782 = 7.029 or 7.03%
2014: Luxottica Retail = $2,318.5 / $32,551.0 = 7.1226 or 7.12%
Growth of market share (2014-2017) = 7.12% - 7.03% = 0.09%
2017 : Walmart = $1,692.0/ $34,782 = 4.8645 or 4.86%
2014 : Walmart = $1,521.0 / $32,551.0 = 4.6726 or 4.67%
Growth of market share (2014-2017) = 4.86% - 4.67% = 0.19%
2017 : National Vision Holdings, Inc. = $1,375.0/ $34,782 = 3.9531 or 3.95%
2014 : National Vision Holdings, Inc = $890.0 / $32,551.0 = 2.7341 or 2.73%
Growth of market share (2014-2017) = 3.95% - 2.73% = 1.22%

2017 : Costco Wholesale = $1,064.9 / $34,782 = 3.0616 or 3.06%
2014 : Costco Wholesale = $833.0 / $32,551.0 = 2.5590 or 2.56%
Growth of market share (2014-2017) = 3.06% - 2.56% = 0.50%
Part
02
of three
Part
02

Optical Industry - Brick and Mortar versus Online

The total online sales of glasses for vision in the US in 2018 was $626.4 million while the brick and mortar sales of glasses for vision was $13,836 million ($13.84 billion) in the same year. The top 5 brick and mortar stores that sell the most glasses for vision purposes include Vision Source, Luxottica Retail, Walmart Stores, National Vision, and Costco Wholesale.

Online Glasses for Vision Sales in the US

  • A report by IBIS World also projected the growth rate of online eyeglasses sales to be 4.4% in the forecast period of 2014-2019.
  • Based on the triangulation of the above statistics, the total online sales of glasses for vision in the US in 2018 was $626.4 million.
  • The Chicago Tribune reported that between 2007 and 2017, the online glasses sales have experienced growth by almost 600%.

Brick and Mortar Stores Glasses for Vision Sales in the US

  • In a report published by Forbes, it is estimated that the total number of eyeglasses for vision sold online in 2017 was 8 million pairs, which was only 4.2% of the total eyeglasses sold that year. This means that the brick and mortar segment is 95.8% of the eyeglass market.
  • According to the IBIS World, the projected growth rate of eyeglasses stores (brick and mortar) in the US to be 1.1% in the forecast period of 2014-2019.
  • Based on triangulated data, the total sales of glasses for vision through brick and mortar stores the US in 2018 was $13,836 million or $13.84 billion.
  • According to Euromonitor International, the brick and mortar sales channel will continue to dominate the eyeglass market because consumers are able to receive complete services. These include consultations and eye examinations with qualified eye care professionals and optometrists while buying and trying different glasses of vision in one place.

Top 5 Brick and Mortar Stores that Sell the Most Glasses for Vision Purposes

Based on the US optical sales (market share) in 2017, the top 5 brick and mortar stores that sell the most glasses for vision purposes include:

Top 5 Online Sites that Sell the Most Glasses for Vision Purposes

Based on the estimated annual revenue, the top 5 online sites that sell most glasses for vision purposes are:

METHODOLOGY

In order to estimate the total sales of glasses for vision through brick and mortar stores versus purchasing online, we began our research by looking for precompiled sales data from industry databases such as Markets and Markets Research, PRNewswire, and IBIS World. Although locate recent data on the prescribed eyeglass sales for the two channels, we located a report published by the Chicago Tribune, outlining the market size of the online segment in 2017. We used this data and the estimated growth rates of the two channels to calculate the estimated sales in 2018 as follows:

  • Online Glasses for Vision Sales in the US
To estimate the total sales of online glasses for vision in 2018, we performed triangulation using 2017 sales data and the projected growth rate for the forecast period of 2014-2019.

The Vision Council also noted that the number of glasses for vision sold online in the US in 2017 was worth $600 million. In another report by Forbes, it is estimated that the total number of eyeglasses for vision sold online in 2017 was 8 million pairs, which was only 4.2% of the total eyeglasses sold that year.

Also, IBIS World projected the growth rate of eyeglasses stores (brick and mortar) in the US to be 1.1% while that of online eyeglasses sales to be 4.4% between 2014 and 2019.

Using the above statistics, the 2018 total sales of online glasses for vision in the US is estimated as follows:
2018 sales = 2017 market size + (2017 market size x CAGR)
= $600 million + ($600 million x 4.4/100)
= $626.4 million
  • Brick and Mortar Stores Glasses for Vision Sales in the US
In order to triangulate the total sales of glasses for vision in brick and mortar sales in the US, we used the online sales data as key figures for triangulation.

As reported by the Vision Council, the US eyewear industry group, the number of glasses for vision sold online in the US in 2017 was worth $600 million. Based on the Forbes report, this value represents 4.2% of the total eyeglasses sold that year, which means that the brick and mortar store segment represented 95.8% (100% — 4.2%) of the market in 2017.

Thus, the total glasses for vision sales through brick and mortar store in the US in 2017 was calculated as follows:
$600 million = 4.2% of the market (online sales)
Brick and mortar sales = 95.8 x $600 million / 4.2 = $13,686 million ($13.69 billion)

Thus, the estimated total brick and mortar sales of glasses for vision in the US in 2017 was $13,686 million.

To estimate the 2018 sales, we calculated the 2017 value by the estimated growth rate of 1.1% as follows:
2018 sales = 2017 market size + (2017 market size x CAGR) = $13,686 million + ($13,686 million x 1.1/100) = $13,836 million

Our next strategy was to look for further insights on the possible future growth trends of the two selling channels. We were able to get information from Forbes and the Euromonitor International, which helped to address the insights.

In order to identify the top 5 online sites, and the top 5 brick and mortar stores that sell the most glasses for vision purposes, we looked for precompiled list from market reports and industry research databases. We found a list of top 5 brick and mortar stores a report published by Vision Monday based on the revenue generated in 2017. We also found several sources mentioning the top online sites, particularly Zenni Optical and Warby Parker. We, therefore, searched through online financial databases such as crunchbase, Owler, and craft.co to find the three top competitors of the two companies based on the annual revenue. Since all data was available, we have presented the required information in the above section.

Part
03
of three
Part
03

Optical Industry - Threats: United States

The most recent sources on the United States optical market, particularly those published in the past 24 months, indicate that the most recent threats to the industry are the rise in demand for laser eye surgery, the stalled growth of private health insurance, the growing competition from alternative retailers such as online retailers, warehouse stores, and supercenters, the rise of smart glasses, and the proliferation of counterfeit products.

RISE IN DEMAND FOR LASER EYE SURGERY

  • Even though most Americans with vision impairment correct their vision with contact lenses and eyeglasses, the number of people opting for permanent correction through laser eye surgery or LASIK is growing. As demand for LASIK increases, demand for corrective eyewear decreases, and the revenue of retailers selling corrective eyewear declines.
  • The rise in demand for substitute services offered by external competition poses a threat to stores distributing eyeglasses and contact lenses in the country.

STALLED GROWTH OF PRIVATE HEALTH INSURANCE

  • Growth in the number of Americans with private health insurance is projected to slow down in 2019.
  • This slowed growth is expected to curtail the rate at which Americans purchase replacements for their prescription eyewear.

GROWING COMPETITION FROM ALTERNATIVE RETAILERS

  • External competition from alternative eyewear retailers such as warehouse stores, supercenters, and online retailers is projected to intensify in 2019.
  • Supercenters and warehouse centers pose a threat to brick-and-mortar optical retailers as they continue to include contact lenses and eyeglasses in their product offerings. Competition from these retailers has grown in the five years that have passed.
  • Competition from internet retailers is especially fierce in the contact lens space. This competition is expected to grow stronger as the portion of services transacted online continues to increase.
  • Even though online retailers of eyeglasses have a long way to go before they pose a real threat to giant optical retailers such as EssilorLuxottica, they have the potential to push the prices of retail eyewear down.
  • Online retailers such as Warby Parker pose a threat to optometrists or eye doctors, but it is unlikely for these online retailers to drive optometrists out of business any point in the near future.
  • Online refraction is considered the most disruptive of the threats that the traditional model of optical retailing faces at present. Technology companies are developing platforms that will allow the online prescription of contact lenses and eyewear, and it is likely that they will be able to overcome legal challenges. Optical retailers may have no choice but to embrace these technological advancements.

RISE OF SMART GLASSES

  • Competition from new entrants will intensify as smart or augmented-reality-powered glasses become more mainstream.
  • Optical retailers may be forced to incorporate the technology in their product offerings as well.
  • Smart glasses pose a threat to optical retailers because they have features consumers may soon find invaluable. They can enable consumers to shop, pay, try on clothes, design products, decorate houses, and visit museums without leaving the comfort of their home.

PROLIFERATION OF COUNTERFEIT PRODUCTS

  • Luxottica Retail, the second largest player in the United States optical retail market in 2017, states that the proliferation of counterfeit products poses a threat not only to company reputation and bottom line, but to consumer health and safety as well.
  • These counterfeit products do not have the same quality as the original products have. It is highly impossible for counterfeiters to replicate the elevated quality of the original products.
Sources
Sources

From Part 01
Quotes
  • "Vision Monday is once again surveying optical retailers and large regional ECP groups across the U.S. to be considered for inclusion in the 2019 Annual Top U.S. Optical Retailers Report. Results from the survey will be published in the May 2019 digital and print issue of Vision Monday and posted on VisionMonday.com. The survey and final report is based on revenues for the calendar year ending Dec. 31, 2018. The survey asks for your total revenues, including sales from both company-owned and franchised stores (if applicable), managed vision care revenues, online sales, and any share of affiliated doctors’ fees or laser-surgery fees that companies receive. "
  • "Participants are asked to report on all revenues their company derives from optical products and services through locations in the U.S. and Puerto Rico (The report does not include revenues from Canada or other countries outside the U.S.)."
Quotes
  • "We’re proud to make some of the most beautiful and highest quality eyewear in the world, but we are in no way a monopoly. In reality, the optical industry is very competitive and fragmented. Of the close to 1 billion pairs of glasses sold worldwide last year, only 93 million of them were produced by Luxottica - less than 10%. "
From Part 03
Quotes
  • "While a majority of vision-impaired Americans use eyeglasses and contact lenses to correct their vision, a growing number of consumers are opting for laser eye surgery (LASIK) to permanently correct their vision. As more Americans use LASIK, demand for corrective eyewear declines, constraining demand for industry products from optical retailers. External competition for the Eye Glasses and Contact Lens Stores industry is expected to increase in 2019, posing a potential threat to the industry."
  • "An increase in private health insurance coverage boosts the rate at which people replace prescription eyewear. Therefore, growth in the number of people with private health insurance benefits glasses and contact lens manufacturers. The number of people with private health insurance is expected to exhibit slowed growth in 2019, representing a potential threat to the industry."
  • "Competition from warehouse stores and supercenters has increased over the past five years as these alternative retailers have included eye glasses and contact lenses in their product portfolio. Additionally, competition from internet-based retailers has hindered demand for industry products from traditional brick-and-mortar retailers. External competition is expected to increase in 2019, posing a potential threat to the industry."
  • "Internet retailers are a source of external competition, particularly in regard to revenue from the sale of contact lenses. Prescription eyewear and contact lenses account for over two-thirds of industry revenue. The percentage of services conducted online is expected to increase in 2018, representing a potential threat to the industry."
Quotes
  • "Online glasses sales hold potential for pushing retail eyewear prices lower, but the e-glasses industry still has a ways to go before posing a threat to the likes of EssilorLuxottica."
Quotes
  • "In recent years, online sales have encroached on many traditional businesses, such as booksellers, department stores and clothing stores. The sale of online glasses is a threat to eye doctors, but it’s not likely to drive them out of business any time soon, said Jack Curran, a senior industry analyst for the independent industry research firm IBISWorld, of online glasses sales."
Quotes
  • "Smart Glasses/AR is another big trend in the optical market. If you think you have a problem with online shoppers now, it will only get worse as the technology and the “coolness” of AR integrates into the shopping mainstream. Add in the ease of payment with programs like Apple Pay and Google Wallet, and you can see the threat this poses."
  • "In the past, AR glasses have been for gamers. In today’s age, you can do almost anything with AR and it’s compatible glasses. Things like trying on clothes, decorating/building houses, designing products, visiting museums and parks, taking a hike, or going on a trip all from the comfort of home. "
  • "As technology evolves and makes AR relevant it will change the way we live our lives. Web stores will embrace 3D as a shopping experience, making it easier to browse and shop. Brick and mortar locations will most likely, in order to compete, have to embrace this technology. "
Quotes
  • "The protection of intellectual property rights also involves combating counterfeiting. The worldwide proliferation of counterfeiting not only threatens official sales channels and company reputations, it also poses risks to the health and safety of consumers. Counterfeit products do not ensure the same elevated quality standards as the originals, whose excellence, in Luxottica’s case, is certified by the most stringent quality tests, by the use of highly innovative materials, impossible to process or replicate without the necessary know-how, by the ongoing innovation in its production processes, and by the introduction of highperformance sunglasses lenses such as Prizm and Chromance."
Quotes
  • "Online refraction poses the most disruptive threat to the traditional model of how consumers acquire vision correction products. There are many technology platforms under development to enable online prescription of eyewear and contact lenses, and it seems inevitable that one or more will prove reliable and accurate enough to survive legal challenges. "
  • "To the extent that the technology works, it is probable that it soon will be adopted by many optical chains to gain a competitive edge."