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Overall Market Performance in 2015

Overall Market Performance

The total vision care industry generated nearly $40 billion in revenue during the 12 month period ending in December 2015. This is an increase of 5.8% over previous year totals, and 15% over the retail sales totals the year before June 2008, just before the recession set in.

While the industry has clearly surpassed the previous industry high water mark from before the start of the “Great Recession”, there are some pessimistic developments worth noting. First, these dollar totals are in current dollars that are not adjusted for inflation, unit sales totals for the industry are still on-par with the unit total sales from before the recession set in, indicating that most of the growth we have observed in the industry over the past 3-4 years is resulting from increasing prices and several select groups of consumers trading up and buying higher-quality eyewear. Second, the growth rate in dollar revenues we observed during 2015 is less than the growth rates we have seen over the past 8-10 calendar quarters (5%+,6%+, etc…), so even though the industry is growing, the pace of that growth has slowed recently.

During the 2013-2015 time period the strongest optical markets were contact lens sales (+10.9% to $4.7 billion) and Rx lenses (+13.3% to $12.6 billion). Plano sunglass sales have also seen moderate sales growth, equally over the past two years, due to a balanced mix of increasing unit sales and rising prices. All other markets are currently growing at a moderate rate over the past couple years, with the exception of LASIK surgery.

Eyeglasses accounted for the largest share of the vision correction market (around 56%) representing $22.2 billion, growing by 11.2% over the past 2 years with a slight majority of that growth occurring during 2015 and slightly slower growth during the 2014. In fact during the most recent year, eyeglass frame and lens revenue were up by 5.2% and 7.9% respectively from year-ago levels thanks to both rising unit sales and rising prices (especially for the lens market where prices have been rising steeply).

The independent side of the optical industry is by far the largest component of the U.S. vision care industry; generating $18 billion in revenues during 2015. When compared to dollar revenues from 2013 the independent side of the industry was up by 13.2% in total; with growth over the past year (+7.7%) slightly stronger than it was for 2014 (+5.2%). During the past year the independents have seen a significant increase in aggregate revenue; about $1.28 billion to be exact, which is a 7.7% growth in sales. This has been the trend in the optical industry now for about 7 years and represents a reversal of fortune for the independents who, as a group were not performing as well as other distribution channels in 2005, 2006 and 2007. However, while independents enjoyed their sixth straight year of dollar revenue growth during 2015, other optical distribution channels also experienced growth recently. For conventional retail chains, sales revenue grew by 4.8% to $8.06 billion during 2015. Additionally, optical sales revenues for mass merchants and wholesale clubs grew by 3.7% to $5.03 billion during 2015.

While eyeglass sales (lenses and frames) make up the bulk of revenue for independent optical outlets, examinations are a close third (almost $4.11 billion in revenue), and that is the main driving component holding up the independent market during the past three years. Unlike the recession and the early portion of the weak recovery, the increase in exam activity we are seeing now is being accompanied by an increase in purchasing activity. That increase would be even greater if the walkout rate for independent eye care professionals weren’t slightly increasing as well over the past two years (from 26.6% in December of 2011 to 29.3% in December of 2015).

In addition to increasing the number of exams performed in aggregate as a group, there are other reasons why independent eye care professionals (ECP) are succeeding in the face of a challenging optical retail environment. The increase of managed vision care benefits by consumers at independent ECP locations is one such reason. The increased utilization and reliance on IPAs and buying groups is another reason. ECP membership in optical buying groups (or independent practice alliances) have grown to an all-time high and grant independent ECPs access to resources, training and pricing that was not previously available to them on their own. Buying groups and alliances create for independent ECPs many of the same advantages (economies of scale, cost savings, training, marketing) that the chains, department stores, and mass merchant optical retailers had 20-30 years ago. Independent practice alliances and optical buying groups have helped to “level the playing field” for many independent ECP practices.

As a recent Vision Council eye care professional survey shows, in addition to having more members participating in their programs, those ECPs who do belong to an optical buying group or IPA are utilizing the services offered by their group or alliance more and more recently. According to a survey of 271 independent ECPs that belong to an optical buying group, 36% are using the services of their group slightly or significantly more during August of 2014 than they were in August of 2013. On the other side of the utilization coin, only 7.9% of buying group members were using their services less over the past year.

Data in this article was compiled from VisionWatch, the large scale continuous research study conducted by The Vision Council. VisionWatch contains useful industry data on lenses, frames, sunglasses, reading glasses, LASIK, contact lenses and eye exams. For additional information, please contact Steve Kodey at 703-740-1095.

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