Optical Goods Stores

SIC 5995

Companies in this industry

Industry report:

This entry includes establishments primarily engaged in the retail sale of prescription eyeglasses and contact lenses for individuals. Establishments primarily engaged in the retail sale of binoculars, telescopes, and opera glasses are classified in SIC 5999: Miscellaneous Retail Stores, Not Elsewhere Classified.

In this industry, one-third of the companies were large national chains, such as Luxottica's LensCrafters and Cole. The other two-thirds of the total were independent opticians, vendors of eye wear prescribed by ophthalmologists or optometrists; optometrists, graduates of optometry school who are trained to detect eye diseases, but not to treat them; and ophthalmologists, medical doctors who can treat eye diseases, prescribe medication, and perform surgery. Total sales in this industry were nearly $9 billion in 2007, with 19,373 establishments that included optical goods stores, contact lenses and eyeglasses prescriptions, and opticians.

According to industry statistics, there were 20,095 establishments that included optical goods stores, contact lenses and eyeglass prescriptions, and opticians valued at nearly $4.4 billion in 2009 with industry-wide employment of 102,770 workers. On average, each establishment employed five workers. Based on market share, optical goods stores commanded (69.2 percent); opticians (13.5 percent); prescription contact lenses (9.7 percent); and prescription eyeglasses (7.6 percent).

Throughout the late 2000s, the industry struggled through the stagnant economy. Some companies reported store closures, while others added to their total number. For instance, industry leader, Luxottica Retail was forced to shed some underperforming stores in 2009. From a reported 3,009 units in 2008, Luxottica ended 2009 with 2,952 units, while National Vision acquired 64 Eyeglass World stores in January of 2009 bringing their total number of stores to 597 stores.

Competition surrounded the traditional optical stores as they were forced to compete with the so-called "big-box value chains" like Wal-Mart, Costco, Sam's Club, and Target as consumers gravitated towards cost savings during the economic meltdown. The discount optical retailers generated nearly $2.3 billion in 2009 commanding about 31 percent of industry share.

The eyeglasses and contact lens retailing industry has become increasingly crowded, as opticians, optometrists, and ophthalmologists compete for the same market. Ophthalmologists and optometrists examine eyes and write eyewear prescriptions. Traditionally, both ophthalmologists and optometrists have offered to fill the eyeglass and contact lens prescriptions they write. But independent opticians can also fill these prescriptions. In the late 1960s, optical stores and some small regional chains began offering eye exams along with glasses and contacts. Retail giants began to spring up, and an industry that was once considered strictly a "healthcare" field became a competitive retail market.

Two 1978 legal decisions further opened the door for retail competitors. In one decision the Federal Trade Commission (FTC) ruled that optometrists and ophthalmologists must give patients their prescriptions, making it possible to shop around for glasses rather than rely exclusively on the doctor who wrote the prescription. In the second decision the FTC unanimously approved a rule pre-empting state law and prohibiting states and professional organizations from banning advertisements for eyeglasses, contact lenses, and eye examinations. Four years later the FTC issued an order prohibiting the American Medical Association from placing a ban on advertising by its member physicians. In American Medical Association v FTC, the Association appealed to the United States Court of Appeals for the Second Circuit, which approved enforcement of the Commission's order in 1982.

These rulings transformed eyeglasses into a marketable consumer product. Retailers began advertising fast turnarounds, low prices, and convenient hours and locations. They promoted eyeglasses and contacts as fashion wear and convinced the public of the need for more than one pair of glasses, in part by offering special deals when two pairs were purchased. Retailers introduced lighter and thinner lenses and more attractive frames, which also stimulated sales. Retailers began offering contact lenses in a variety of colors, and many consumers bought several pairs because they liked the idea of changing their eye color. In recent years, the emergence of less-expensive daily "disposable" contacts opened further marketing opportunities.

At least 150 million people, or more than half of all Americans, require vision correction, and the incidence increases with age. Nearly two-thirds of all women in the U.S. wear corrective eyewear. About 40 million people in the U.S. alone, are contact lens wearers, a number which represented about 5 percent of those who required corrective services.

The industry's growth rate has slowed through the 1990s from steady annual increases of around 10 percent to yearly gains as low as 4 percent, but sales were expected to rise as the population continued to age. In the late 1990s corrective laser eye surgery provided competition to optical goods retailers. At a cost of between $1,800 and $2,500 per eye, laser surgery provided a permanent solution to impaired vision for approximately one million Americans each year. Although traditionally only performed on adults, by the 2000s such "laser in situ keratomileusis" (LASIK) surgeries had also been performed on a few children with "lazy eye."

In the 1980s emerging retail eyewear chains grabbed a third of the market from optometrists, ophthalmologists, and independent optical goods establishments, which previously had dominated the entire market, but their total share has since remained constant.

Luxottica Retail, which owns Cole National Corporation and LensCrafters, among others, is one of the world's largest optical store retailers. Its 2006 estimated sales were $6.1 billion from all operations. Cole National Corp. is one of the nation's largest eyewear retailers, with approximately $1.2 billion in sales and 2,900 retail locations. Based in Ohio, Cole Vision expanded its business in 1996 by purchasing Pearle Vision, Inc., for $165 million. Cole Vision was acquired by Luxottica in 2004. With approximately 900 stores, LensCrafters is North America's largest eyewear retailer. Estimated sales in 2006 were $881 million. Founded by Procter & Gamble Co. executives in 1983 as a profoundly team-driven company, LensCrafters has always been family-friendly. In 1999 the LensCrafters parent company, Luxottica, purchased Bausch & Lomb's sunglass business for $640 million.

Another industry leader was Eye Care Centers of America Inc., which runs more than 385 locations in the United States in 2008, under the names of EyeMasters, Visionworks, Vision World, and Hour Eyes. The company posted an estimated $302 million in sales. The Eye Care Centers of America Inc. has grown to over 430 optical stores in about 35 states. The company reported $537.7 million in 2009 with 5,600 employees.

National Vision Inc., with the majority of its stores located in Wal-Mart stores, was one of the industry leaders until 2000, when the company filed for Chapter 11 bankruptcy, from which it emerged the following year. The company sells low-cost contact lenses and prescription glasses in about 600 retail locations, which 200 are in Wal-Mart stores. In 2005, the investment firm Berkshire Partners bought National Vision.

For contact lenses, the leader in the mid-2000s was 1-800-CONTACTS, which benefited tremendously from the 2004 Fairness to Contact Lens Consumers Act. That Act gave consumers the right to take home their prescriptions for contact lenses after an eye exam. No longer were consumers required to order contacts from their doctors. 1-800-CONTACTS posted 2006 sales of nearly $249 million. In 2007, the company was taken private for $340 million by the private equity firm Fenway Parnters.

Mass-merchandisers and discount chains were making significant inroads into the optical industry gaining more and more market share. According to VM's 2010 Top 50 Optical Retailers, in 2009, these channels accounted for about 31 percent of sales. Wal-Mart led the nation with 2,490 in-store Wal-Mart Vision Centers with sales of an estimated $1.2 billion and an additional 227 National Vision stores with sales of about $160 million, while Costco Wholesale operated 404 in-store Costco Optical Vision Centers, in which 12 were added in 2009 generating $540 million in 2009.

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