By Grant Larsen, President, Digital ECP Inc. www.digitalecp.com
A $65 billion-dollar merger, 140,000 employees, thousands of retail locations in 150 countries. Anytime two companies of this size get together, in any industry, the numbers make headline news, and often with negative undertones. In Canada, its impossible to manage an optical store or work as an optician and not deal with Essilor or Luxottica branded products, every day. Luxottica’s retail brands, LensCrafters, Sunglass Hut, Pearle Vision and even glasses.com are formidable competitors to many opticians. They also employ thousands of Canadians and hundreds of licensed Opticians. Essilor, Transitions and Clearly.com have a media presence familiar to many consumers searching for vision solutions online. So why does a consolidation of these giants evoke such a negative reaction? Better yet, how will this help the optical industry in Canada?
When two companies so different get together the result is logically complementary. Consumers see lenses as functional and frames as emotional purchase decisions. When you combine branding from both companies, the presentation at retail brings clarity and trust to consumers in an ever confusing and fragmented market. We often say “quality and brands speak for themselves”. That being said, Essilor and Luxottica will have a lot to talk about and advertise in the coming years. Their branded clout and market share size will stabilize branded value and the luxury eyewear market. Good news as more and more price focused companies enter a very attractive eye care industry.
How does the investment world view this merger? Although still early, both Essilor and Luxottica share values have increased post-announcement by as much as 8%. The global eye care market is forecasted to grow at more than 5% annually through 2020. Luxottica and Essilor have made significant investments into market expansion, global manufacturing, online channels and technology research. Investments and learning they undoubtedly will share to capitalize and grow their current estimated market share of 27%. With the next largest company in global eyecare at barely 4% (J&J), you can bet on other companies seeking alliances or mergers to gain some competitive advantage or build investor interest.
So how do small independent retailers, consumers or eye care competitors benefit? First of all, lets keep this in perspective. You will see very little change in either company in 2017. Some of the more complicated relationships between retailers, online and vision plans (EyeMed) will take longer than that. Brand availability, pricing, policy changes, sales representation will change to build the synergies between both companies, but they will appear to be separate for years to come. So, for now this is a little like when Brad Pitt and Angelino Jolie first started dating. Lots of headlines, a whole lot of speculation, plenty of fake stories and pent up anticipation for what’s next.
Sometimes we forget how big this industry is, even in Canada. Many thought online retailers would bankrupt half of the independent bricks and mortar stores when they launched 10 years ago. Yet online is less than 6% of all eyeglass sales globally and appears to be plateauing. With so many branded choices, complicated technology and eye health implications, consumers remind us, time and again, how much they rely on your expertise. Buying eyeglasses is not a transaction. Opticians are critical to selling brands, getting the most from lens technology, protecting eye health and creating better vision. That can only be done by a local, trusted, eyecare professional