There are very few retail categories that have not been affected by online retailing and digital logistics. Optometry is, or has been, one such case.Considered by some to be something of a ‘cottage industry’, the sector’s most recent shake-up – albeit now almost a decade old – came with the advent of Specsavers. The global optical chain challenged the traditional model of independent optometry practices, but did not ruin the industry as many people predicted.Mr Steven Johnston, CEO ProVision, a buying group representing 465 practices, said that the margins of most independent businesses have rained relatively stable over the period.“In other industries that I’ve been a party to, margins are being impacted by major disruptors, like Bunnings did when it launched into the hardware industry. If you were a little strip shop hardware store, your margins suffered. Unless you had a decent business foundation to start with, you were very quickly found out.“Optometry ses like it’s fallen on this equilibrium where everyone’s still making a decent margin if they had a good business to start with.”However, according to Johnston, the current state of the sector is covering up a much larger probl. “There hasn’t been any external pressure that has said you have to brace technology and do things a different way.”Lingering inefficiencies, such as outdated logistics and the triple-handling of frames before they reach a customer, threaten to erode the optometry practice business model from the inside out. However, stock and order managent syst ProSupply has the potential to solve the probls of the future, today.Natural selectionGenerally speaking, there are two types of business change; one that is forced upon a business or an industry, and one that erges from within.Businesses have little control over forced change, which typically comes from a mix of technological advances and changing consumer preferences. Its impact can decimate entire business models.For example, there were more than 2,600 video rental stores operating in Australia in 2000, including hundreds of Blockbuster stores. Thanks to the increased convenience and reduced cost of digital streaming, over the past decade the video rental business became completely irrelevant to consumers.In January Blockbuster finally ceased operation in Australia, with the chain closing its last reaming store in Perth. At its peak the company had over 9,000 stores worldwide.This retail category only lasted around 40 years – beginning to end – hanging on for almost two decades from its peak around the year 2000.Other specialist retail categories such as music stores and newsagents have, to-date, outlasted the fate of video stores, but they are also ‘sunset industries’.The second type of business change does not result in the withering of a retail category, but instead sees individual businesses undergo enormous change from within. Those that can make the change thrive, but those that don’t quickly disappear.While independent optometrist practices will not face widespread irrelevance, the profession is increasingly confronting a need for internal change, driven by consumer dands and cost reduction.This is the change with which Johnston and the ProVision board have been most concerned: “The probl is that, while we foresaw that margins might be okay now, they are not going to be okay 10 or 20 years from now. If we don’t change our business model now, we’ll just die a death of a thousand cuts because we won’t know that we’re just being slowly eroded away over time.”Johnston believes that most optometrists, and small businesses in general, are not always in the best position to identify their own probls. The current supply chain process utilised by many optometrists, which necessitates frames being sent back and forth between frame suppliers, lens labs and practices, will eventually become unviable.This inefficiency is of particular concern due to the streamlined competition created by major international chains and direct-to-consumer online businesses, both of which have the luxury of deep pockets and scale.{{quote-A:R-W:400-I:2-Q: The probl is that, while we foresaw that margins might be okay now, they are not going to be okay 10 or 20 years from now -WHO:Steven Johnston, CEO at ProVision}}“Fortunately, our board realised that and said ‘we need to get a better supply chain here, or we’re going to be left high and dry’, Johnston explained. ”We’re going to be paying costs for freight three times for a pair of glasses before we get it to the consumer, whereas our competitors have an integrated supply chain and can keep the product on the shelf and supplied back to the practice.“It’s not a sustainable business model.”He also pointed to other areas that needed change, such as practice managent behaviour.“People in the practice like to see, feel, and touch every frame before they buy it. However, you’ve got to take a leap of faith eventually that the suppliers will provide you with a decent quality product each time, and if they don’t, change suppliers.”Thanks to the rapidly changing market, stores now also need to re-order best sellers immediately in order to maximise sales, with or without seeing supplier representatives.“Our practices were only seeing [sales] representatives every, say six, eight, ten, twelve weeks, and sometimes only twice a year, and they wouldn’t place orders for product until they saw a rep to make it worth their while,” Johnston said. “This meant that when best sellers were off the shelf, they pulled out ‘shelf fillers’ from the drawers to fill the spot. By definition, these products were not best sellers.”Johnston added that this probl is not confined to the optometry practice. Speak to a supplier in any industry and they will often tell you that the biggest inefficiency of store managent is not analysing sales and promptly re-ordering popular, fast selling products.Fortunately for independent optometrists, small and large optometry businesses are on fairly even footing when it comes to customer choice and in store consumer experience.“Most of our practices would have between 500 and 600 frames on display,” Johnston said. “That’s one of the reasons why larger chains and franchises haven’t destroyed the independent market, because the breadth of their offer to the consumer is somewhat comparable.“It’s not like when Bunnings started with say, 50,000 products versus the old independent hardware store on the high street with 5,000. Specsavers stores don’t have a much bigger range than our mbers would have in any typical [independent] practice. Even more importantly, independent optometry practices are selling completely different product versus Specsavers and in most cases, significantly different frames to the corporates.”Unlike other retail categories where larger floor space to accommodate increased consumer choice can result in more sales, optometrists are unlikely to see increased return on investment for doubling their floor space to accommodate a wider selection of frames.For that reason it is in the area of logistics and cost reduction where the battle will take place.Innovation through automationIn order to ensure, or at least strengthen, the long term viability of its mbers, ProVision has developed a first-of-its-kind managent tool, aimed at automating and efficiently managing inventory, retail, training and skills development, as well as consumer and market data managent.The ProVision Syst consists of a suite of smart managent platforms, namely ProSupply, ProMarket, ProShop and ProLearn.ProSupply provides mbers access to the largest frame database in Australia, which showcases more than 24,000 frames via an online catalogue from more than 200 brands and 18 supply partners. It’s equipped with nearly 18,000 frame-to-follow options that can be shipped directly to laboratories, helping mbers save time and freight costs while also substantially reducing turnaround.The ProMarket program is a multi-channel marketing communication syst that delivers customised ail, print or short message service (SMS) to target customers. Users can choose from more than 300 tplates, upload their target list and the rest is done for th.ProShop is an ecommerce service that provides mbers with direct contact to customers through an online store. It is designed to assist in customer retention and add value by ensuring a smooth journey to purchase. The fourth module is ProLearn, an online learning portal that provides the latest in skills and development training for practitioners and staff.The introduction of ProSupply in 2013 gave mbers the ability to view an enormous database of products. According to Mr Andrew Parker, ProVision’s business systs manager, more than 50,000 frames will be ordered in FY19, and around 300 mbers are logging into the syst each week.“It’s not just about placing an order in the syst. ProSupply can search for a particular colour, eye size, material, shape, styling and even whether it’s a classic or fashion design. We also then go into whether it is a male, fale or unisex frame, and whether it’s kids, teen or adult,” Parker said.“There’s a lot of parameters that sit against one single SKU, it allows our mbers to drill down, to search, and use it as a virtual catalogue to extend the physical catalogue that’s available to [independent practices] via ProVision wholesalers.”{{image3-a:l-w:470}} {{image5-a:l-w:470}}
| Hidden benefitsEyecare Sunraysia, which consists of two practices in Mildura, Victoria, has been a ProVision mber for more that 15 years. Mr Clinton Williams, a dispenser and partner, said there have been enormous improvents in stock managent since adopting ProSupply two years ago. While the syst was initially used for “checking colours and frame shapes” and “generally looking around what other suppliers have”, additional benefits have erged.At first, the syst was used sparingly. “We only used the Frame-to-Follow service every now and then initially, mainly for more difficult jobs such as unusual frames shapes, higher scripts and where we thought we might have trouble fittings those ourselves,” Williams said. “Therefore we sent it to the lab to do the job for us.”Williams also explained that stock managent was also a challenge. “We were never really good at managing our stock – sometimes we were understocked and other times we were overstocked, so we arranged for our ProVision manager to help us review both practices.{{image4-a:r-w:450}}“She explained the benefits of ProSupply and the features we were not necessarily using effectively and we started using the Frame-to-Follow service more, which has greatly improved our logistics and cut our costs.”The service has also improved William’s relationship with his suppliers. “If we go back to before we were using ProSupply we’d only see frame suppliers every three to four months and we’d purchase stock there and then. All the suppliers seed to visit around the same time, which meant that in the following months we’d have a lot of bills to pay, which had a dramatic affect on cashflow. It created large peaks and toughs,” Williams said.“Now, using ProSupply, we order on a daily basis or as required, not only when the rep visits, so out stock purchasing cashflow evens out. Frame-to-Follow has made a massive difference to our business. It now represents 40 to 50% of orders.”While all of these things have helped Eyecare Sunraysia improve its cashflow and stock managent, Williams pointed out one very important aspect that was not previously available: keeping best sellers on display.Practice staff have always been able to physically analyse their own sales data to identify best sellers, however it is a laborious task. Not only does ProSupply allow the user to more easily verify their own best sellers, it also allows th to search and filter the best sellers of brands that the practice does not stock.“We search the best sellers across the syst, and that can influence 20 to 30% of our purchasing decisions,” Williams explained.That said, he also stresses the need for face-to-face contact with supplier sales staff: “We still heavily rely on reps visiting the practice to touch and feel product, view the latest frames, and stock rotations.. Reps are also very important for advice so the business-to-business human contact is very important.” |
New channelsIt may be an old retail maxim but it still rings true today – you can’t sell what you don’t have – and according to Parker, ProVision’s mbers are using the platform in two different ways. The first is replenishing stock without the need for rinders and visits from sales reps.“They are keeping stock levels sensible rather than a feast and a famine type scenario; mbers can level out their stock based on what’s happening within the practice through the month, and they don’t rely on the sales reps visiting the practice,” Parker said.While this means the stock levels of the most popular frames are better managed, it doesn’t overcome the out-of-date logistics with which many optometrists still operate.That is, individual frames are still being sent from a supplier to a retailer, who then sends the same frame to a lens laboratory when a customer makes a purchase. The same frame is then sent back to a store to be collected by the customer. Compare that to other retail categories where product shipment consists of one delivery from wholesaler to retailer who then sells it to the consumer.In fairness, the optometry profession has always worked this way, but Johnston believes it is one of the reasons why business owners have not realised why dramatic change is needed.For a long time the three-handling method was part and parcel of every practice, whether it be a small independent, a mid-size group or a large corporate optometry business.However, as technology improved and the vertical integration models of the larger competitors began to take hold, the market began to change. It is now time to strip out excess handling and shipping costs from the overall transaction – from supplier to customer.Frame-to-followWhile ProSupply can be used solely as an inventory managent syst, Parker believes its real value comes in roving the need for sending frames back and forth several times.“The second behaviour [of users] is about completely re-engineering the stock ordering pattern into what we call a ‘Frame–to-Follow’ model,” Parker said. “This is where the practice runs a ‘display model’, where they actually manage an inventory that sits on display that might be massaged based on popular trends.”Under the Frame-to-Follow model, when an order is placed a wholesaler, rather than a practice, sends the frame directly to the laboratory to be fitted with lenses. When completed, the spectacles are sent to the practice for a patient to collect.“Your inventory or your display stock can sit there and keep selling and working the floor, while the wholesaler is sending the product across to the laboratory and the finished product is sent back into the practice,” Parker said. “And that’s all happening in the background; the practice then can maintain a really good product mix.”With the Frame-to-Follow model a practice can keep a wide and dynamic selection of frames in store, with only a handful of examples of the most popular styles necessary for customers to try on. It makes keeping up with dand easy, since as long as a wholesaler has frames available, they will not run out of stock. Retailers do not need to fill gaps on their display racks, and bestsellers are always available.According to Parker, of the approximately 50,000 frames that will be ordered in FY19, almost half will be Frame-to-Follow.“The other thing is the practice can still manage and massage the mix so they’re not carrying as much stock anymore, but they can then really identify what’s working,” Parker said. “Under the ‘old behaviour’ [product re-ordering] they don’t really know if the bestseller goes in the first week it could have sold another six times.”Johnston said there’s a need to change the underlying behaviour because most purchasing decisions and frame selections are being made based on gut feel.“Our mbers are starting to ask, ‘Okay if I’m going to cease stocking Brand X what should I replace it with? What dographic should I be looking for and what price points should I be looking to fill?’ And so, our technology then becomes part of the science of making much better range decisions based on fact and data.”Increase in supply partner engagentMr Tony Jones, ProVision merchandise manager said that in addition to the syst allowing mbers to better manage product selection and ordering, there have been major advantages for wholesalers too. The main benefit has been an increase in engagent.Rather than just sitting with staff flipping through frames, Jones said suppliers are now concentrating on building relationships around actual sales results.“The nature, or the benefit, of ProSupply is the ability to discuss the sell-through, so we found a change in the nature of that conversation means that you’re able to have a business building conversation which is all about sell-through versus the sell-in.”Not only has the syst enabled suppliers to minimise costs, Jones said it has resulted in significant sales growth for suppliers who have braced it, because the Frame-to-Follow model means that their best selling lines rain on the display shelves.It also means that suppliers don’t have huge inventory tied up with sales reps on the road, which Jones claims can often amount to hundreds of thousands of dollars in display stock.Unfortunately not all product is successful – what might sell overseas might not sell locally – therefore ProSupply allows suppliers to easily identify ranges that don’t meet internal sales expectations or forecasts and move quicker to discontinue the line.Smart sales reps realise that ProSupply also helps to sell their ranges 24/7. According to the company there have been examples where reps have hit their monthly budget even though they have been on holiday.Sunrise versus sunsetOne of the reasons why independent optometry has largely been unaffected by major disruption by digital competitors is because the business is not solely about selling a commodity product.By straddling the line between health services and fashion retailing, physical practices rain essential to the optometry business model. One only needs to look at the likes of Warby Parker and Oscar Wylee, whose expansion into retail outlets suggests an online-only model has its probls.If all great change is preceded by chaos, then the traditional independent optometry model cannot thrive in the digital age without first evolving from a cottage industry. That requires changes in behaviour as well as technology.After six years of continuous syst improvent, ProSupply is about to upgrade to a new, faster platform to further enhance the user experience. With its mission being to “ensure the ongoing viability of independent optometry” ProVision has decided to offer the platform to the wider independent market – non-mbers – to increase the efficiencies of the sector.“If we expect to compete with the corporates in the long term, independents need to be fit for business,” Johnston said. “ProSupply will help to facilitate a smarter supply chain for practices who have an eye on the future.”{{image7-a:l-w:470}} {{image8-a:l-w:470}}
| Large improvent in stock turnLeading Melbourne-based frame supplier Eyes Right Optical (ERO) has been a ProVision ‘partner’ since 2003. Managing director Mr Mark Wymond clearly sees the benefits to his company, and said ProSupply is like having extra sales reps on the road.ERO has been on the ProSupply database since its inception and only began working with the ‘Frame-to-Follow’ model about 18 months ago. There was an immediate impact.{{image6-a:r-w:300}}“Frame-to-Follow has allowed practices to keep their bestselling frames on the shelf. We’ve seen the sell through rate on our high volume ranges like ProDesign and Lightec get repeat orders of up to seven in between sales reps visits. Some of these frames. such as Prodesign 1700 -6022 and 1785 8542 and Lightec 30041L NB04, are all great high volume sellers.“It is really helped in that regard and has substantially increased stock turns for the practice. Previously we had seen practices sell a frame in the first week or two of being on the shelf and then not replacing it for three months.”That’s where the extra rep on the road analogy comes into play. “The stores are now able to order in between seeing reps,” Wymond said. “It has definitely improved stock terms of our best sellers and the ProVision mbers who are right behind Frame-to-Follow have seen the benefit.”Wymond said the syst also allows him to better forecast his own deliveries for his own stock levels, as a Frame-to-Follow order is an order to the end consumer, not just to practice where there is still a chance of return.“Our administration tasks such as ordering and input into our syst have also been substantially reduced through automation of the Prosupply and Frame-to-Follow orders.” |
