To battle the sector’s biggest players, Safilo is positioning its eyewear collection as the feather in independent optometry’s cap. COLEBY NICHOLSON and MYLES HUME look at how the company is using its extensive international expertise to support the local market in Australia and New Zealand.
As the giants of corporate optometry continue to consolidate and expand, independent operators are wondering what their future looks like. What might surprise them is the crucial role they are being encouraged to play in Safilo’s mission to re-impose itself on the global optical market.
Traditionally a dominant player in the luxury brands segment, market forces have been the catalyst for change at the Italian giant as it braces for significant movement across its big-name licensed portfolio.
The company is preparing to give greater attention to its proprietary brands, and has also signaled its intent to strengthen its presence in both the contemporary and premium categories.
Safilo currently holds the licenses for more than 20 brands, including luxury labels Hugo Boss, Max Mara, Jimmy Choo and Dior. As such, sunglasses now account for two thirds of the company’s sales, while optical makes up the rest. This is in stark contrast to the global eyewear sector where these figures are reversed.
According to Mr Gerd Graehsler, Safilo Group chief financial officer, there is now consideration about how the company can rebalance its entire portfolio to better reflect the global eyewear market.
Graehsler, who recently completed his second trip to Sydney, believes Australia is an ideal market to strengthen the company’s optical segment and test new products.
Outside of its North American and European strongholds, Australia is one of Safilo’s top 10 markets, helping contribute to the company’s 33.7% increase in sales across the Asia-Pacific region in the first half of this year. Overall, Asia Pacific accounts for approximately 8% of Safilo’s revenue.
“In Australia, I would say we have a good level of market share,” Graehsler told Insight.
“It’s an interesting market for us to invest in strategically because it’s a country that has a strong optical segment, and that is one of the key strategies of Safilo going forward.
“You will also see us become much more focused on optical frames, as opposed to sunglasses which has been a major business for us in the past, making up two thirds of our sales, because we would like optical to be closer to two thirds of the company. It’s a core historical strength.”
Graehsler said during the 1980s – before Luxottica’s expansion – Safilo was the number one maker of optical frames in the world. “We have a trendous amount of skill, we have a trendous amount of reach with 100,000 points-of-sale, and I think we have a long tradition in the optical industry that we want to bring back.”
Safilo’s recent launch of its latest prescription sunglass lens designs for its Smith brand at O=MEGA19 is indicative of the value the company sees in the local optical market. He also pointed to Polaroid and Boss as standouts in the Australian market, as well the historically popular Carrera.
“I think our brands resonate quite well in the Australian market,” Graehsler explained.
“One of the brands that does particularly well in Australia is Carrera, which is something that has been strong here for many, many years. It’s a brand that is bold and action-oriented. But I think it is also has a sort of lifestyle angle to it, without being too technical or too rigorous or too sporty.”
The clinical difference
Graehsler likened Australian eyecare professionals to their counterparts in the UK and Germany, who typically differ from more fashion-centric opticians in countries such as Italy and France.
“If I think in terms of the optometric profession in Australia, I find it more medically-focused and more clinical, so it’s much more of a doctor’s profession. I think in Europe the independent opticians are probably more brand-focused, more retail-focused and maybe more fashion-focused. If you would go to Italy, France, Spain, certainly that is the case.
“I see some similarities with the UK or German markets, I think the market structure is a little bit similar in that you have some very strong parts of the market dominated by chains, such as Specsavers and OPSM, and then you have the independent markets.”
However, Graehsler also believes that the UK and Germany are stronger in e-commerce and feature many more online-only retailers. On the other hand, Australian optometrists typically adopt a more traditional approach by prioritising service.
“My observation is that Australian opticians, at least the ones that I visited in January, seem to be very focused on service and go beyond selling the product. I think there is always the attempt to sell value-added services and extra solutions to the patients, or the patient really walks out of there saying that ‘yes, this was the perfect personalised service that I needed’,” Graehsler explained.
“What I tend to see in Europe is European opticians are very in tune with what’s in fashion, with what’s in trend and very good at selling stories behind the brand, advising clients on what is the thing to wear this season.”
With this in mind, Graehsler said the Australian optometric market presented a real opportunity for Safilo to partner with independent practitioners who are keen to add a fashion-oriented layer to their service, but may lack the expertise.
“I think about what Safilo could really do more in Australia and I think helping the practices to become a bit more brand-educated is something that we can help with. And I think it’s something that patients and consumers want in the end.
“Clearly in the modern world where you have very professional chains, especially here in Australia, I think that it is relevant for the independent optometrists to continue doing what they do so well, but also partner with others who can help them develop the business in the areas where perhaps they don’t have their core competence,” he said.
Graehsler also points to the need for independent practices to differentiate their business from the multi-national chain stores.
“Independent optometrists don’t want to sell the brands also sold in chains because that’s a sort of a red-ocean strategy. It’s very difficult to go against someone that is very big and dominant with the same brands.”
Safilo boasts a portfolio of four proprietary and more than 20 licensed brands. Current revenue generated from the separate portfolios is lopsided in favour of the licensed products, which account for approximately 70% of revenue.
Graehsler said Safilo believes it is time for the company to leverage its expertise to help even-out sales across the portfolios and prevent such a heavy reliance on licensed products. Stronger sales of its in-house brands would help bring more stability to the company and reduce risk exposure.
“Twenty years ago, Safilo barked on this journey to become the partner of choice for many of the big luxury brands. We had Armani, Gucci and Dior, but over that time and it was very much sunglass, fashion, luxury and license-focused.
“Now we want to use the incredible skills and capabilities that we have from that in terms of designs, trends, innovation and quality. We want to put that in service of the rest of our portfolio, while offering our unique expertise to potential newcomer brands which want to extend their presence into our category, and core brands clearly being the most relevant part in our strategy.”
The company is braced for significant change among its licensed brands, most notably the December 2020 expiration of its long-standing agreent with Dior. For more than 20 years, Safilo has distributed and sold more than 30 million pieces of Dior eyewear, which itself accounted for 13% of Safilo revenue in 2018.
The loss has been mitigated by the renewals of key brands such as Kate Spade New York, Tommy Hilfiger, Havaianas and Fossil, among others, as well as recently signed license agreements.
“I think relevant to Australia will be Levi’s and David Beckham, these are two of the new licenses that we are bringing,” Graehsler said.The company’s focus is therefore evening out sales and to not rely on a particular brand or segment. The aim is for Safilo’s core business – being the company’s owned brands – to increase from the current 30% to 50% in the coming year.
Sticking to its knitting
In keeping with Safilo’s desire to maintain its focus on its core wholesale business, in May the company announced the sale of its struggling US retail chain, Solstice, to Fairway LLC, a US-based investment firm.
At the time, the company claimed the sale of the 76-store chain was in line with the company’s strategy of recovering “a sustainable economic profile”.
Graehsler admitted Solstice, which had reduced in size, was a difficult business for Saflio. The chain had been competing directly with other outlets, to which Safilo was also a wholesaler.
“It is part of our strategy to focus on our core business which is wholesaling, and to be an independent partner to our customers. So we don’t want to be doing business with them, while at the same time compete with them,” he said.
The decision to sell Solstice made sound business sense, and eventually resulted in a win-win situation.
Safilo is back to being a wholesaler, allowing it to focus on its core brands as well as its relationship with independent customers.
Meanwhile, the buyer of Solstice has signed a long-term supply agreement with Safilo.With a renewed focus on brands and relationships, without the distractions that accompany a direct-to-consumer retail business, Safilo’s vision for the future will play out in Australia’s independent practices over the coming months and years.