There was an excellent discussion of the Australian spectacles market in today’s Age newspaper.
A previously docile market dominated by a very large player in the midst of hundreds of effectively sole traders has been shaken up considerably by the entry of British outfit Specsavers.
The incumbent giant is the Italian firm Luxottica who added the OPSM and Laubman & Pank marques to their globally known Sunglass Hut brand via an acqusition in 2003 (as discussed in my chapter in a book called The Internationalisation Strategies of Small-Country Firms).
They may be #174 in Deloitte’s Global Retail Powers rankings, but have clearly struggled when challenged by a lower-priced, more streamlined competitor. Luxottica are a curious player in the optometry business, as they were once only a manufacturer and have vertically intregated forward into the retail business, without obviously passing on any cost savings to consumers. Their stores are typically positioned as quality, fashion-conscious purveyors.
In contrast, Specsavers have grown fast in their home-country, Ireland, Spain and Scandinavia through a more thrifty range of offerings and aggressive pricing. It is fascinating that Australia has become such a big target for this mob (we may soon by 15% of their business). Presumably this reflects their own observation about the easy goals that can be kicked on this previously high-margin playing field.
As the article notes, Specsavers are not the only new entrants. Woolworths is experimenting with even more pared back concern through their Big W variety stores. This may well also be a testing ground for Woolies as it prepares itself for another inevitable attempt to tackle the pharmacy regulations and become even more Wal-Mart-like.
It was always going to be hard for Luxottica to build considerable barriers to entry in this business, as there are a lot of optometry outlets (and optometrists) to be snapped up by an aggressive entrant. The challenge is now to adapt their business strategy to this new competitive dynamic.
As a glasses-wearer, I say bring it on!