Global trends in eyewear for Optrafair 2020

2/10/2020

Eyewear, the combination of spectacles, sunglasses and contact lenses, is a mature product as far as consumer goods go. Despite this, there is a dynamic future ahead for the industry. Here, Optrafair partner Euromonitor provides an overview of the most important trends shaping the category now and into the future.

From a 2019 retail value of USD138 billion, global sales are expected to expand by USD13 billion through to 2024.  While this growth is not as explosive as that seen in other fashion industries, growth in eyewear is consistent and underpinned by stable, real-world fundamentals that give the industry a particularly attractive investment profile.

Ageing global populations and lifestyle changes are producing booming rates of vision-health issues, consistently driving demand for eyewear as a medical device. Alongside this, eyewear has rapidly expanded in influence as a fashion statement, particularly at the luxury end of pricing. All of this is supported by relatively low penetration in developing markets and rising willingness to trade-up to higher value products in developed markets. These dynamics Insulate demand for eyewear from the worst downturns of discretionary spending while opening it up to the potential upside of better times.
 

 
Consolidation
This has drawn in rising interest from investors and larger corporate players. Traditionally fragmented, eyewear has become increasingly concentrated across the value chain.

From 40% of global sales in 2013, the top 10 eyewear brands have grown to account for 44% of sales in 2018. The formation of EssilorLuxottica SA in late 2018 represented a major increase in concentration, creating a diversified player that accounted for at least 25% of eyewear retail values in 2018.

At the retail level, all regions except for Asia Pacific recorded a decline in the share of new entrants and smaller optical shops. From 15% of global retail sales in 2014, the top 10 ranked optical shops companies rose to account for 22% of sales in 2019. This trend has developed more rapidly in mature markets such as the United Kingdom.  Here, the top 10 optical shops brands expanded from 69% of sales in 2014 to 85% in 2019.

In addition to the expansion of multiple retailers such as Specsavers Optical Group Ltd, private equity- funded retail groups such as Nalka Invest AB in the Nordics and Hakim Group in the UK have acquired controlling interests in a rising number of independent retailers.
 

 
Polarization
In order to maximise revenues from single sites with high overhead costs, independent optical shops have typically focused on mid-range price points. However, as larger-scale chains and buying groups have taken control, the new owners have shifted these businesses towards a lower-price, volume-driven strategy. Alongside rising competition, this has resulted in an overall decline in the unit prices that is expected to continue well into the future.

From USD14 in 2014, the average price per unit of eyewear is expected to fall to USD10 by 2024. Given the category’s traditionally high relative prices, this has been a net benefit to many consumers, making eyewear more affordable than has been the case in the past.

This is in sharp contrast to the growth of luxury eyewear, forecast to outperform the industry average, adding USD 3 billion in sales between 2019 and 2024 at a 2% compound average growth rate, globally. Prescription frames and sunglasses alike allow consumers to express personal style and differentiate themselves with an accessory that serves a practical purpose; all at a price point that is much more accessible than other luxury accessories.

With the strongest growth occurring at the two extreme ends of pricing, mid-priced eyewear brands are expected to take on a declining role in the industry.

 

Disruption
Alongside dynamic change in the competitive landscape for eyewear, the rising influence of e-commerce is expected to place mounting pressure on traditional retail. This growth will also open up opportunities for a range of new rivals with disruptive business models.

In 2019, optical shops were the leading channel for eyewear, appealing to consumers who value the expertise provided by in-store professionals. However, traditional channels will face mounting pressure from the growing sophistication of internet retailing. Offering shoppers convenient access to eyewear at competitive prices, digital channels are expected to see rising uptake, particularly among digital-native younger generations. In Euromonitor’s Consumer Lifestyles Survey 45% of respondent’s cited “best-price” as a motivation for shopping online.

As the uptake of online sales of eyewear expands, pure play internet retailers such as Vision Path Inc’s Hubble and MyOptique Group’s Glasses Direct will pose an increasingly credible threat to the future growth of optical shops. Working with a direct-to-consumer online-only business model allows these players to offer frames and lenses at significant discounts to traditional retail.

However, this model denies these players direct access to the credibility provided by the optical trade. While online shoppers were motivated by utilitarian concerns like price and convenience, uncertainty and impulse drove consumers into stores.  In 2019, 47% of respondents cited “see or try before buying” as their motivation for shopping in-store.
 

As a result, closer integration between the channels is to become increasingly common, as a growing number of players seek to capture sales from consumers at all stages of their decision-making.

Exemplifying this is German optical retail start-up Mister Spex GmbH. Incorporated in 2007, this player’s online retail operations are complemented by a network of thousands of partner opticians across Europe. Rapid growth for this player across Western Europe has been supported by an omnichannel approach to eyewear that allows consumers to access the convenience of an e-commerce platform, with physical retail partners providing eye tests, repairs and advice in-store.

Price polarization, retail concentration and the disruptive impact of e-commerce are producing major changes across the value chain in global eyewear. This is creating a significantly more complicated environment to operate within and threatening existing business models.  However, these changes are also introducing new flexibility into a typically slow-moving industry, creating opportunities for savvy players who are willing to adapt.

To find out more about eyewear trends, don't forget to register for Euromonitor's session 'Threats and opportunities in eyewear retail' from 09:30-10:00am on 4 April. 

Author: Miles Agbanrin, Senior Analyst, Euromonitor