Jul 23 2020
The Optometry and Optical Dispensing industry has grown at an annualised 0.7% over the five years through 2019-20. This minor growth is largely due to the mature industry’s relatively static business model, where brick-and-mortar storefronts provide both basic eye testing services and optical product retailing. As a result, the industry has largely lacked innovation. However, a range of trends are forecast to affect industry growth over the next five years, such as:
- Major retailers moving from a bricks-and-mortar model to bricks-and-clicks
- Growth in telehealth services
- An increase in volume-based demand as the population ages
- Growth in online-only optical wear sales
Dispensing stores and eye health clinics have temporarily limited their services or closed in response to the outbreak of COVID-19. The economic downturn associated with the COVID-19 pandemic has limited consumers’ discretionary incomes. This trend is anticipated to hinder consumer demand for new spectacles as they look to defer prescription and fashion eyewear purchases.
The industry will likely adapt to providing more services and sales remotely, with the COVID-19 pandemic limiting in-person optometry services and retail sales. While the Federal Government’s National Health Plan aims to increase the uptake of telehealth servicing, the optometry sector was not slated for reform. However, major players Specsavers Pty Ltd and Luxottica South Pacific Holdings Pty Ltd have turned to digital consultation services during the COVID-19 pandemic, heralding the introduction of telehealth in the industry.
Consumers are expected to defer purchases as a result of the downturn in discretionary spending due to the COVID-19 outbreak. Consumers are also likely to seek out cheaper alternatives to those sold in physical stores. Online purchases of spectacles are expected to increase in response, as consumers can order no-frills imported glasses with pre-existing prescriptions for a cheaper price. Both Specsavers and Luxottica have attempted to counter online sales growth by adopting a bricks-and-clicks model. Using this model, both major players sell their products online and in physical stores, in an attempt to drive consumers away from other online-only retailers.
Specsavers holds the largest market share in the industry, and has been able to drive internal price competition by providing bundle deals for the past several years. Other retailers have had to follow similar models to remain competitive. Luxottica, which operates the OPSM and Laubman & Pank brands, has positioned itself as a premium brand retailer in contrast to Specsavers and other industry players. Specsavers’ price competition has contributed to Luxottica’s market share remaining relatively stagnant. As online sales occupy an increasing portion of sales, Specsavers’ bricks-and-clicks model has led to the company opening fewer new stores. Instead, Specsavers has opted to expand current outlets to provide extra services, such as audiology services.
The industry is projected to increase at an annualised 1.5% over the five years through 2024-25. The volume of corrective lenses required is forecast to increase as Australia’s population ages, contributing to this growth trend. More children are also projected to require lenses in the future, largely due to eyesight issues related to digital eyestrain. While these pre-existing trends are forecast to drive modest growth over the next five years, the effects of the COVID-19 pandemic are likely to accelerate changes in the industry.
Overall, the industry is likely to rely further on online sales and telehealth servicing to complement its physical presence over the next five years. This trend will likely reduce optometrists’ physical presence, with the number of stores projected to decrease over the period. Increased competition from online-only retailers is forecast to affect the two major industry players, and they will likely attempt to wrestle market share back from their own online sales. With competition increasing online, the number of potential consumers is projected to grow, but a fall in discretionary income will impact their ability to purchase premium-priced eyewear.
IBISWorld Reports Mentioned in this Release: