Optometry market

The Eyes Have It

Eine Filiale der Optikerkette Fielmann in den Pasing Arcaden in München. Foto: M. C. Hurek [ Rechtehinweis: picture alliance ]
An eye for a good thing: more outlets are providing services to customers in Germany.
  • Why it matters

    Why it matters

    Competition is growing on the optometry market in Germany as providers offer both eye tests and hearing tests.

  • Facts

    Facts

    In the 1970s Günther Fielmann stormed the market with his concept for fashionable, yet affordable glasses.

    Fielmann has grown consistently since listing on the Frankfurt stock exchange in 1994, and now has an annual turnover of around €1.5 billion ($1.7 billion).

    A battle looms as Fielmann moves into hearing aid retail, and Kind enters the optometry market.

  • Audio

    Audio

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The Hamburg entrepreneur who turned the German spectacles market upside down nearly four decades ago is adding hearing aids to his product line.

It’s a smart business move in a country with an aging population, but a battle is looming as Germany’s largest hearing aid maker enters the eyewear market.

The fight over the future of optometry in Germany is in full swing, divided along the lines of products, services and online versus offline sales. For a while, the online optometry chain Mr. Spex has been been nibbling at the market. At the same time, Günther Fielmann, the founder of Germany’s largest optometry chain Fielmann has been holding off from making the leap into online sales.

In the 1970s, Günther Fielmann stormed the market with his concept for fashionable, yet affordable glasses, leaving many traditional optometrists shaken. He gave the bespectacled masses a range of options, setting them free from the classically ugly, heavy-framed glasses which were covered by German health insurance funds. He removed the stigma of wearing glasses and turned them into a fashion item.

Now it’s the traditional hearing aid retailers who are worried, as he diversifies his business and moves into a new growth phase. It’s only a question of time before the Fielmann chain has a branch in every town in Germany, and in more and more of them hearing aids are also available.

“95 percent of our hearing aid customers also wear glasses. ”

Alexander Kind, Chief Executive, Kind Hörgeräte

Mr. Fielmann, 76, is one of Germany’s oldest chief executives, and doesn’t shy away from confrontation. Fielmann has shown consistent growth since listing on the Frankfurt stock exchange back in 1994, now with an annual turnover of around €1.5 billion ($1.7 billion). Although the company is now under attack on multiple fronts from new online-opticians, the market leader has a strategy to continue growing into the future.

Now, however, Germany’s leading hearing aid retailer is fighting back. Martin Kind, chief executive of Germany’s hearing aid market leader, Kind Hörgeräte, plans to add spectacles to his retail product range.

259 Kind-01

Mr. Kind, who is just five years younger than Mr. Fielmann, has entrusted his son Alexander with the task. He confirmed to Handelsblatt that the company’s first shopfront to sell both hearing aids and glasses is due to open in Osnabrück on June 20.

Kind Hörgeräte employs more than 3,000 people in 14 countries, including 500 trainees and apprentices. Alexander Kind says the company’s annual turnover is well over €200 million. In five years’ time he wants between 20 and 30 percent of all branches to be retailing both hearing aids and glasses. The first of them has just opened in Koblenz. That store is Kind’s 600th German store – and they have another 130 stores in other countries, including Luxembourg, the Netherlands, Poland, Spain, Azerbaijan, Armenia, Ukraine, Georgia, and Russia.

But the Kind family isn’t simply planning to gain a foothold in the glasses market by opening its own new branches. They are also planning take-overs, eyeing traditional opticians and other, smaller, optician-hearing aid combination businesses, of which there are already a few in Germany.

Spectacles are big business in Germany, but the average German tends to avoid the traditional optometrists, saving money by purchasing their eyewear from a chain.

Recent surveys show that 60 percent of Germany’s adult population wear glasses, that figure rising to more than 90 percent in the over-60s. There are 11,900 optician’s stores in Germany. In 2015 the German retail market for eyewear was worth some €5.6 billion – significantly greater than that for hearing aids, which in the same year created sales of €1.4 billion. The margins for glasses are also higher than those on for hearing aids, according to estimates.

Fielmann is Germany’s number one eyewear retailer, with 586 outlets – fewer than Kind – but they sell every second pair of glasses in the country. Their market share in terms of pure turnover is around 21 percent. The second biggest market player is Apollo-Optik, with around 800 retail outlets; and Pro-Optik comes in a distant third, with 134 storefronts.

Combining the markets for eyewear and hearing aids seems obvious to Alexander Kind.

“95 percent of our hearing aid customers also wear glasses,” he said. “These customers come in every three months to have their devices serviced in our stores.”

It seems logical to him to offer an eye test at the same time as a hearing test.

In addition to current customers, Mr. Kind said the company is looking at a broader, younger customer base.

“People in their 20s who are shopping for some hip sunglasses are not necessarily our target group,” he said, but added he could see potential in the multifocals market, touted by analysts as the next driver of growth in the optical marketplace.

Meanwhile, Günther Fielmann’s tactical move into the hearing aid sector has been going well.

“The hearing aid part is developing happily,” he said, “and is delivering two figure growth. In the medium term, we’re looking at 250 hearing aid storefronts.”

So far, 145 of those are already in operation. That means Fielmann is already Germany’s fourth largest seller of hearing aids – behind Kind, Geers and Amplifon.

But there is an important difference. Fielmann, unlike the others, doesn’t manufacture its own devices and so is dependent on a portfolio of other brands – including Kind.

Günther Fielmann calculates that the market for hearing aids is highly fragmented along price lines, as the eyewear market once was. Now he wants to place himself in the hearing aid marketplace just as he did with spectacles in the 70s and 80s, that is, as a large chain with lower prices. And he sees a ready-made market there as the multifocal generation which drove his company’s growth now becomes the hearing aid generation.

Those who know the markets for prescription eyeglasses and hearing aids see the idea of cross-selling as essentially sound. However, there’s a skills shortage which could cause a bottleneck. Finding workers have suitable qualifications to work as both opticians and audiologists could make a rapid expansion difficult. To that end, Kind Hörgeräte is offering staff the opportunity to study and qualify as opticians. At the same time, opticians looking at coming on board with Kind are able to get qualifications as hearing aid acousticians, at the Kind academy.

How Mr. Fielmann overcomes this problem remains to be seen. Like Mr. Kind, though, he too has a son with an innovative streak. In his mid 20s, Marc Fielmann joined the ranks of the company executives at the start of the year. It may be up to him to determine how the company overcomes this hurdle. It will likely also be left up to him to engineer the company’s entry into the online marketplace.

Perhaps Günther Fielmann has been justified in ignoring online sales until now. Growth in the online optometry market has been rising steadily, but but comes nowhere close to the turnover from the chains. According to Germany’s Central Association of Optometrists (ZVA), in 2015 online turnover grew from €210 million to €225 million ($236 million to $253 million). In the same period, turnover through traditional retail outlets rose from €5.4 billion to €5.6 billion ($6.1 billion to $6.3 billion). But online retailers like Mr. Spex and Brillen.de are starting to cooperate more closely with storefront retailers, giving optometrists a new way to win clientele. Shoppers are becoming ever more price conscious and online offers are undercutting the deals which regular customers are getting in real-world stores.

Mr. Fielmann himself is partly to blame for the difficulties that inline retailers have in gaining a toe-hold in the market. It has always been the strategy chain stores to offer the most favorable prices – once upon a time at no cost to customers covered by the compulsory public health insurance, but now also to those who can afford private health insurance. Therefore, even though some of the online merchants are importing products from Asia and can deliver at an extremely low cost, customers are disinclined to buy without professional consultation, and prescription fitting.

The real war in the sector is between the chains and the independent optometrists.

The Fielmann empire continues to grow. Their stated goal is to have even the most far-flung regions of Germany covered within a few years. Fielmann is not alone in its regional ambitions. In the last eight years, the 10 largest chains have opened a further 400 branches. Today there are more than 2,000 optometry chain shopfronts in Germany. The revenue share of the ten largest retail chains – especially Fielmann – now accounts for 40 percent of the market. That’s six percentage points more than eight years ago.

Opticians with low sales volumes are especially at risk in the current climate. According to industry association ZVA, an optician with annual sales of €250,000 or less can expect a profit margin of just 0.1 percent. Opticians with sales of half to a quarter million euros can expect a 6.3 percent profit margin – primarily because of sinking personnel costs.

Market analysts warn that Fielmann has its largest growth phases behind it. The baby-boomers have now all been furnished with their high-margin multifocal glasses. UBS consultants say that this is reflected in the recent plateauing of Fielmann’s share price; and that those looking for growth would do better to invest in Grandvision, parent company of Apollo Optik, which is actively expanding into emerging economies.

13 p19 Here's Looking at You, Germany-01

Handelsblatt’s Christoph Kapalschinski writes about companies and markets, focusing on consumer goods, textiles and food. Katrin Terpitz covers companies and markets at Handelsblatt, focusing on Germany’s Mittelstand and family-owned businesses. To contact the authors: kapalschinski@handelsblatt.com,  terpitz@handelsblatt.com

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