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Ophthalmic Goods & Services 2010
Key Note Publications Ltd, Aug 2010, Pages: 110
In 2009 and 2010, an already consolidated market for ophthalmic goods and services experienced another period of acquisitions and mergers. This is a healthy market, underpinned by strong levels of government subsidy, which encouraged major players such as Specsavers, Vision Express and Optical Express to expand their store portfolios. The other two major retail opticians, Boots Opticians and Dollond & Aitchison (D&A) announced a merger in May 2009 and, during 2010, began the process of converting D&A stores under the Boots Opticians retail brand.
The value of the market stood at an estimated £2.93bn at the end of 2009, having grown by 11.2% since 2006. Despite the economic recession, which started in 2008, confidence has held up fairly well in this market. Purchases of spectacles are often partly essential and partly discretionary, since the amount an individual can spend on them is variable. The market is buoyed by NHS subsidies, which funded around 74% of eye tests in 2009 and issued more than 5 million vouchers redeemable for spectacles and contact lenses. Since 2006, the level of this subsidy has risen year-on-year.
However, it is not only the public purse that has supported growth in market value; strategies on the part of the opticians themselves have encouraged greater take-up. Consumers have a strong interest in designer frames, and retailers have encouraged high volume sales by promoting glasses on two-for-one offers, often pitching prices at around the value of NHS vouchers. Although this market is highly competitive and has not seen any significant price rises over the 2008 to 2010 period, volume sales have continued to increase, compensating for this.
Nevertheless, the retail market is set to become even more competitive, with two dominant players, both of which are supported by vertical integration in terms of the manufacturing of frames and lenses. As a result, pricing is expected to remain a key issue in the spectacles subsector over the forecast period (2010 to 2014), making it difficult for smaller chains and independent retailers to compete. Between 2008 and 2010, the value of private sight tests began to fall as more (large and small) retailers offered discounted eye tests as a means of encouraging customers through their doors. The rapidly emerging player Tesco, which has increased the number of in-store opticians significantly over 2009/2010, also offered free eye tests in 2010.
The UK population is an ageing one and demand for optical goods and services to treat age-related visual impairment is set to rise over the next two decades, which augurs well for this market. There are also opportunities for retailers to diversify their offerings into other areas, and there was evidence of this type of activity in 2010. The market is likely to remain healthy and exciting, although only moderate value rises are forecast for 2010 to 2014.
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