The eyecare industry is huge – over $40 billion in the US alone. And startups have taken notice, with newcomers attacking margins and service delivery in several important product categories like contact lenses (e.g. Hubble, Waldo, Scout, etc.) and glasses (Warby Parker, Jins, and some others like Zenni). But is this really a good space to target, and do these startups have hope of generating real, sustainable businesses?
A big industry with an odd distribution network
Various sources peg the overall US market at just over $40 billion in annual sales. That’s big! Different sources suggest that either the overall market is barely growing (0.1% year over year growth) or is growing 3%+ year over year. (Here are some good stats on the industry’s growth that we’ll cite in this article.)
The eye care space breaks down into several product and service lines. Lenses and frames are the biggest product category, and services (exams) are also a major service line. Below is the breakdown by eye care category spend within the independent optical retail segment:
- 38%: Lenses
- 28%: Frames
- 23%: Exams
- 11%: Contacts
- ~1%: Other (mainly sunglasses)
Let’s compare that to overall industry stats in the US (we will have to take data from a number of sources since it’s well laid out in the freely available industry reports out there). Note that the numbers in the table below sum to over the $40 billion industry size estimate referenced above, mainly because of the different sources used to compile the table below and the addition of the sunglasses segment. And it’s very interesting to see that the market growth for each segment is projected to be less than the overall growth number we referenced above!
| Category | US Market Size | US Growth Rate |
|---|---|---|
|
Sunglasses |
$4.8 billion |
2.7% |
|
Contact Lens |
$4.7 billion |
2.3% |
|
Eye Glasses |
$32.3 billion |
1.7% |
|
Vision Correction Surgery |
$2.7 billion |
0.5% |
|
Exams |
$6.1 billion |
0.5% |
Find sources at the end of the article.
So we’ve got a huge industry, with a number of big product and service lines. And the distribution is equally interesting.
Eye care distribution
Eye care products and services are distributed through a few national changes, a few big retailers, many, many independent providers with retail locations – and increasingly, by new direct to consumer (D2C) startups.
The online vision care market is close to $2 billion in size, so depending on how you size the overall eye health market, it is 5% or less of the overall market. Online is projected to grow over 5% a year or more, and doubled in size from 2011 to 2017.
Major retail distributors
Offline/retail vision care is distributed by the following providers:
- Luxottica – 7,000 locations and $7 billion in sales
- Walmart – 3,200 locations and $1.5 billion in sales
- Vision Works – 620 locations and $556 million in sales
- National Vision – 750 locations and $850 million in sales
- Costco – 440 locations and $757 million in sales
- Vision Source – 2,800 franchise locations, unknown sales
- Dozens of smaller chains
- 10,000 or more independent retail locations
Source: Harris Williams
Aside: These offline providers are staffed or owned by various trained vision experts. I actually found the difference in the doctors and experts to be a bit confusing, so here a little primer on the titles and responsibilities in the vision care space:
- Ophthalmologist – this is a doctor, with an M.D. An ophthalmologists went to medical school, had a one year internship and a 3 year residency. They can generally licensed to perform eye surgery and diagnose complex vision problems. If you have glaucoma or serious eye injuries this is the doctor you see. Ophthalmologists can also perform comprehensive eye exams.
- Optometrists – this is a vision care expert who is trained to prescribe and fit lenses (contacts and glasses). An optometrist has had a four year medical program after they completed their undergraduate studies, and have a doctor of optometry degree (an O.D. degree). They can also diagnose and treat many eye conditions and diseases, and are able to do comprehensive eye exams.
- Optician – this is a person who is specialised in designing and dispensing lenses for vision care. Opticians usually get a one or two year certificate degree. They are responsible for filling the prescription that your eye doctor gives you.
Beyond the somewhat complicated set of professionals who might help a consumer find the right prescription and get fitted with lens in a traditional retail setting, there are a host of new disruptors – startups trying to change the distribution, pricing or service model.
Eye care startups
Perhaps the best known, “Silicon Valley” style startup in the vision space is Warby Parker (note they are actually based in NYC, not Silicon Valley). This juggernaut has been disrupting the prescription glasses business since 2010. They were one of the first D2C companies to really take off, and attacked the industry’s margin from the start. And their growth has helped them raise close to $300 million in venture capital funding. In an exciting new development, Warby Parker has introduced a line of contacts branded “Scout,” which we review here. We’ll see if this new offering takes off!
Beyond Warby Parker, the contact lens industry is under fire from a host of interesting startups. Companies in the contact lens space have a higher barrier to entry, in that they need to have an FDA approved product (turns out when you put a “medical device” into your body the FDA gets involved – kind of nice actually!) Key players are Waldo, Hubble, Sightbox, and Aveo. While they are clearly competing against each other, Aveo and the other also compete against established players like Acuvue, which is owned by J&J. (Read our comparison of Hubble vs Aveo vs Acuvue here).
Top online vision care companies
- Warby Parker – glasses – $290 million in funding
- Waldo – contacts – $6.8 million in funding
- Hubble – contacts – $73.7 million in funding
- Aveo – contacts
Hexa Research thinks that about ⅓ of online sales are contact lens, while the remainder is eye glasses.
It’s not all up and to the right for startups in this space. For example, a startup called Rivet & Sway tried to take on Warby Parker (and the traditional prescription vision wear space) – they raised $2 million in venture capital financing, and then close 16 weeks later. Companies may fail for a variety of reasons, including the high cost of customer acquisition, problems with quality, issues related to how they approach the industry’s regulation, and more.
Online Eye Care
Product Split
Online vision care will continue to grow
We can confidently predict that online sales of contacts and glasses will continue to grow. With consumers increasingly willing to trust their healthcare decisions to online companies, the space will naturally benefit from the move to online business (see our piece on telemedicine D2C startups for more). The difficult distribution network, with many small retailers and a few big players, also leaves a lot of fragmentation – something a well funded group of startups could take advantage of, and build a brand.
We expect more exciting companies and growth in the online eye care space!
Some of our sources:
https://www.harriswilliams.com/system/files/industry_update/vision_industry_update_hcls_0.pdf
https://www.thevisioncouncil.org/media-room
https://www.visionmonday.com/business/research-and-stats/article/vision-markets-see-continued-growth-in-2017-visionwatch-says/
https://www.globenewswire.com/news-release/2019/04/29/1811416/0/en/Contact-Lenses-Market-to-Reach-US-10-75-Bn-by-2027-Noted-TMR.html
https://www.statista.com/outlook/12020000/109/sunglasses/united-states#market-globalRevenue
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