The optical retail market in France was virtually flat last year at around €6.7 billion, according to the French trade magazine Bien Vu, and for the first time in many years, the number of optical stores declined by 0.1 percent. However, with 12,739 points of sale at the end of 2016, the density of opticians in the country remains high and the competition is increasing in a market that has been under growing price pressure from new government regulations and the standards of the complementary mutual insurance companies for the reimbursement of consumers' expenses on ophthalmic products.
Since January 1, 2016, French consumers can claim a refund of their optical expenses by the government's health insurance system every other year. Previously they could claim once a year. Because of that and the relatively low new ceilings applied to the amount of the reimbursements, the market could drop by as much as 20 percent in the next years, according to experts, which would probably lead to major strategic adjustments for the leading French optical retail groups.
Reacting to the situation, two heavyweights of the sector, Alain Afflelou and Optic 2000, announced plans to start selling glasses in pharmacies almost simultaneously last month. Pharmacies do not sell glasses in France, to our knowledge. In some other countries such as the U.K. and the U.S., drugstores have physical optical retail counters operated as concessions by optometrists or by specialized optical retailers. The proposed French solution would make more use of the newest digital technologies.
Afflelou is planning to move into pharmacies under the brand of an internet retailer, Happyview, that it acquired at the end of last year and that recently opened its first brick-and-mortar shop in Paris. The setup in the drugstores would consist of a standard display of 60 Happyview frames with a two-level price offering: a €159 package for a pair of glasses with single-vision lenses and a €299 package with progressive lenses. The consumers would place their orders directly on a touch screen, scanning the frame of their choice and entering their ophtalmologist's prescription. The screen would then take a picture of their face for measurements and the glasses would be ready to be picked up at the pharmacy in less than a week.
Affelou plans to supply the first ten pharmacies with its Happyview digital shop window during the summer, and it has announced a target of 150 to 200 installations by the end of 2018. Company officials say the program will allow Afflelou to service areas that are not well covered by optical shops, keeping out areas served by Afflelou franchises. Pharmacies will have to rent the Happyview display for €340 per month and will then receive a 25 percent commission on the related revenues.
As for Optic 2000, the biggest single optical retail group in the market, it will enter the pharmacies through a partnership with Otiko, a French low-cost online optical retailer in which it already has a 33 percent share through a subsidiary called Bagheera, with an option to acquire the rest of the shares currently held by financial investors, according to a French financial daily, Les Echos. The partnership with Otiko, which already has a presence in 70 pharmacies in the country, will be co-branded “Otiko avec Optic 2000” and launched in September. The offer will consist of a display with about a hundred frames and four price packages ranging from €39 for glasses with single-vision correction to €149 for glasses with progressive lenses.
Differently from Afflelou's strategy, the implementation of the Otiko shop-in-shop program will rely on the work of the local Optic 2000 opticians, who will be assigned a number of pharmacies to visit in their area. The affiliated opticians will also be physically present in the pharmacies for at least half a day per week when they can make appointments with clients. Pharmacies will not be charged for the display and the proceeds of the sales will be shared between the optician and the pharmacist. This new system is currently being tested at 15 locations. It will be fine-tuned by Optic 2000 during the summer. The company's management has not yet given a target for the number of doors.
There are currently about 22,000 pharmacies in France but their number is actually decreasing, too. It went down by 0.8 percent in 2016. On average, one pharmacy is closing every two days as their profitability is declining. As here again the government and the mutual insurance companies pay for prescription drugs in France, the gross margins of the pharmacies on all drugs, which represent most of their business, is estimated at 30 percent only. In terms of glasses, they have been selling only readers so far at very low average prices. Their sales and margins would be higher by adding a range of new and higher-priced glasses with minimal personnel costs.