Salmoiraghi & Vigano, Italy's largest integrated optical retail chain, and Vision Service, one of the country's major buying groups, will join forces to negotiate more favorable terms with their suppliers as from 2007. They formed at the end of last month a consortium, called Kentral, as the central purchasing structure for the 1,130-plus outlets owned or serviced by the two companies.

With a sell-out of €310 million this year - €120 million for Salmoiraghi and €190 million for Vision Service ? the two partners represent an estimated 14 percent of the Italian eyewear market, and the partners hope to raise it to 20 percent in the medium term. Salmoiraghi's chief executive, Riccardo Perdomi, will act as chairman of Kentral, while the chief executive of Vision Service, Marco Procacciante, will be its managing director.

The partners stress that Kentral is a non-profit-making service organization.Kentral will approach the 30-odd suppliers that the two retail groups have in common - including world leaders such as Luxottica, Safilo, Marchon and De Rigo ? with the aim of obtaining better conditions. Kentral will establish the overall purchasing program, which would have been worth €100 million for this year on a pro forma basis, working with each individual outlet. The consortium will subsequently re-distribute any benefits or advantages that it may have obtained from suppliers, on the basis of the actual orders received from the retailers. That includes year-end bonuses and discounts, contributions for marketing and other forms of support for the sell-out of the suppliers' products. Future plans include the establishment of common logistical platforms and laboratories in strategic locations throughout Italy. However each group will maintain its individual identity and will control its own development strategies.

According to the latest figures, Salmoiraghi has 278 direct outlets including 184 top-end stores, 55 lower-priced Vistasi outlets and 39 corners. It also has 53 franchised outlets trading under its own banner. Furthermore, over 20 independent opticians have joined an experimental buying group that Salmoiraghi set up a few years ago, taking the total number of outlets to 351. For its part, Vision Group has six directly owned stores, which act as pilots for 200 franchises trading under the group's banner, plus 578 independent affiliated stores that use some of its services.

The partners want to encourage a certain freedom of movement among these three levels of membership, but with a trend toward maximum centralization. Vision Service will give strong incentives to the independents to move to a status where their purchases and other functions are taken over by the group, with or without a transfer of store ownership. This will increase the group's leverage in terms of choice of products and will give Kentral greater bargaining power with its suppliers. The more centralized they are in the system, the greater the benefits for individual stores in terms of discounts and other terms obtained from the suppliers.

In the full financial year ended last Sept. 30, Salmoiraghi's sales rose by 12 percent to €120 million, with growth of 3 percent on a same-store basis. Earnings before interest, tax, depreciation and amortization (EBITDA) rose by 16 percent to €18 million, and net income increased from €1 million to €4.5 million. In the first two months of the current financial year, sales have risen by 21.4 percent from the same period a year ago, representing a gain of 7.5 percent on a same-store basis. In his 4-year tenure at Salmoiraghi, which he bought with the money made by selling his stake in Safilo, Dino Tabacchi has turned the loss-making group into a profitable operation and boosted its turnover by 60 percent, partly by opening new stores or buying up other retailers.