MOVING TO THE HIGH END

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The recession of 2008 caught the attention of just about everyone. For those who didn’t realize it, they learned that a huge percentage of the country’s prosperity hinged on consumer spending. Even though the federal government and financial experts tell us the recession is officially over, it sure doesn’t feel that way on the street. The recession drastically cut into business’ profits so business leaders immediately searched for strategies to prop up their businesses. One strategy was to cater to the higher-end shopper.

Addressing the high end is an appealing prospect because it has so many advantages. This is a segment of the population that doesn’t fall into poverty or has to cut back on non-essential items when the economy softens. It has disposable income, it saves and invests its surplus income, and it uses money as a resource to acquire what it wants and needs. Compare that to a low or lower-middle income family working hard to make ends meet and you’ll have the picture.

Selling to those with financial resources instead of those with lesser resources seems obvious, but the advantages to optical retailers may not be as obvious. If you’re selling low-end eyewear products, you’re profit is probably low as well. Even if you’re buying a $10 closeout frame and selling it for $110, you’re only grossing $100, even though you’ve marked it up 1,100%. If you sold a $125 frame and sold it for $375, you’d make $200 gross profit with 200% markup. This means that in order to make the same amount of money in a month, the low-end seller has to use more equipment, more worker hours, more utilities, more inventory management, more lab services, more wear and tear on facilities. In other words, have more of everything. All this increased utilization costs money. If you sold to the higher end, you could reduce all of these things and enjoy the savings.

Look at the airline industry. Its strategy for getting out of the recession was to raise prices. Why? For exactly the reasons listed above. They’re flying fewer planes, charging bag fees, special seating fees, cancellation fees, etc., and they’re making more money. Just as important, they’re reducing utilization of their equipment and people. They’re a shiny example of moving to the high end. Retailers are doing this, too. Just about every retailer has introduced a premium brand to attract the higher-end shopper.

Selling to the high end is well suited for optical retailers. If your demographics support it, it’s something you should consider. Believe me, industry and big retailers are already there.

email me at ed@visioncareproducts.com

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