Things, we’re told, are getting better. Unemployment has dipped to around 6.5%; the housing market is rebounding in many areas; the Dow was breaking records every day (well, a couple of months ago). Despite these harbingers of good times ahead, many people seemingly are still struggling. And the reason for that is…because they are. The average U.S. income today is just a bit over $50,000, according to the Wall Street Journal. Remarkably, it was exactly the same 25 years ago.
So who’s pushing the economy forward? Rich people. The New York Times recently reported that wage earners in the top 5% account for 38% of all consumption, and the top 20% account for more than 60%-a substantial rise over the last decade. Meanwhile, the bottom 80% consumes about 39%, a significant decline over 10 years.
The effects of these trends are becoming fairly evident. Hotel brands like St. Regis and Four Seasons are up in sales, while Best Western is flat to down. Sears and JCPenney are hurting, closing stores, and laying off thousands, but Nordstrom is doing just fine. Talk of income inequality is, in fact, more than just talk.
How should optical interpret these shifts as an industry largely built around the middle class? Well, if you’re preparing to open a new dispensary, it’s probably a good idea to think about luxury products. Or very low cost products that cater to the lower segment of the market.For the so-called middle market, eyecare will no doubt be even further driven by managed care benefits. Managed care, in fact, may well turn out to be the industry’s salvation.
But here’s the caveat: don’t just accept managed care plans, make them work for you.
In the outer boroughs of Greater New York there is a four-store optical chain that does an enormous amount of business with primarily third-party patients. But the bulk of their sales are in better-priced eyewear brands. While they carry product to accommodate the material allowances of benefits plans, they rarely sell it.
Instead, they treat the patient’s benefit allowance as a starting point-a discount, and often a healthy one. From that perspective, the patient now perceives that those designer brands are within reach. As they say, you may not have a million, but you can look like you do.
Trading up is nothing new; optical has been talking about it for years. But if the economic landscape remains the same, having the skill and the mindset to do so will become imperative.
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