Optical retail chains are taking customers away from “no-name” shops, but still cannot compete with subway vendors.

Marina Tupikova

“Ten years ago, people bought glasses because they had bad vision. Now they buy frames to match their handbag. Today, you can’t just think about quality. People want glasses with feeling,” explains an owner of a Moscow optical store. Russia’s rapidly expanding optical retail chains are hoping to give consumers just that. Recently, this segment has become one of the fast growing specialized retail markets in Moscow. Every new shopping center has one. Earnings are growing by 20-30% a year, and at some chains by as much as 100%.

From the kiosk to the boutique
On the Moscow optical market there are three types of retail outlets: small stands and kiosks in metro stations, generic opticians, and brand-name optical chains. Metro retailers trade in cheap glasses costing 200-300 rubles. Their low prices are due to the origin of their lens and frames, which either come from Russian factories or Chinese sweatshops. This “primitive” retail earns an estimated $70 million a year, 35% of the total Moscow market in monetary terms and 65% in real terms.
No-name opticians and optical stands in drugstores are generally either former municipal opticians revamped by private investors or small stores in shopping centers. They focus on the product itself and walk-in customers. These stores carry a wide assortment of products, from expensive Italian to cheap Korean frames. Due to their high costs and lack of a target audience, these opticians’ main goal is to sell as many expensive frames as possible. This is the only way they can survive on the market.
The first well-organized store dealing in eyewear, Interoptika, appeared about ten years ago. When the store first opened, the market had no strict segmentation and no brands. The company targeted the exclusive price niche and was the first to import expensive brand names like Swarovsky and Cazal. Interoptika is still focusing on well-off customers, and the average price of an order at the store runs from 100 to 300 euros.
For a long time, Interoptika was the only brand-name store where Muscovites could purchase a decent pair of glasses. Only in recent years have other brand-name stores begun to expand rapidly on the market, chains like Ochkarik, LensMaster, and GoodLook. For the time being, they only control 30% of the so-called “civilized” or store-based market, but retail chains’ market share is growing fast. Unlike municipal opticians, retail chains are targeting specific market niches and offering higher-quality selection and knowledgeable staff.

Cheap. Fast. Cool.
Ochkarik, with 14 stores, is the biggest chain. The chain began as the Optika Union of Moscow, which was taken on by a private investor in 2000. “It was a large company that had existed for more than 70 years with a large workforce and bad economic indicators. Only four out of forty opticians were actually operating and even they were barely squeaking by,” recounts Sergei Bodrov, General Director of the Ochkarik Chain. “We came up with a name, changed our equipment, found the right specialists, rented new stores, and starting developing our selection.”
Ochkarik stores are based on the supermarket principle. They carry glasses in all price ranges for customers of different income levels. Glasses cost anywhere from 500 to 30,000 rubles depending on the lenses and frames. Expensive frames are purchased from Russian distributors for European brands or directly from Italy and Germany. Mid-priced frames are usually made in China and Korea following European design, while cheap frames are mostly Russian. Russian companies also produce the cheapest lenses. “We call them `potatoes’ because they are the simplest. They are thick, heavy, fragile, and easily scratched. Demand for them is fairly limited. More complicated lenses are becoming more popular and these are made in Germany, France, and Japan,” notes Bodrov.
In the future, Ochkarik plans to target the budget segment. “If we focus more on lower priced products, we will strengthen our market position thanks to increased turnover. Our ability to sell relatively less expensive products will depend on to what extent we can increase the number of stores,” believes Bodrov. This is exactly why Ochkarik is actively opening shops in Moscow’s bedroom communities. “The more sophisticated consumers become, the more they stop buying products in kiosks that are bad for their eyes and start shopping with us, where there is bigger selection, better quality, and a guarantee on their glasses,” argues Bodrov.
The second biggest chain, with 10 stores, is LensMaster. It is promoting the idea of “glasses in an hour” in Russia and focusing on fast service. The company is operating in the mid-priced sector. “Though we do carry very expensive frames, we emphasize the mid-priced segment,” says Amal Shakir, Deputy General Director at LensMaster. “Our customers demand quality, which we guarantee, and convenience, fast service. They aren’t after trendy or pricey brand names.” Particular attention is paid to lens quality. LensMaster primarily sells “good vision,” using only expensive Japanese and German lenses.
Another notable market player, GoodLook, is positioning itself as the place for fashion. Though it opened its first store in 1998, the company only began to develop rapidly and create a retail chain very recently. GoodLook now has seven stores. “We are bringing a new approach to eyewear, the boutique approach. We are selling fashion. If you just want to correct your vision, you can go to any optician to get your glasses. If you want a fashionable accessory that expresses who you are, come to us,” says Yuri Duravkin, General Director of GoodLook. Frames cost an average of $150-200 in its stores. GoodLook orders them from small factories in Italy that produce eyewear for French and Italian design houses.
Almost every optician today offers designer frames, which make higher profits. For this reason, GoodLook’s founder decided to attract customers by frequently changing collections (every three months) and not carrying last season’s frames. “We try to get a hold of products before our competitors,” states Duravkin. “Some models we carry you would even have a hard time finding abroad. This is what foreign customers tell us when they visit our stores.” GoodLook plans its selection based on the demand in specific regions of the city. “For example, Chanel sells better on the Rublevskoe Shosee, Yudashkin on Manezh Square, and MaxMara in outlying neighborhoods,” Duravkin explains.

The eyes have it
Investor interest in optical chains is easy to explain. Specialized retail, when a relatively expensive and small product is sold in small spaces, is one of the most profitable sectors of retail trade. For example, stores dealing in cell phones make excellent profits. Of course, with their larger rental spaces and more expensive equipment and products, investment in optical retail is fairly expensive, around $300,000. Interior design, which is extremely important to high-end opticians, can also get expensive. “The distributors of Christian Dior and Gucci frames only agreed to do business with us once they saw our boutique in the Manezh Shopping Center,” says Duravkin.
The optical retail chains compete most directly with “no-name” generic opticians by offering similar products at lower prices. Chains’ more complicated store setups, which include eye exam offices, lens workshops, and storage rooms, also give them a competitive advantage. “Today’s optician is both a medical supply establishment and a retail store. It requires specialized medical knowledge as well as good knowledge of your customer. The universal entrepreneurial approach is not enough,” explains Sergei Bodrov. Smaller opticians often use the facilities at chain stores for making difficult lenses and of course cannot compete with chains in prices or the time it takes to fill an order.
It still proves difficult to compete with street and subway vendors, however. This is not only due to the higher prices in retail stores, but also to Russians’ different approach to eyeglasses. “Russia differs from Western countries, where glasses have long been part of a person’s image,” says Yuri Duravkin. This is why budget opticians exist in the West that specialize only in glasses for the farsighted or sportsmen. Foreigners also pay closer attention to lens quality, and opticians earn most of their money from complicate lenses that can constitute 70% of the total price for a pair of glasses. Russians tend to buy simple lenses that only make up 30-50% of the total cost of their glasses.
All retail chains plan to keep expanding their presence on the Moscow market. According to company estimates, the market can accommodate another 150-200 stores in Moscow without cutting into the profits of existing stores. GoodLook and LensMaster are also considering expansion into Russia’s regional markets. For example, LensMaster plans to open stores in Kazan and then in Nizhny Novgorod and St. Petersburg and is currently negotiating with Mega Shopping Center to accomplish this. GoodLook is still considering how to win over provincial customers. “The fashions we sell are associated with Moscow. In other parts of Russia, a less elitist, supermarket-style approach would work better, perhaps a store for the whole family under a different brand name,” says Duravkin.

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