An eye for price: Specsmakers is on the brick-and-mortar route to expansion

With a focus on affordable eyeware, Specsmakers is on the brick-and-mortar route to expansion

When he entered the third shop to buy spectacles, Surendran was sure he was not going to find anything within his budget there because the establishment looked expensive. To his surprise, the branded shop had a variety of products on offer at comparatively low prices. An unconditional warranty for the frame was the clincher. Specsmakers thus acquired one more customer.
 

Chennai-based Specsmakers Opticians, a company incorporated in February 2007, has its focus on the affordable eyewear segment. It offers quality products at affordable prices, competing directly with neighbourhood mom-and-pop stores. Unlike modern trade, which bets on omni-channel presence or e-commerce play, the company is wedded to the brick-and-mortar model.
 

In an environment where money chases tech-supported, online companies, Specsmakers last month raised $10 million from investors led by Eight Roads Ventures India and others. Fulcrum Ventures had earlier invested an undisclosed amount in Specsmakers in 2014 and made a partial exit during the latest round of funding.
 

"We have been impressed by the execution capabilities of the management team  at Specsmakers and are excited to partner with the company to increase access to quality prescription eyewear products at affordable price points for Indian consumers,” said Sandeep Singh, principal at Eight Roads Ventures India.

FACT BOX

Launched in: February 2007
 

Area of business: Optical retail chain
 

Founder:  Pratik Shah 
 

Target: To expand to 3,000 stores by 2025, from 120 stores now 
 

Funding: Raised an undisclosed amount from Fulcrum Venture in 2014; $10 million from investors,  led by Eight Roads Ventures India

Business model

Pratik Shah, the chief executive officer of Specsmakers Opticians, returned from the US and gradually took over his father's  optician business. In 2007, it was a multi-brand retail shop in Chennai and Shah visited China several times and familiarised himself with the nuances of the business.
 

Spectacles usually go through a supply chain of eight or nine vendors, from the manufacturer in China to the neighbourhood retailer. If one assumes a 15 per cent margin for each of these points, the markup is huge on each pair of spectacles.

“We have eliminated all the middlemen and are purchasing directly from the manufacturer in China, which helps us to sell at a lower price," said Shah. This also ensures that the retail chain can buy quality products.
 

"We are in the affordable eyeware segment and our focus is on offering high quality products at low prices," Shah added. From a multi-brand shop, it became a single-brand retail chain, selling only the Specsmakers brand of eyeware. Specsmakers offers unconditional warranty on spectacle frames. For lenses, it works with international brands in China and India. 
 

If a pair of spectacles costs Rs 2,500-3,000 in a mom-and-pop store, Specsmakers can offer it for Rs 1,500-1,800. This is the same for fashion eyeware, except that the brand name is Specsmakers. At present, the company has 120 stores,  72 of them in Chennai, four in Madurai and the rest in Bengaluru. It sells 15,000-20,000 pieces of eyeware a month.
 

The opportunity
The eyeware business in India is worth Rs 220 billion, of which 90 per cent is with mom-and-pop stores. The unorganised segment is declining in terms of growth while the organised segment is growing at around 15 per cent. It is this 90 per cent of the market Specsmakers is targeting. Of the total business, around 90 per cent is the prescription market.

The company reckons there is an opportunity for at least 150 stores in each city and with more people using gadgets with bright displays, it expects demand for eyeware will rise.
 

The challenge is in creating awareness about eyecare and making people seek regular vision correction. “We are addressing that through regular eye checkups and camps. The second challenge is in training the right people who are passionate about retail,” Shah said.
 

Way forward

Specsmakers owns all the stores it operates. The company is now looking at the franchise model to expand. It plans to add 100 franchisee stores this year. The company will operate these store with its own employees and inventory. It will also expand its own stores, and has plans to invest around Rs 300 million in the next couple of years. Specsmakers is hoping to break even by March, while at store level it is already profitable. 
 

Specsmakers is also exploring opportunities to sell its products in mom-and-pop stores. The company can serve 500-1,000 such stores and scale up later, Shah reckons.

Specsmakers is expecting the number of its own stores to reach 150 by the end of March. Its further expansion will be in the southern and western parts of the country and its target is to reach 500 stores by 2020, by when it plans to sell 100,000 pieces of eyeware a month. Specsmakers expects to be a pan-India player by 2025 with 3,000 stores.


EXPERT TAKE

Better product and service is key

V Rajesh A retail & shopper behaviour expert

The eyewear retail segment has been witnessing a shift from conventional outlets to chains. This shift is driven by three aspects. First, eyewear is no longer a functional purchase but it has become more of a lifestyle accessory. Second, chains are better suited to cater to the shopper's expectation of consistent quality and offer uniform retail experience across geographies. Third, global sourcing has enabled retailers in this space to offer a better range.  Several retail business models exist such as own stores, franchising and the multi channel route. Chains such as Specsmakers need to consider a multi channel option if not an omni channel one. The own stores plus franchise outlets might be a competitive advantage to get into the online space. However, product and service quality across the outlets, especially franchise ones, would be key to sustaining the shopper base.