Business owners always have a soft spot for those rascally entrepreneurs like Richard Branson, who come into a market, aggressively attack the incumbent’s position, and grab news headlines along the way.
But what about when you’re in the position of the market incumbent? How would you react?
That is exactly the position Chris Beer has found himself in. Beer is the chief executive of the Australasian, South East Asian, South African divisions of international eyewear company Luxottica.
The company, which owns brands including OPSM, Laubman Pank and Budget Eyewear, is the clear market leader in Australia’s eyewear sector, with a share of around 33% according to IBISWorld.
But in the last two years, British franchise chain Specsavers has entered the market and started attacking Luxottica. It plans to open 50 new stores in 2009 (taking its total network to well over 150 stores) and is aiming for revenue $200 million. And Specsavers has not been shy about trumpeting its growth at every stage, often aiming a few barbs at OPSM at the same time.
Beer insists the arrival of Specsavers has not had an impact, and the business continues to meet or beat its budgets. (Beer will not reveal figures, although IBISWorld estimates the group’s annual sales are just over $400 million in a market worth around $1.2 billon.)
He says much of Specsavers growth has come at the expense of independent optometrists, who account for just over 50% of the market and are being squeezed hardest.
But Beer does acknowledge he and his team have been caught by surprise by the ability of Specsavers to seize the media agenda. “We need to get better at dealing with that,” he says.
“Maybe naively – and that’s my fault – we thought that (when) competitors come into a market, they play fairly.”
The two companies became embroiled in legal action recently when a OPSM employee emailed 350 pages of confidential OPSM documents to her home email account just before going to work at Specsavers.
Beer says OPSM was only ever concerned with getting its documents back, but Specsavers forced the matter into court and was even able to claim a sort of victory when the judge decided the matter in OPSM’s favour but awarded damages of just $10.
“They’ve done a great job at turning a loss into a positive,” Beer admits. He says a second similar case is currently pending in Victoria.
Beer says the company will increase its marketing and PR efforts, although he acknowledges he needs to be careful not to give Specsavers oxygen just for the sake of it.
“We are the market leader and we’ll continue to behave like the market leader and talk about things market leaders talk about, not these side issues,” he says.
Besides, Beer has enough on his plate dealing with a difficult retail environment and managing Luxottica’s growth plans.
While the company’s store network is large and well established, Beer has a five-year plan to expand, with the Budget Eyewear chain likely to expand from 90 to 200 stores, the Laubman Pank chain set to grow from 146 stores to around 200, and OPSM expected to increase from 290 stores to around 370.
Much of this growth will come from franchising, particularly in the OPSM chain, where the number of franchised stores is expected to grow from 25 to 100 by the end of 2010. While most of the current franchisees have come from within OPSM’s network of optometrists, Beer is expecting strong interest from independent optometrists keen to join the chain.
“There’s lots of interest externally, and I think you’ll find that new franchisees will come from external sources.”
Under the Luxottica model, stores can be company owned, franchised or even a mixture of both (whereby a franchisee shares ownership with Luxottica). Beer argues it gives the group great flexibility and creates a culture where optometrists feel there are multiple ways to become involved with the company.
“We don’t really care if a new store is company-owned or franchised. We are not hard wired for anything.”
Beer says he is very pleased with the way the company is tracking during the downturn, and puts this down to a conscious decision taken in 2007 to ready Luxottica’s young management team for recession.
“Most of the team hasn’t been through tough times, and we wanted to prepare them for that,” he says.
Part of this preparation was the investment of over $1 million in corporate engagement, training and development.
The company’s general manager of human resources, Rhonda Brighton, says a telling statistic about the mindset of the staff back in 2007 was the response rate to the corporate engagement survey – a paltry 56%.
“I think there was a degree of apathy, thinking ‘we are making money and we are doing OK’. I don’t know they were unhappy, but they didn’t have a say.”
Separate programs for general staff and optometrists were created to give these people a say in the way the business was run.
In the case of the optometrists – who, like many health professionals, can be difficult to manage – opportunities were created to allow them to join the executive team, own their own business through franchising, and give back to the community through charity initiatives and mentoring. Last year, the corporate engagement survey had a response rate of 76%.
“We are looking after staff better than we ever have,” Beer says. “The economy will come back, and we want to be sure we keep our talent.”
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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