By Tina Lahti, ABOC

The optical industry is unique in combining health care with fashion. In health care, use of generic drugs grew quickly from a mere 14 percent in 1984 to 8 in 10 prescriptions today. For over-the-counter drug store merchandise, private label products account for 18.3 percent of sales in dollars and enjoy a large percent of market share in some specific categories. Forty-four percent of vitamins sold in drug stores are private label.

In fashion, private label is much more than generic. Large retailers create targeted house brands. At Macy’s, for example, 19 percent of revenue is from sales of private label merchandise thanks to brands like INC, which targets trendy metropolitan females ages 18 and 40 with an average income of $80K, and American Rag for diverse and urban men and women ages 20 to 30 with an average income of $50K.

Research has shown 36 percent of grocery consumers are likely to make a special trip to buy a private label brand from their primary retailer. These customers are more satisfied with their purchases and more loyal to the store. The retailer has created a unique product experience that competitors cannot easily duplicate.

In addition to differentiation and loyalty, retailers who utilize a private label strategy gain significant control over the products they offer. They can define factors such as consumer benefits, size and price. This gives retailers the freedom to better control their relationship with the customer, their image, the consumer value proposition and their own profitability.

Some of the most disruptive retailers in the optical industry have been successful, in part, based on their private label strategy. Costco optical has repeatedly earned the highest overall satisfaction score among optical retailers by Consumer Reports. Costco’s use of unbranded and Kirkland Signature brand products has allowed them to seamlessly improve the products and maximize consumer value by controlling their cost of goods. Warby Parker utilizes an exclusive private label strategy. They sell only Warby Parker frames and lenses. Warby Parker has built a strong brand and a company estimated to be worth $1.2 billion dollars in only five years. They enjoy total ownership of the relationship with their customers. Small retailers can benefit even more than large retailers from a good private label strategy. Their customers expect personalization and customization. Specialty stores are, after all, expected to offer special products.

Optical retailers are in a unique position to easily add private label into their overall retail strategy. Lenses are by their very nature transparent. They have no visible trademark for a consumer and require no physical package. In addition, small imprinted items, like cases and lens cloths, are readily available in small quantities for branding.

With the help of a good local wholesale lab, a small optical retailer can go beyond private label to create artisanal offerings that are unique and locally produced. What a great way for a small optical retailer to create differentiation and help ensure customer loyalty.