Specialist
Former executive at 1- 800 Contacts Inc
Agenda
- Major trends and developments in the D2C online contact lens market
- Key players’ competitive positioning, including 1-800 Contacts, Warby Parker (NYSE: WRBY) Lens.com and Walmart (NYSE: WMT)
- Partnership ecosystem opportunities, plus expectations for Luna Solutions, 1-800 Contacts’ Q1 2022-launched B2B business
- International expansion prospects and barriers to entry in ex-US markets
- Q4 2022 industry growth outlook and potential consolidation dynamics
Questions
1.
What are some of the major trends and drivers you’ve been following in the online contact lens market recently?
2.
What tailwind do you think the pandemic has presented for the D2C contact lens market, perhaps in terms of capturing customers over from the brick-and-mortar channel? How sustainable could this benefit be in a more normalised environment with in-person facilities back open?
3.
1-800 Contacts has a number of start-up businesses, such as the online exams business, white label premium lenses, and glasses. Could you discuss the approximate revenue contribution and profitability mix across those subsegments?
4.
You mentioned a lot of the 1-800 Contacts’ businesses were bolted on via acquisition. How well-integrated are some of those pieces across the company’s umbrella? Where do you see further room for synergies to be realised, perhaps looking at Ditto, the 6 Over 6 merger or otherwise?
5.
What is the grander strategic vision for 1-800 Contacts’ subsegments going forward? How is the company leveraging synergies across product offerings to create differentiation or a holistic “one-stop shop” offering in an otherwise commoditised market?
6.
Could you expound on some of the regulatory pressures and how are they impacting 1-800 Contacts?
7.
From my understanding, it’s fairly easy for a competitor to set up a website and start selling contacts, but the regulation that sellers need to verify prescriptions with an optometrist is what prevents cheaper websites from getting scale. How complicated is this regulatory stipulation? To what extent does it work in 1-800 Contacts’ favour in establishing a competitive moat?
8.
Do you see more competition coming in the D2C channel over time, given you said the regulatory moat is not particularly substantial? What has been stopping smaller players if not the regulations?
9.
What other ways is 1-800 Contacts tailoring or customising its service to specific customers to make them feel comfortable with a D2C offering and perhaps create some customer stickiness?
10.
Revisiting your supplier comments, could you quantify the discounts 1-800 Contacts negotiates with manufacturers given its size and scale? What kind of margin boost is attainable here?
11.
Could you discuss 1-800 Contacts’ technological capabilities on the logistics and supply chain end? How much of a competitive advantage does this give the company in terms of optimising sourcing processes?
12.
What impact might the Apple iOS changes around targeted advertising have on 1-800 Contacts’ digital marketing initiatives and cost-per-lead?
13.
What other avenues might be explored on the marketing side to reduce 1-800 Contacts’ reliance on social media and other channels impacted by the iOS changes? How could the company change its marketing strategy to acquire customers more efficiently?
14.
Where might 1-800 Contacts look next acquisitively as it seeks to augment its footprint and protect against competitive threats? Which ancillary segments or companies might it make strategic sense to buy to create a more comprehensive and margin-accretive portfolio offering?
15.
How do you assess the competitive dynamics between 1-800 Contacts and large retailers such as Walmart and Costco moving into the D2C contact lens market? To what extent does Walmart’s existing online capabilities and scale give it an advantage on price?
16.
What tweaks on the pricing side could 1-800 Contacts make with its subscription offering?
17.
To rephrase, how nimble or flexible could 1-800 Contacts get on price, offering different structures or packages to perhaps defend its position or create some flexibility or stickiness with customers against the cheaper offerings from the big wholesalers?
18.
What are the most important customer criteria beyond price when looking at a contact lens vendor to go with? How do customers weigh relative factors in the “user experience” that you mentioned?
19.
How do you assess 1-800 Contacts’ positioning against rival D2C firms such as Warby Parker or Lens.com? How does the company stack up on the user experience front and otherwise against the smaller pure-play names?
20.
How are you viewing the risk from other large e-commerce businesses such as Amazon entering the contact lens market? What threat does Amazon or even CVS pose to 1-800 Contacts longer term?
21.
What are your thoughts on a potential acquisition of 1-800 Contacts by Amazon, especially noting that Amazon just bought One Medical? Could you talk about some of the synergies with adding contact lens in-house alongside Amazon’s budding B2B healthcare franchise? How seamless of an integration would that be? Could you expand on any relevant synergies beyond what you mentioned?
22.
Do you think we will see large contact lens manufacturers start exploring going D2C? How difficult would this be to implement from the manufacturer side and what’s the likelihood of this happening over the next few years?
23.
How robust is 1-800 Contacts’ partnership ecosystem? Are there any avenues the company hasn’t pursued that might make sense to widen its customer base or unlock new patient demographics?
24.
What are your thoughts on 1-800 Contacts’ launch of Luna Solutions to enter the B2B contact lens channel? How would you size the market opportunity in enterprise?
25.
What are the keys to penetrating the B2B demographic? How is 1-800 Contacts thinking about its go-to-market strategy to HR departments, benefits consultants, and other entities to try to convert logos efficiently in the enterprise channel?
26.
How do you asses 1-800 Contacts’ international expansion efforts? What advantages does the company’s Israel-based acquisition of 6 Over 6 Vision give it in terms of international penetration?
27.
Which ex-US markets do you see as most attractive for further growth for 1-800 Contacts? How is it balancing patient population accessibility vs competitive saturation and regulatory hurdles?
28.
How do you anticipate macroeconomic inflationary concerns to impact consumer behaviour? Could we see customers increasingly shifting to e-commerce or downstream if the economic outlook worsens? How would you juxtapose those dynamics with the trickle-down impact on 1-800 Contacts?
29.
Is there anything we haven’t touched on that might be especially important to highlight around 1-800 Contacts or the D2C online contact lens market?
