The optical market - Portugal

1.2 A growing global market

Global eyewear sales increased *.**% from $***.* billion in **** to $***.* billion in ****. The market is expected to grow even faster over the next three years, reaching $***.* billion in ****

Source: ****

Despite its relative maturity, the growing demand for eyeglasses has been driven primarily by the increase in cases of myopia and presbyopia related to changes in consumer lifestyles (***) and the aging of the population around the world. These factors are having an exponential effect, which explains the expected acceleration in the coming years. Indeed, over time, new generations are adapting to this way of life and living longer each time. In addition, the influence of fashion, which supports the demand for eyeglass frames and sunglasses, continues to grow.

1.3 The Portuguese market is also expanding

Since ****, the Portuguese market for optical products has experienced substantial growth, bringing its overall sales in **** to *** million euros. A positive forecast is made for the following year, with an expected growth of *.*%.

Source: ****

In addition to the fact that it is the third oldest country in the European Union in terms of average age, which increases sales of corrective eyewear, the Portuguese market is also boosted by the tourism boom the country has experienced in recent years [***]

1.4 Unbalanced Foreign Trade

Value

World trade in eyewear products puts China at the top of the list of exporters (***). Portuguese eyewear exports represent only *.**% of total world exports and *.**% of total imports. In the graph below, we note that the amount of exports has recently experienced its first decline since ****, reaching US$** million in ****. Moreover, it is easy to observe a clear imbalance between exports and imports.

Source: ****

This imbalance is even more evident when looking at the coverage rates in the table below. Although the value of exports has increased in recent years, it can undoubtedly be said that Portugal remains a net importer of eyewear products.

Source: ****

Geography

Geographically, as far as Portuguese imports of protective eyewear and sunglasses are concerned, Europe (***) and China account for the largest share of the total, with more than **% of total exports.

Source: ****

Below we see that Portugal is also dependent on other European countries for the supply of contact lenses.

Source: ****

Source: ****

In addition, with regard to the export of contact lenses, we are now seeing a significant domination of Spain among the top destinations.

Source: ****

2.1 Summary of the application

The eyewear industry has many sub-segments, a relevant distinction in the context of demand analysis is based on the purpose of eyewear :

Non-corrective use (***) Corrective use (***)

The proportion of the population benefiting from the product is undoubtedly a relevant variable influencing the current and future turnover of the industry. Nevertheless, there are some complications when trying to estimate the number of Portuguese people who wear glasses, as there are many variables to take into account. It is necessary to know whether customers alternate between glasses and contact lenses, or whether the sunglasses they use come from a medical prescription and sun protection or simply from a fashion accessory

2.2 Key Demand Factors

Corrective eyewear

Visually impaired population

In the eyewear market, the number of Portuguese people with optical disabilities is undoubtedly a determining variable. In Portugal, nearly ***,*** people over ** years of age suffer from moderate to severe vision loss or blindness [***]

New demographic realities

It is believed that the correction segment of the eyewear industry is influenced by demographic changes. The most important age group in Portugal is indeed the "over ** years old", who represent about **% of the total population. The database of the Portuguese National Statistics Institute shows that this age group has already overtaken the youngest group (***) since ****. Moreover, there is a clear trend for this gap to widen even further in the coming years, as shown in the graph below.

 Source: ****

These figures indicate a trend towards an ageing population affecting Portuguese territory. Despite the fact that visual defects affect all age groups, research shows that their incidence increases with age. In fact, adults aged ** and over are the most exposed to eye diseases. For example, the prevalence of blindness and visual impairment increases rapidly, especially after age ** [***]

Changes to lifestyle

The technological transformations affecting society, both in the field of work and leisure, are gradually influencing consumers' habits ...

2.3 Ranking of optical retailers in Portugal

Ranking of major retailers

Department stores and other retailers selling optical products

Source: ****

3.1 Market organization and dynamics

The breakdown of the market into categories shows the importance of eyewear (***), which accounted for approximately **% of the national eyewear market in ****

Source: ****

Segmented global competition

Nevertheless, an under-segmentation of the eyewear industry is necessary in terms of competition, as some categories are more concentrated than others. Thus, breaking down global competition into sub-segments, we can see that Johnson

In addition, in sunglasses, Luxottica Group SpA, Essilor International SA and Safilo Group SpA account for roughly three-quarters of worldwide sales, with Luxottica's Ray-Ban and Oakley brands alone accounting for nearly one-third of global sales. Eyeglass frames stand out as a much more fragmented segment, benefiting from the preference for purchasing this type of product over the Internet, which configures a much lower barrier to entry. [***].

Price segmentation

A further distinction between product categories is essential to understand the characteristics of the market. This distinction is based on positioning and price:

Top of the range - Luxury Mid-range Bottom of the range

The luxury eyewear market is expected to exceed $** billion in revenue by ****, with annual growth of more than *% between **** and ****. The top four companies alone account for **% of the world market in the high-end segment (***) and control **% of world production ...

3.2 Distribution channels not very varied

The domination of traditional canals

In ****, distribution throughout the eyewear industry was dominated by a single channel: optical stores. Traditional optical stores are losing market share in the non-corrective eyewear sector, but remain the leaders in the corrective eyewear segment. [***].

The category of non-corrective eyewear is undoubtedly experiencing greater fragmentation as alternative channels take off. Sunglasses are gradually being sold in boutiques and sports shops. [***].  

Optical stores are the largest distribution channel for eyewear in Portugal. In ****, the number of optical stores was *,***. Given the exponential growth in recent years, there has naturally been an increase in competition in the sector and, as a result, an increasing aggressiveness in terms of offers and discounts. This has led to the disappearance of many independent establishments, most of them family-owned, unable to survive in a scenario of intense rivalry and shrinking margins.

Many of these players have ended up joining large commercial groups or franchise networks. It should be noted that in ****, **% of optical stores were owned by large chains, whereas in ****, this percentage will be **%. These figures reveal the process of concentration with regard to the distribution process. The largest groups of optical stores in Portugal today are GrandVision, CECOP, Opticália, ...

3.3 Market value chain

4.1 Unequal sales volume depending on the offer

Sales volume in the different offers

As mentioned above, the segmentation by category identifies three main sectors within the eyewear industry:

Eyeglasses (***) Sunglasses Contact Lenses

In terms of volume, contact lenses dominate the landscape. A considerable part of this high volume is due to the popularisation of daily disposable lenses, driven to buy their relatively low price. In addition, it is known that the more frequently lenses are replaced, the healthier and more comfortable the eyes tend to be. [***]

4.2 Competition at all levels

In the early ****'s, the Portuguese market was mainly focused on healthcare. Products were manufactured with little differentiation and consumers were not very loyal. The market consisted mainly of large chains such as Luxottica and Safilo, which reduced the possibility for new producers to prosper if they wanted to sell through optical stores.

Today, the commercial structure of the sector still shows a high degree of concentration of supply in the Iberian market (***), with the combined market share of the top five operators reaching **% in ****, a percentage that rises to **% if the top ten are considered.

Although ** companies operate in the sector, generating an overall employment volume of *,*** workers, only six Portuguese companies have more than ** employees. In comparison, Spain has ** companies with more than ** employees. [***]

Most of the main operators are integrated into large foreign groups. The increasing concentration of the retail distribution channel and the consequent increase in the negotiating power of distributors, competition from imports and the proliferation of imitations of original products, particularly in the frames and sunglasses segment, are other important trends in the sector

Concentration on the market does not take place exclusively at the manufacturing stage, but also at a later stage, at the ...

4.3 A large price gap

Prices vary considerably within the different product categories of the eyewear industry. Undoubtedly, products whose functional and conceptual meaning is intended to last longer have higher prices than products with limited use. The largest difference is observed between frames and contact lenses. It is estimated that about *** *** people in Portugal wear contact lenses [***]. However, this product generates the lowest turnover of all categories because it has the lowest unit price, which in **** was USD * per pair.

The statistics show the price differential between categories and the average price per unit, without taking into account the three sub-segments in terms of positioning mentioned above (***)

Price segmentation: High, medium, low range  

A classification of eyewear based on brand image and positioning in the eyes of consumers allows for additional price differentiation.

The high-end segment is then divided between luxury brands (***). Here again, the price gap is visible, this time within a single category: eyewear.

Source: ****

4.4 New potential threats to the existing hierarchy

A number of social, demographic and economic factors are expected to influence market dynamics, both globally and nationally. However, most of the above-mentioned variables are expected to strengthen the eyewear industry (***), although a range of potential threats are developing that could indeed impact the evolution of the industry

Latest innovations

It is estimated that about **% of the world's population will suffer from myopia by ****. This news has previously been treated as a possible stimulus for the corrective eyewear segment, although with advances in technology, the latter assumption may not be true. Research conducted by scientists at Israel's Bar-Ilan University has developed an alternative solution to treat myopia and hyperopia that could replace traditional glasses: "nano drops". These eye drops, composed of non-toxic protein nanoparticles, would have the same corrective effect as glasses or contact lenses. [***]

Existing innovations

One existing innovation that could potentially pose a threat to corrective eye care is laser eye surgery. This technology was invented in the ****s after years of experimentation and testing, although it has long been associated with a number of drawbacks [***].

4.5 Supply trends

Customization

A trend that affects both corrective and non-corrective eyewear is the progressive impact of personalization on consumer purchasing habits. According to a study conducted by Deloitte As one in three consumers base their purchases on the ability to personalize a product, the trend affects all industries and is of particular interest to the consumer goods market, with a predominance of the fashion industry. The possibility of obtaining a tailor-made product convinces **% of consumers to pay a premium. The result of companies that adopt this changing nature of consumer purchasing behaviour is to gradually allow the customer to choose a tailor-made product. An increasing number of companies are moving away from the concept of "one size fits all" in order to improve the customer experience through a highly personalised offer. Some players are launching this trend in the optics industry, offering the possibility of modeling glasses based, for example, on a *D facial scan.

Sustainability

Growing consumer awareness of the impact of sustainable, green and environmentally friendly choices has transformed the way companies position themselves and their offerings.

Sustainable awareness has a considerable impact on the behaviour of Portuguese consumers. **% of consumers stated that they are concerned about sustainable consumption when ...

5.1 Rules on the sale of all categories of eyewear products

Due to the particular nature of the product categories, all eyewear, whether worn for corrective or non-corrective purposes, is subject to specific and strict regulations at national and international level.

Decree-Law No ***/**** transposed the European directive ****/**/EC in Portuguese law. It lays down rules on the investigation, manufacture, marketing, putting into service, surveillance and advertising of medical devices and their accessories. In other words, it concerns the commercial exchange of spectacles and contact lenses, which are regulated as medical devices.

It is stated that medical device sales representatives should be adequately trained and possess scientific knowledge and ethical training to provide accurate and as complete information as possible on the medical devices they present.

In addition, in April ****, the new regulation EU ****/*** was introduced to extend and amend the old Directive **/***/EEC regarding personal protective gadgets such as goggles and sunglasses. The new regulation aimed to provide a clear and concise set of standards for the entire value chain of the eyewear industry in the EU, from supplier to retailer.

National regulation relies heavily on a certified body to approve product requirements and specifications, and to ensure that only competent and certified professionals are allowed to refer potential customers. These requirements ...

5.2 Medical Benefits

Health expenditure also qualifies for a deduction from the WHT, regardless of the VAT rate. In this category, it is possible to deduct **% of the amounts paid, up to a maximum of EUR *,***, per household.

The health deduction covers a wide range of expenses. Consultations, surgical interventions, hospitalizations, treatments, medicines, prostheses, orthodontic appliances, glasses (***) and contact lenses.

Health expenses with **% VAT must be prescribed. It is also necessary to link this prescription to the corresponding invoice on the personal page of the electronic invoice, in the finance portal .

In addition, there is also a bonus to the family allowances that social security gives to children and young people under ** years of age when they are diagnosed with a vision problem classified as "disability". The allowance starts at **.** euros per month for children up to the age of **; between ** and **, it increases to ** euros, and between ** and **, it increases to *** euros.

The Social Security Institute specifies that, although household income is not taken into account for the grant of the bonus, since it is a supplement to family allowances, only those aggregates "whose total value of securities (***)" is less than EUR *** *** are eligible.

6.1 Segmentation of players

• Safilo Group
• Essilor Luxottica groupe
• Johnson & Johnson
• CECOP