What have we learned since the last recession?
We hate to burst your bubble, but a recession may be on the way. No one can doubt that consumers everywhere are feeling the pinch and whether or not we "officially" enter a recession this month, next quarter, or next year it never hurts to review and prepare for what may or may not come.
Interest rates are up, and consumer spending is down. There are still a few hopeful elements to the economy including the job market and rising wages, but overall most Americans believe that we are headed toward a recession. A lot of this is due to the Consumer Price Index steadily spiraling out of control. It is understandable that 70% of Americans believe we are reaching an economic downturn when their everyday life is being made more difficult by climbing gas prices and grocery bills. Now, aside from what average Americans believe, many economists also say that it is likely that the US economy will experience hard times over the next year and a half. So, what does that mean for the eyecare business? What did ECPs learn about recessions since the 2008 financial crisis? First off, we have gotten a little bit better at predicting them. This can be helpful because it gives us more time to prepare.
What lessons did ECPs learn from the 2008 financial crisis?
During the most recent recession that began in 2008, optometrists survived with their business intact by doing a couple of things right. The top strategy utilized to make it through the recession without severe financial damage to their business was relying on referral networks. Your referral network can be your secret weapon during a recession. Afterall, being able to see properly is still considered a necessity. So even though overall consumer spending will be reduced, there are still opportunities for your practice to bring in revenue. Referral networks are so great for this because you are tapping into a market of people who already have a reason to trust you and your business. Building trust with your clients is key during difficult economic times because consumers want to feel like they are making smart financial decisions. When they shop with a business they trust, they are more likely to leave satisfied.
Are we already in another Recession? What indicators do we have?
It is still debated whether or not we are already in a recession – or if one is inevitable. According to Forbes and a fed indicator with a strong track record, yes we are. According to the Washington Post and other sources, no we are not. According to Politico, a recession is inevitable. By technical definition, a recession is determined by 6 consecutive months of economic decline. The National Bureau of Economic Research (NBER) is the panel responsible for officially calling a recession. They watch for a decline in factors such as unemployment, manufacturing production rates, and consumer spending. So far, they have not called one (at the time of this publishing)
How much value will consumers place on vision care during the next recession? Good news for ECPs.
Following the pandemic, Versant Health conducted a Vision Wellness Survey. Their goal was to discover if the pandemic had shifted consumers' overall opinion and value placed into vision health. The results lean favorably for ECPs. Most consumers stated that, “the ability to identify both eye diseases and chronic health conditions are highly valuable services offered by eye doctors.” The past few years of being hyper health conscious have led many Americans to becoming more aware of their conditions across the board, and vision health is no exception. One way for optometrists to make it through this next recession is to lean into your role as healthcare providers providing a necessary service. Consumers will be expecting ECPs to provide excellent health related services.
How can you protect your eye care practice during this recession?
There are a number of ways for your practice to prepare for a recession. However, the most essential action you can take is to remain calm and remember that the economy will eventually recover and stabilize. Unfortunately, the economy is not fully predictable so we can’t say how long it will last or how bad it will get. What we do know is that recessions have occurred around every decade for the past 70 years. It is easy for us to compare this economic downturn to the Great Recession because of the recency effect. The reality is that the 2008 financial crisis was the worst recession in nearly a century. The economy has evolved a great deal, and it is likely that this recession will not last as long or plummet as low. Remain calm and hopeful above all else. Aside from that, here are 5 tips to help your business get through a recession.
1. Watch your competitors
Keep an eye on what your competitors are doing during this time. Now more than ever, it is essential to differentiate yourself from the competition. You may want to offer unique products or services, and even reconsider your positioning. Perhaps the other ECPs in your area serve a lower to middle class market. Now would be a good time to evaluate elevating your selection and go after upper middle class consumers who will be less concerned with the effects of a mild recession.
2. Reduce your debts
It is never a bad time to pay off debts, but there is hardly ever a better time than right before a recession. Interest rates are going to go up, which means debt is becoming more expensive. If you aren’t able to pay off your debts right now, try negotiating your interest rates with your line of credit.
3. Hone in on your capture and conversion rates
As we discussed previously, consumers will expect ECPs to continue providing necessary health care services during a recession. The need to see properly does not go away just because the economy is in a difficult place. This is why you will want to nail down your process of converting patients who receive eye exams to also purchase glasses. You may need to strengthen your sales skills in the front of the office, but focus on continuing improving the ratio over the next few months.
4. Beware of becoming reliant on discounts and promotions
It may be tempting to put everything on sale and run crazy discounts and promotions to increase cash flow, but be careful. Your clients will get used to the promotions and it can create a never ending cycle that is extremely difficult to break. Instead, focus on building your referral base and tightening your capture rate.
5. Go deeper in your selection of brands and vendors
Typically sticking to core vendors and brands will give you an economic advantage over your competitors. You will want to go deeper within a selection of brands or collections rather than spread out across many. Additionally, if you are going through an independent curator like Villa Eyewear you will gain an advantage by having more autonomy over your pricing structure and profit margin.
If you are looking for the right vendor to go deeper within a collection or brand, contact Villa Eyewear today.