Why eyewear stores are taking over London’s high streets
Private equity-backed brands such as Cubitts, Ace & Tate and Jimmy Fairly compete for scale in financially alluring sector
It is hard to walk through London without encountering spectacle shops. The proliferation of estate agents has been succeeded by outlets of brands such as Ace & Tate, BlooBloom, Cubitts and Jimmy Fairly. They seek to lure design- and budget-conscious customers from longstanding optical chains such as Specsavers and Vision Express.
About 10 such brands are clustered in Soho and Carnaby Street, and three on Broadway Market in east London, including one branch of Cubitts in a former eel, pie and mash shop. Private equity-backed efforts to take on the industry’s giants, led by Vision Express’s owner EssilorLuxottica, are changing some retail districts.
But even some of the people involved are sceptical about the chances of many of these upstarts succeeding. “Everyone is following each other and destroying value. When I see another one opening, I think good luck to you,” says Tom Broughton, chief executive of Cubitts, the UK chain he founded in his flat on Cubitt Street 13 years ago.
Broughton was working as a consultant when he conceived the idea for a design-led eyewear brand. “I would go into Specsavers and I did not understand why the glasses I wanted did not exist. Frankly, I thought I could do a better job,” he told me at Cubitts’ new head office and workshop in a former stables near King’s Cross.
He was not alone: the Netherlands brand Ace & Tate was also founded in 2013 in the wave that followed Warby Parker, the pioneering US eyewear brand that started online in 2010 but has 320 branches in the US and Canada. Jimmy Fairly, a French brand founded in 2011, now has 19 UK branches, including 15 around London.
Eyewear is financially alluring. EssilorLuxottica, which has 18,000 stores under various brands, made operating profits of €4.4bn on sales of €28.5bn last year. It also has a partnership with Meta to make smart glasses with cameras. Specsavers, the biggest UK operator, reported £4.5bn in revenue in the year to February, selling 26mn frames.
Anyone who has entered an optician’s for an eye test and left after spending £400 or more on a pair of glasses will see the potential for competition. Most offer expensive lenses with frames made under licence from brands such as Chanel and Burberry (both have licensing deals with EssilorLuxottica).
Broughton describes the cost of producing a standard frame and optical lenses as “pretty low”. He estimates that a typical high street optical chain will sell a frame for about three times the wholesale cost and lenses at up to five times. Cubitts uses Zeiss lenses in frames that it designs and produces, offering a pair of spectacles with standard lenses for £175.
But the costs of building brands and opening enough shops to attract a large enough base of loyal customers are substantial. Warby Parker and Ace & Tate found they could not operate purely as online direct-to-consumer brands and needed branch networks. This is not like other kinds of retailing: it requires optometrists to give most customers eye tests before they can move to buying frames and lenses.
“It looks like the barrier to entry is low, but it is very high,” says Lex van de Vliet, Ace & Tate chief executive. Its sales were €65mn last year it and achieved positive earnings before interest, tax, depreciation and amortisation (ebitda) for the first time. It now has 93 stores, which he estimates is about the minimum that such brands need: “Then, the whole thing ticks”.
Cubitts has 20 stores, including two in New York, so it is sub-scale by that standard. It had revenue of £16.8mn and ebitda of £330,000 last year but made a loss of £967,000. Broughton says that Active Partners, the private equity firm that owns a 26 per cent stake in Cubitts (he has 58 per cent) wants to keep adding branches but he is reluctant to scale rapidly.
He predicts a shakeout of brands burning through private equity capital in an effort to expand. He also believes technology will change the industry, allowing people to try frames virtually using face-scanning apps on their phone, rather than having to do so in person. It has been developing software to offer more products online or through other opticians.
That is a wise precaution, given the number of brands competing on London’s streets. “We’ll open the odd store in the right place but we want to change the way people buy glasses,” Broughton says. Good luck to you, those who have tried before might retort. But the industry remains a tempting target.