A lens maker sets its sights on U.S. boomers

At a gathering in Ottawa, Coastal Contacts Inc. president Gary Collins listened intently as two guests at his table started raving about ordering eyeglasses online. For Collins, who served as B.C. finance minister from 2001 to 2004, the conversation last fall came as a pleasant surprise at the U.S. embassy’s event for officials with experience in Canada-U.S. relations.

Coastal Contacts CEO and founder Roger Hardy
and president Gary Collins, at the Coastal
Contacts facilities in Vancouver
Photo: Rafal Gerszak, The Globe and Mail

“I happened to notice a guy at our table and he had a black case for glasses, and it was our brand. A woman beside me wore glasses. That was ours, too,” Collins recalled in an interview at Coastal’s plant in Vancouver. “They were customers, and they talked about our product and service. I was just quiet and it was nice—better than me talking about politics.”

Collins, who touted the importance of British Columbia’s trading relationship with the United States during his time in politics, has set his sights on expanding Coastal’s U.S. presence in 2013. Even though the Canadian dollar is hovering close to par with the greenback, Coastal is still able to provide good value to Americans through its Coastal.com website for U.S. consumers, he said. The Canadian website is called ClearlyContacts.ca.

Coastal founder Roger Hardy launched the company in 2000, selling contact lenses online until diversifying into eyeglasses in 2009. Since then, the company’s eyeglasses category has grown rapidly, accounting for almost one-quarter of the company’s $196-million in revenue in the fiscal year ended Oct. 31, 2012. Hardy, who is Coastal’s chairman and chief executive officer, named Mr. Collins as the new president last August.

Coastal intends to step up its marketing in the United States in 2013, buoyed by forecasts that the number of people age 50 or over in the United States will climb roughly 19 per cent between 2010 and 2020, fuelling demand for eyeglasses. U.S. eyeglass sales nearly doubled at Coastal in its fiscal first quarter ended Jan. 31, 2013, compared with a year earlier, the company said Wednesday. First-quarter eyeglass revenue in Canada jumped 36 per cent.

Canada accounted for 32 per cent of Coastal’s total revenue in the 2012 fiscal year, while 16 per cent came from the United States. The company’s subsidiary in Sweden sells in overseas markets such as Europe through the LensWay brand name.

Hardy, 43, does not need eyeglasses, but Collins, 49, has started wearing reading glasses. Collins had been straining to read menus, so he knew it was time to order a pair of specs from his new employer.

In the online retailing of contact lenses, it is important for Vancouver-based Coastal to have large inventory on hand to allow workers to quickly process orders by picking from a certain prescription in stock and packing the product for shipment.

Coastal reckons that customers can save up to 20% on its contact lenses, compared with brick-and-mortar retailers, while those who order eyeglasses might reap larger savings of 50% to 70%. With such savings on glasses, the company is counting on winning repeat business and hoping that some customers will buy two pairs at a time.

But Coastal faces its share of challenges in marketing costs and stepped-up competition. The company lost $4.9 million in the 2012 fiscal year as it touted online promotions for getting the first pair of selected frames and standard lenses free. Some stores, such as the Bay’s optical section, are offering discounts to narrow the price gap.

While traditional optical retailers say they offer better service and quality, Hardy defends his products, saying he orders premium eyeglass lenses from South Korea, Germany, France and the United States. He expects many people who obtained free glasses to return as paying customers in the future.

Some institutional investors have toured Coastal’s plant, located in a technology park on Vancouver’s east side, and they are pleased to see automated machines reshape glass “pucks” into lenses for specific frames, Hardy said. Workers manually fit the glass lenses into frames, but the earlier automation speeds up the production process and cuts costs.

“We find that there is a real ‘aha’ moment for people when they come in here and say, ‘Now I get it. You have to actually manufacture.’ Each order is custom-made for each person in that day, so getting the fit right and speed is part of it,” Hardy said.

Coastal’s Vancouver plant produces more than 4,000 pairs of eyeglasses a day for customers in North America, Australia, New Zealand and Brazil. The automated machines are capable of handling nearly 12,000 daily in Vancouver, so there is plenty of room to ramp up production.

The company sought to raise $40-million (U.S.) through an offering of common shares in November, but cancelled the plans owing to unfavourable market conditions for financing, Collins said. Still, Coastal remains keen on the large U.S. market and is well-positioned to expand its customer base south of the border in 2013.

“It’s a big market for us and a real opportunity,” Collins said, emphasizing that he is looking ahead and not reminiscing. “I spent 14 years in politics and that was a long time. It was a great experience, but I’m happy doing what I am doing now.”