Case Study:
Sharon needed a new pair of glasses. She went to the optometrist’s shop at her local mall
for an eye test. It had been three years since her last pair of glasses so there was quite a
difference in her vision. Rather than have a pair of glasses for general use like driving and
watching TV, and a stronger pair for reading, Sharon was advised to get progressive
lenses. The optometrist did her eye test, and also tested Sharon for glaucoma, and
entered Sharon’s results into the computer for a prescription. When Sharon went back to
the counter she asked for a copy of her prescription and asked how much the lenses
would cost. She was told “approximately $650 plus the cost of the frames”. Sharon tried
on lots of pairs of frames. Her friend Lily was with her so Lily could take photos of Sharon
in her favourite frames.
Sharon had no intention of buying the glasses at the mall. When she got home to she
went onto an online American store, created a profile, entered her prescription details
and started browsing through the thousands of pictures of frames. She uploaded a photo
of herself and tried on the virtual glasses that were similar to ones she had liked at the
mall. Sharon bought the glasses online because even after paying the currency difference
and delivery cost, her glasses cost $NZ135 instead of the $850 it would have cost at the
optometrists at the mall.
Sharon had used the mall optometrist’s shop as a showroom.
The class interviewed an optometrist about how the business he works for is
affected by situations such as in the case study. He agreed to answer our
questions provided his name and his business weren’t named. Fictional names are
used.
The contemporary accounting issue I have chosen to explore is showrooming. This is
Wikipedia’s definition:
Showrooming is the practice of examining merchandise in a traditional brick and mortar
retail store or other offline setting, and then buying it online, sometimes at a lower price.
Online stores often offer lower prices than their brick and mortar counterparts because they
do not have the same overhead cost
http://en.wikipedia.org/wiki/Showrooming
Showrooming often happens with glasses (spectacles) where it has become quite popular
for people to buy glasses from online stores that are based overseas. Joe the owner is very
aware that customers are continuing to buy eye exams from his business, but then many are
using his shop as a showroom so that they can try on his frames and then go online to buy
the frames and have them fitted with lenses.
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Up until a few years ago XXX Eyes didn’t give clients copies of their prescriptions following
eye tests unless clients especially asked for them. With more and more clients asking for the
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prescriptions, Joe decided that he would charge $10 for a copy, so the cost now for the eye
exam is $70 or $80 if the client wants to take a copy of the prescription with them. Joe said
he is comfortable charging this extra $10 and has only had a few customers mildly complain
about it. The $10 helps to offset the business they are losing through people buying glasses
online.
At the bottom of the prescription it clearly says that the $10 will be refunded if glasses are
ordered through XXX Eyes, and that the full cost of the eye exam will be deducted from the
cost of complete glasses. (Complete glasses means XXX Eyes fits lenses into one of their
frames). Joe decided to offer this as an incentive for clients to buy their glasses at XXX Eyes
rather than online.
Another decision Joe had to make is to ensure the PD (pupillary distance) is on the
prescription. Joe has seen that all online glasses suppliers emphasise that the prescriptions
show the PD, so he decided it was just easier to include the PD rather than have people
phone or come back in to ask for it. This had happened quite a lot.
Another change Joe has made in the past six months is to charge non-clients a flat fee of $15
to adjust glasses that were not bought at XXX Eyes. They used to offer a free-of-charge
adjustment or screw-replacement service. Nowadays quite a few people who have bought
their glasses online need to have the ear curves or nosepieces adjusted. There is some
variation in this $15 charge. For example, if someone came in with a problem like a nose pad
had come off, and it was pretty clear that they hadn’t bought the glasses online, they would
use their discretion and do the repair for nothing. Joe doesn’t want to put people off XXX
Eyes.
Joe has now made a conscious decision to promote the personal service they offer which
cannot be provided by an online store. Joe decided to have a poster and brochures made.
This poster is in the display area in the shop and in the eye exam rooms.
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The last thing Joe said was that if the trend of selling eye tests rather than complete glasses
continues to increase, in the future he might have to decide to reduce the number of
optometrists. He said he wouldn’t cut one of the optometrist’s jobs but that if one of the
two optometrists left, he would probably not replace them.
In conclusion, showrooming has had a big impact on XXX Eyes. This situation has caused Joe
to make decisions he would not have made otherwise such as to start charging for hard
copies of prescriptions and adjustments for non-clients as well as to automatically include
PD on prescriptions and to actively promote that XXX Eyes offers full customer service. This
allows him to still benefit financially from customers who use his business as a showroom as
well as try to encourage customers to buy glasses from XXX Eyes rather than online. In the
future Joe might need to make the financial decision to reduce his staffing as the impact of
showrooming may mean that two optometrists are no longer needed.
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