Economy

An Eyewear Entrepreneur’s Vision for Expansion

Coastal Contacts built a global e-commerce system for selling eyewear by paying close attention to individual markets’ dynamics

Written by Jared Mitchell

While many Canadians weren’t, well, looking, a Vancouver-based eyewear company became one of the world’s largest e-commerce sites for glasses and contact lenses. Starting in 2000 from a basement office, Coastal Contacts founder Roger Hardy figured he could attract budget-conscious customers by selling contact lenses online, thus undercutting the heavily marked-up products sold in eyewear retail chains.

After just three years, Hardy took Coastal public on the TSX Venture Exchange. By 2007, the company shot past the $100-million-a-year revenue mark, forcing its competitors to pay attention. It didn’t take long for Coastal to expand into the cutthroat eyeglasses market, in which the company also made quick gains.

Coastal also built a formidable export presence, acquiring online eyewear companies in northern Europe, Scandinavia and Japan. The firm moved aggressively into social-media marketing, and has hundreds of thousands of Facebook fans.

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By the end of fiscal 2013, in fact, only about a third of Coastal’s $217 million in revenue came from Canada. North America accounted for half of all sales, while the company’s European operation generated $84.6 million, and the Asia/Pacific region contributed a further $25 million. Yet, the company’s segmented market information offers a telling detail: while Coastal’s eyeglasses sales in North America are almost equal to its core contact lens business, glasses account for a much smaller portion of the firm’s sales in places such as Sweden, Japan and Australia.

That variation reflects Hardy’s recognition that Coastal must present itself as a localized brand in every market. “We don’t have the marketing dollars like Amazon[.com] to create one big global brand,” he says.

Instead, Coastal’s export approach, born of its acquisition strategy, is to develop a brand presence rooted in a particular geographical market while leveraging the cost advantage of the firm’s global purchasing and distribution back end. “For us, that’s been a very successful way to position ourselves,” Hardy explains.

Coastal traces its origins to the aftermath of the dot-com bust. In 2000 and 2001, Hardy recalls, there were lots of firms testing the waters of e-commerce in the U.S. He selected the contact lens space, which had relatively few players.

Early in Coastal’s expansion drive, the company focused on regions that were early Internet and e-commerce adopters. A decade ago, residents of northern European countries such as the Netherlands and Sweden were going online at a faster rate than in just about any other area in the world, thanks in part to substantial investments in broadband infrastructure.

In 2004, Coastal acquired a Scandinavia-based firm, Lensway AB, for $19 million. Coastal has retained that brand ever since, with stand-alone marketing and groups now operating in the U.S., Sweden and the Netherlands.

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Then, in 2005, Coastal bought its way into the Japanese market, in which the firm operates as Contactsan, or Mr. Contact. To serve that market, however, the firm drew upon the presence of large numbers of Japanese students in the Vancouver area, offering them jobs in its West Coast call centre. While Coastal leverages that facility so it serves both U.S. and Asian customers, Hardy points out that Coastal’s marketing strategy for Japan bears little resemblance to the approach the firm uses for the U.S. Whereas American shoppers are price- and sale-driven, he says, Japanese customers are much more likely to be referral-based; Coastal’s marketing tactics, which are based on frequently updated customer surveys, reflect the difference.

Does the strategy work? While Coastal reported a $14-million net loss for fiscal 2013, partly because of a steep increase in marketing costs, the company attracted the attention of a global player, Essilor, a €5-billion-a-year ophthalmic-products giant that earlier this year offered to buy all of Coastal’s shares for $430 million. The deal, which closes at the end of April, represents a 43% premium above the firm’s recent share price. For Hardy and Coastal’s other shareholders, that kind of exit looks lucrative indeed.

Originally appeared on PROFITguide.com