Game Changer Perspective: One‐on‐One Conversation with E. Dean Butler E. Dean Butler, Chairman, LensPro Pty, Ltd.; Chairman, BBH Optical Partners, Inc.; Board of Directors, Prescription Eyewear Limited; President, Power Vision; Director, Adlens, Ltd. Moderator: Mike Hundert, REM Eyewear Friday, January 18, 2013

Mike: What’s next? E.: I look at retailing in general. Eyewear and contact lenses are retail but medical doesn’t motivate consumers. The primary motivator is what fills desires. I wish I could convince ODs. They believe medical is important and that ODs solve their problems. Patients don’t understand their prescription. They just know the frame holds their prescription.

During the Christmas season in the UK, 20 percent of consumers shopped online. Eyeglasses will lag behind. 1‐800 CONTACTS was selling replacements but it didn’t grow quickly. It grew over time. I believe that will happen with eyeglasses. I’m on the panel of Glassesdirect.com, Nyoptique.com and Sunglassesshop.com. We’re selling 1,200 pairs of a day.

Mike: PDs are a big conversation online. E.: It’s suicidal for an ECP to turn away a customer who wants his PD. What drives online purchases? Value, not price. A large number of consumers don’t like the current optical buying experience or the environment. They like a lot of samples and they don’t want someone breathing down their neck. I believe online will account for 20‐25 percent of eyeglass sales in the next ten years. We know the purchase cycle in Europe is one pair every two years. Glassesdirect.com is every 14 months. It’s hard to sell two pairs online at a time. However, they come back and purchase a second pair, on average, six months after their original purchase. The motivator is the offer. ECPs should understand their database. A lot of retailers don’t have that. They need to create and learn to use a database to drive promotions based on past purchase experience.

Mike: A recent white paper by VCPN stated that the interest will increase business versus cannibalize current because people will buy more often. E.: I 100 percent agree. When we started LensCrafters, the US was considered saturated. In 1984‐1985, we built 150 stores. During that time, consumption increased 70‐80 percent. Sixty percent of sales occurred when competitors were closed (after 6p.m. and on weekends).

Mike: Do you see a threat to suppliers or what should they do to adapt? E.: It’s going to happen. How do you ride the wave? For ODs, they have to do PDs.

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Mike: You’ve said perfection is the enemy of good. Please elaborate. E.: It’s difficult for the US to grasp that. In the UK, we overdo it. When I opened nine stores in Latvia, they wrote spherical equivalents. We thought we’re better than that. Now I don’t believe the vast majority of people see better if you prescribe a stigmatism.

Regarding PDs, a horizontal prism induced by a PD is not a problem. At Glassesdirect.com, we ask if you have a PD. We ask what is your head size: small, medium or large? We pick based on that.

Mike: What about the idea of refracting or parts of exams online? E.: Have you seen doc in a box? Wellpoint is doing that. Refracting remotely will happen. The technology already exists.

Mike: What does that mean for ODs? ODs come in expensive chunks. ODs do about 20 exams a day. They hire a second OD for $100K and then split 12 a day and hate each other. What if you could refract online? Why can’t you do online during nights or weekends? The bottom line is technology is such that you can go somewhere to get refraction done very well. You can set up a tech to do all of the pre‐testing and have a kiosk to give a PD and get glasses online. The customer can try glasses on at home and send the rest back.

Mike: Is that a winning combo? E.: Click and mortar is the winning combo. Internet purchases with brick and mortar operations will be available for recourse if you have a combo of online and physical places you can go in major cities.

Mike: . They sell everywhere but have two locations. How does that work? E.: It works well and will work if they continue click and mortar. Who would have believed VSP would sell glasses online?

Mike: Is the independent OD coming to a close? E.: Define the independent OD. They have 700 stores in the UK and 300 in and the . They’re basically a franchise. Specsavers was supposedly the end of the independent OD in the UK. They get independents to convert and sign up with them. They handle accounting, marketing and in‐store promos. The OD is still an independent practitioner who can concentrate on medical. Specsavers splits revenues 50/50. ODs get “A” shares. Specsavers gets “B” shares. “B” shares represent services. Specsavers believes they’ll double sales based on their services. In the US you can’t force someone to buy your products, which is why Specsavers stays out. They charge a 40 percent fee on services.

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Mike: What about Specsavers in the US? E.: They looked hard at the US for five years but they have a hard time dealing with the competitive market in the US. Tesca, an international grocery chain, just pulled out of their venture in California.

Mike: What about Canada? E.: It’s hard because, as I used to say, it’s 25 miles high and 3,000 miles long. However, if they do enter the market, vendors should be concerned because they source their own product.

Mike: Tell us about lenses that can change the environment. E.: It began six years ago with technology from Oxford University. The Alvarez lens product had two lenses that slide against each other. The liquid lenses, now with the John Lennon brand, are available. They work well as an emergency services product now. They are a bit funky as the spectacles are round but other shapes are becoming available.

In the long term, there will be a market for self‐adjusting lenses. Current regulations don’t cover this. In the US, we’re selling to ODs. They lock the settings so consumers can’t adjust them. It’s very useful for MDs to adjust post‐surgery and good for diabetics. It’s not a substitute, it’s a net extra. The only issue is that people tend to over refract themselves.

Questions from the audience: Mike Daley, The Vision Council: How do you handle getting prescriptions on the internet to analyze expiration or efficiency? E.: We contact the OD. By law, they have to give it. We can’t really tell what the expiration date is. The vast majority are single vision. There are not a lot of progressives.

Kerry Strain, Silhouette: How does the ECP handle people coming in for adjustments or repairs on glasses purchased online? E.: If I were an ECP, I would do everything I can to create an enthusiastically satisfied customer. In the UK, this isn’t a major issue. The country is small and the online retailers can fix it and send it back.