Marc Fielmann

Yes, first of all, welcome to us here at Fielmann. My name is Marc Fielmann, I am CEO of Fielmann AG, a publicly traded company. You already mentioned that it belongs to the family, but also to many other shareholders, many of whom are our own employees. 22,000 employees serve 27 million customers in 15 European countries. The multi-channel business model and the main products are glasses, contact lenses, hearing aids, and to a lesser extent, sunglasses. Okay, we are not allowed to make forward-looking statements since we are listed on the stock exchange, that always restricts us a bit. But we can certainly quote what is on the website.

Well, if you mean the main performance externally, those are the classic dimensions. But if you ask about the secret to success, it's our customer-centric philosophy that runs through all parts of the company. I think many companies talk about customer centricity, but with us, it's actually the key metrics. We spend millions every year to measure customer satisfaction and we intensify accordingly. We look very closely at whom we welcome at Fielmann. We have a lot of training on customer satisfaction, and the same applies to the incentive system. For us, from the employee in the branch to the board, a large part of the variable compensation depends on customer satisfaction.

So the market has grown overall over time. It's now about six billion euros. The vast majority, more than 80%, is generated with prescription glasses, and then to a lesser extent also contact lenses and sunglasses. For us, that's the biggest business, but it's actually a completely separate market. The main development in the market is consolidation, meaning the degree of finalization continues to increase. You have a much more digital customer journey today than six or seven years ago. That means the proportion of people who spend part of their customer journey online has increased significantly. This varies greatly by product. For example, for contact lenses, the mail-order share in the market is about 50%, with us even 60%. And the opposite example: in eyewear optics, the revenue share for prescription glasses by mail order is just about one percent. Huge difference. You can actually compare contact lenses with electronics or books; contacts are after-purchase, and glasses are a completely different category where mail order has not yet established itself.

To answer your first question: we are in a comparable position in Central Europe. In the German-speaking markets and also Slovenia, we are the leading multi-channel provider. We have very similar positions as in Germany in terms of market share, especially in terms of customers and pieces. If you look a bit further at markets where we haven't been present as long, like Eastern Europe or Southern Europe, we are not number one yet, but we are confident we will expand. The markets differ quite a bit. A striking example is sunglasses. That leads to a much higher share of sunglasses in Spain, where we just took over the number three, or in Italy, compared to Germany. Then you have purchasing power and target groups that differ. In Germany, the share of prescription glasses is over 80% of the six billion, about five billion for glasses, 500 million for contact lenses and sunglasses. In Italy or Spain, the sunglasses share can be up to 15%.

So if I go to Croatia or Portugal, the independent specialist shop is still predominant. Yes. For example, in Italy, to my knowledge, it is one of the least consolidated markets. The degree of consolidation there is maybe 20%. Germany is in the upper middle range, about 70% of the market is already consolidated. And then you have other markets like Scandinavia, where 90% of revenue is already consolidated. Okay, so there is definitely still a lot to be gained in international growth.

I think there is a lot of money in the market, high investment pressure. We ourselves also have a family office and invest in various other topics. You can observe that negative interest rates and high investment pressure are there. That certainly leads to a market with very healthy margins. In eyewear optics, you have to see that with prescription glasses, we are not just trading a product; we have comparable characteristics to a retail concept, but we are not a pure retail concept. We also have the medical aspect. When you finish a pair of glasses from two pre-products—lenses and a frame—you have significantly higher margins. The business is also a lot more complex because we have to handle the entire production of glasses. And if you want to build your own brand, you also need product development and sourcing.

We don't really orient ourselves by the financing plans of the market or competitors. We mainly look at what it does to the customers. What does it mean if someone builds a very good copy of Fielmann or even with additional services? I would be happy to find such a chain and pay a high price for it. But I think that would first have to be replicated.

At contact lenses, we are by far the market leader. You have to distinguish between two steps in the customer journey. First step: you need to know which contact lenses are right for you. Over 90% of customers have their contact lenses fitted. That means the visual acuity is determined, as with glasses. For many, it's also an entry product. The majority of customers are between 20 and 40, 70% female. Before you choose the contact lenses, you have to go to an ophthalmologist or optician to know your strength and eye condition. Once you know which contact lenses are right and in which strength, then you are relatively free for after-purchase. So you can split the market in half. On one side, you have the fitting and aftercare; most people come for a check-up every two or three years. Then you have the regular after-purchases. The art for us is to make the customer so happy at the first fitting that he stays with us for all after-purchases. We optimize our entire offering so he has no reason to switch. The market for fitting is ophthalmologists and opticians; the market for after-purchase is like many products that are easy to compare and where it doesn't matter much where you buy. Online platforms are very strong. So we have different competitors. At contact lenses, you don't have such a high product variety; if you look at our website, you'll find 90 products, but behind that there is an exponential article variety because each contact lens package comes in strengths from -11.25 to -15 etc. That sums up to 180,000 SKUs. Volume is a huge advantage because you can make the products available and deliver faster. That is a big advantage.

We also have an app where we tell you which contact lenses are suitable for you, you try them out, and once you have registered, you can reorder in ten seconds. That has proven very effective. For the customers who wear contact lenses permanently, we have a subscription model. For the others, we have numerous solutions: they can buy in the online shop or in the branch. The most effective for us is the app. Regarding the channels, about 15% of our contact lens sales are through the online shop, 40% through stationary, and 45% through omni-channel like the app or subscription. So the vast majority is through these omni-channel routes. The customers who buy via mail order stay stable; they don't go back to the branch. That share will increase over the years. But they come back for check-ups to see if everything still fits.

I would say it's relatively consistent. What is interesting about the purchase of contact lenses is that I thought it would be a pure e-commerce topic, but it's not so much. Our overall sales: online shop share maybe 15%, stationary 40%, and omni-channel 45%. So the majority is via these channels. The key point is that for the purchase of a contact lens pack, if you know your lens, you don't need to go to a stationary touchpoint. That's completely different with glasses.

Yes, there are some approaches. But if you want to make high-quality silicone hydrogel contact lenses, you have very high startup investments because you need to build these expensive plants, and it's a medical product that sits directly on the eye. So anyone starting their own factory would be very capital-intensive. The market is very consolidated on the supplier side; there are three big corporations that cover the branded products and also manufacture for retailers. We also buy from them. It depends on the prices. We are in constructive discussions and looking at options to possibly add value for our customers.

I would say the markets are completely different and also completely different in terms of suitability for mail order. If you look at the industry figures from 2020, the COVID crisis massively reinforced existing trends but did not bring about fundamental changes. For contact lenses, the mail-order share was already very high, and now it jumped to almost 50% in sales and 40% in revenue. With us, it's 60% in mail order. For glasses, it's different. The key difference is that for glasses, you have to have your visual acuity determined, and you also need lens centering to ensure the lenses are placed correctly in the frame. So you always need a stationary touchpoint if you want quality. That's the big difference between contact lenses and glasses. The game changer in eyewear optics is measurement technology. We need to bring refractometry (determining visual acuity) and centering onto the customer's smartphone. We have been investing in R&D for 4-5 years, with cumulative investments of about 15 million euros, and have 24 patents. We are now making these technologies available for more customers. For example, we recently launched a feature where customers can buy glasses completely online using our app, but it is currently limited to certain prescriptions and modern iPhones. For existing customers, we already have their refraction data, so they can use it. We have also just certified the second measurement technology as a medical product and will integrate it step by step. The challenge is to turn this into a clean user experience and make it available to as many customers as possible. However, I think the pure-play e-commerce share of glasses will grow to a maximum of 10%, meaning stationary will still account for at least 90% in the medium term.

It is end-customer ready. You can order glasses from us in quality. The question is for all end customers or for many. For customers without iPhone, they can also use our app on Android? Not yet. So the question is not singular; it's when can we offer it for how many customers. The answer is: we can offer it short-term for some customers, but not short-term for all customers in the usual quality. The art is to gradually develop the technology with real customer data and feedback, and see how far we can go without losing quality. The digital channel must be measured against the stationary channel in quality. For the customer groups where we have made it accessible, we are very happy with the quality. I think this can lead to the pure-play commerce share of glasses growing to a maximum of 10%, but that still means stationary will make up at least 90% in the medium term.

First of all, we are not far from that discussion because we started thinking about channel conflict back in 2013 when we started with contact lenses. If 60% of our contact lens sales are now via mail order, we are fully in the multi-channel model. What we did is two things: we communicated very early, and we met with great understanding because our entire company is extremely customer-centric. Our employees understood earlier than management that this is the right path because customers want it. We grew from one branch to the market leader in Central Europe because we are customer-oriented, not because we said we must measure more precisely or that it only works stationary or only online. The second point is that we have always attributed every single euro of revenue, even online, to a specific branch. That branch benefits from it. So if you are a customer and use our app to buy glasses, the revenue is attributed to the branch that did the fitting and to which you likely go for adjustments. That has elegantly bypassed the channel conflict.

Two things. So perhaps first the big summary: before the corona virus crisis, waiting time was our biggest problem. The main reason a customer leaves is because they had to wait too long. And during the corona virus crisis, waiting times were and remain our biggest problem, now even more exacerbated because we have restrictions, ones we imposed ourselves and also those due to infection protection, such as only allowing a limited number of customers per square meter into the branch. That has intensified the waiting time issue. So for us, a very, very big topic is productivity and managing customer flows. For example, through appointment scheduling, on the one hand we don't frustrate the customer, on the other hand we ideally utilize our branch so that the customer can be served without waiting. That is perhaps the big challenge concerning waiting times. Otherwise, you asked about customer behavior. What we observed is that the corona virus crisis reinforced the already existing customer behavior. That means where online ordering was already done, even more was ordered online. With sunglasses, where we previously saw an online share of 8-10%, we also saw a relative shift, although that business segment lost a lot because in the past it was more of a fashion product, an impulse purchase. With glasses, for the reasons mentioned with measurement technology, purchases were postponed, not canceled. That means we saw that during the time when stores were restricted, for example in spring we voluntarily, when we didn't yet know how dangerous corona was and when we didn't have masks available, we voluntarily put our stores on emergency operation for four weeks, meaning everything was reduced by 90% to protect our customers and employees. Then we only reopened fully when we had ordered ten million masks and set up the entire protection concept scientifically, and thus could guarantee the health of customers and employees. That also explains why we had a decline last year because we prioritized health over sales in those few weeks. Exactly, a sales decline that was bearable.

Of course, on the one hand, even before the whole home office obligation and so on and so forth, we already focused on mobile work early on, and that continues to happen for infection protection reasons. So we can say now about 80% of our employees work mobile. Those who are here are those who really have to work here, because actual physical presence is partially required for the work, such as manual work or important appointments that cannot be held digitally. But you can say that the proportion of those who are not working on-site has drastically decreased. And that is of course something that will occupy us in the future. I believe we will never return to the presence rate we had before, because people have realized that it works. At the same time, I think we also have to say that not everyone has the privilege of having a garden and a large apartment with separate rooms, perhaps for a family with father, mother, and children. So we also have to allow for both possibilities, as long as infection protection allows. I have probably also conducted surveys among our employees and we have done that too. And they say that between 75 and 90% can actually imagine working primarily remotely, perhaps coming to the office once a week to meet. That changes the role of the office. We have already had a few meetings and it's mainly about socializing. It's a different model. But socializing outside the office has taken place. Have you asked about that?

Does it also affect your hiring policy? Could I imagine that for central functions, even for digital teams, you hire people from Croatia, Portugal, Spain, who then don't come to the headquarters at all?

Strongly growing. It's nice because we are a customer-oriented company. We had a great customer wish that was always expressed before we started with it almost a decade ago. We then began to fulfill it. The business is growing strongly, which is also due to the fact that we have trust with customers and the transition is relatively quick. If you trust us with your eyes, you might also trust us with your ears. The market is super exciting. It's a bit like the eyewear market 20-30 years ago. There is a lot of potential to create customer value. We are doing that very successfully. We are expanding exclusively organically. That means we are now at well over 200 locations through the purchase in Spain; they also had hearing aid studios, so we have that included. And it's always an integrated concept for us, we don't do it separately. And I believe that we can now transfer many experiences from contact lenses (which are very e-commerce oriented or online), sunglasses (which are fashion), glasses (which are medical products with a lot of regulation), and hearing aids (which are highly regulated and also involve a lot of business with health insurance companies) to the hearing aid market, and thus create more value in the market.

You just said augmented reality and virtual reality. I think you mean virtual reality. Yes, Scott Galloway's quote referred to virtual reality. So I'll answer virtual reality only briefly because they are very different things. Augmented reality is super exciting for us. We have invested in the world market leader for 3D try-on of sunglasses and glasses. That helps us with fitting. But I think that's not the question, but rather virtual reality. And I would say that is very far from our business model, except that the name includes 'glasses'. But at the end of the day, it's mainly an entertainment device. What is relevant for us, which lies somewhere in between, is the topic of smart glasses. We have also invested in the world market leader in the B2B area. If smart glasses ever become mainstream, it is highly relevant because then technology companies could enter the market with completely different monetization models than, for example, an optician or a retailer like us. What could happen is that they don't make money from selling the product or the marketplace, but from the underlying ecosystem and the data generated. That is a topic we are watching very closely. Virtual reality is not part of our business model. Smart glasses is a topic we see as strategically relevant, but no one can say exactly if and when the breakthrough in B2C will come.

First question: do we use influencers? Yes, clearly. So we use it with varying intensity. I have observed that it performs much better for branding than for performance. So we use it very actively and a lot, especially in our growth markets. Very active in Italy, Poland, and in Germany we also used it. In Italy, we have a well-known TV chef, Alessandro Borghese, as our testimonial. That works very well. He has a big black pair of Fielmann glasses and has high recognition value. Regarding the question about brand safety, I think you meant that. I don't know the tool. As a very established brand with high brand awareness, we naturally have to pay a lot of attention to brand safety. So that is a big topic for us. I don't know if that answers the question. Otherwise, it's good that there are no Dubai influencers here. I take that as a positive.

I think it has to make sense in context. We have to offer added value, and we are very focused on what we can do without overdoing it. For example, we moved to a new location or completely renovated our branch at the Rathausmarkt. That is now the largest optical specialty store in Germany, with a channel sales perspective of about 10 million euros. In that branch, we have built everything that exists and is possible. I think you can create customer experiences, but still close to our core business. We have brought in all innovations, for example, sunglasses that transmitted sound through the skull. They were great, unfortunately discontinued, but they were well received. Those were smart sunglasses in a way, but not with visual information, just sound transmission. Big sunglasses that could do something. We can look at that together; it might be interesting for you. The main benefit is added value. For example, the 3D try-on, which we originally developed for e-commerce and which increases conversion rates, we have brought into the branch. So you can not only look at the 20,000 models on site but also extend the product depth to 120,000 models by viewing them digitally in 3D. We have digital time management because waiting times are our biggest problem. We developed a tool for customers who come without an appointment so that we can tell them exactly to the minute when they will be served. So if you walk through the city and see our flagship store and say you want to go there, we have the challenge of limited square meters and it's often full. So we can say exactly: 'Alex, it's full right now, could you come back in 19 minutes? Then you will be served.' You can also walk in and explore the store, but if you want a consultation, we need to schedule it. That sounds exciting. But the thing with the big sunglasses with sound, that's exactly something for you. They don't exist anymore? I'll check.

I'll start with the assessment of the second question. How we see ourselves in comparison: we benchmark first and foremost not against the market or competitors, but against our customers. For us, the most important metric is active customers, then customer loyalty, then customer satisfaction. Because customer satisfaction leads to customer loyalty, and before you can bind customers, you first have to have them. That is the cascade, and in our view, it leads to sales, revenue, and eventually profit. But we don't start with profit. When I look at those metrics, we were very satisfied as a company and still are, but we can always improve. We have a repurchase rate of over 90%, and if the customer buys a second pair from us, it's far, far into the high 90s. That means we have very good customer loyalty. Also in customer satisfaction, we have incredibly high values. For example, when we ask customers if they would buy again, well over 90% say yes. So I see us very well positioned, also in the digital area, because we ask all customer groups, not just digital or non-digital. And I think that is the continuous metric you have to use to see if we are fulfilling customer wishes. Then you have to look at migration movements, because the customers you survey are only your own. You also have to look at whether we are losing customer groups because we are not meeting certain needs. We look at that in parallel.

I answered the second question first because our customer-oriented philosophy makes it very easy. That means we have people like everywhere, with different interests and different work environments. Some are very process-oriented, others are creative. We have a relatively large product development unit, and they are naturally more creative. What unites us all is customer orientation. So for me, communication is always relatively easy when I can show that something we do creates customer orientation. I think the biggest challenge in transformation is that when you come into a company with legacy, you naturally cannot realize many ideas right away because you are stuck in processes or systems. The only way out is to completely redesign the business model once. That means you have a lot of change. But with us, the constant is customer orientation, which is always the communicative bridge. That is something in our company that is very well and quickly received when you say we have to change, we have to rebuild because of customer orientation. That works pretty well.

You are now talking to someone who has been CEO for a while and so on. We have been digitalizing and transforming for eight years. If you look further back in time, I think there were massive resistances to change. But you don't always have to see that negatively. Internally, we call it the legacy cycle: a cycle of three factors. On one side, the existing organization, the existing processes, and the existing systems influence each other and lead to a culture that, whether you like it or not, clings to the existing. Because even if someone wants to change a process, the system might block it. That cycle can only be broken if you really take three steps back and say that all these processes are not important, but the customer wants a certain thing, so we have to optimize for that. And I think that is also a function of self-confidence, both for me and for our leadership team. We are sure that things change. I think the biggest danger for established companies is that due to their business success, they do not recognize the need for change early enough and then realize it too late. I think it was also described well in one of his podcasts: if you notice too late and build up the skills and capabilities only shortly before, you have no chance to catch up. For us personally, the way is to actively track customer movement and customer satisfaction to show early on. With a replacement interval in our industry of about three to four years, customer satisfaction gives us insight into what the customer will probably do in three years. That is a system that costs us many millions, but it gives us a certain time advantage to know what is happening. If you then also do market research, look at the market properly, and analyze customer movement, then you see it. And that way, we have at least created the urgency to act, even though we are running around with a profit margin of 16-18% and could say, 'The market confirms our strategy, we are opening new stores, we don't have to do anything.' The fact that we have invested 15 million euros in technology and that we make it available and integrate it should show that we are not just continuing as before, because then we would no longer be customer-centric.

Yes, as CEO, my main task is culture and organizational development. That means my job is to make the job so good that people can do their job well. What I look forward to most are the things I can't see yet, which will lead to many new active customers and bind them at over 90%, because that is ultimately what makes us a company. If I could predict everything, I would lead the company top-down hierarchically, and then I think we could no longer be customer-centric in today's environment. But there is so much new happening. If I compare it to Tarik Müller, who announced today that the company wants to go public, and look at the pace of things happening in a business like that, international expansion, technology being outsourced, new investors coming in, expansion of own brands, it all happens in a time-lapse. That means what you are doing is optimizing a lot, but also innovating for the long term. In the area of measurement technology, you have to renovate over years. But are there in your daily life many wow effects where you say 'that's crazy, we have to do that'? Yes, but those are things we started three years ago. So much of what I work on cascades with the teams we set up, and what we fix or build or develop today, we will profit from in two to three years. So I can tell you that I look forward to the fact that we are going to the Czech Republic and that we will open our first branch in two weeks. In the Czech Republic, the purchasing power is much lower, but customers there pay significantly more than in Germany, and I don't think that's good. I think we can provide much more value there. We are coming in with our entire channel business model, and I look forward to offering a solution to customers in the Czech Republic.

I would like to put my three KPIs in the room: number of active customers, customer loyalty (i.e., repurchase rate), and the third is customer satisfaction index, essentially intention to recommend and intention to purchase. And what would interest me most are the biggest weaknesses of Fielmann and where we need to improve to perform better on these three KPIs. Ideally, currently dissatisfied Fielmann customers should contact me and express why they are dissatisfied. That would be interesting for customer retention, but also customers who need glasses and have never bought from us, who tell me why they don't come to us. And equally interesting are existing corporate customers who say they buy from us but see a negative development and that if we want them to stay, we need to change something here and there.

Very nice, very informative for me. I learned that I don't have to worry. But now I have to get to know the Pose over there, because you are not yet a customer with us, and we need to fix that right away. We'll do it right now.