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Health and Beauty We examine the trends underlying the growth of the global marketplace in health, beauty and hygiene. Our analysts will point the way forward by highlighting critical innovations and behaviours that are driving industry evolution.

Bringing Vision Care to the “Base of the Pyramid”

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Businesses operating in emerging markets are looking beyond the higher-income brackets, towards the “Base of the Pyramid” (BoP) – the economic segment that operates in an informal economy and has an annual per capita income of less than US$3,000 in purchasing power parity, as defined by the World Bank Group. Yet this group has substantial purchasing power combined: the BoP constitutes a US$5 trillion global consumer market, after adjusting for purchasing power parity. The BoP mainly resides in rural towns, where the population is fragmented, products not evenly distributed and the market unpenetrated. Unlike in the cities, rural markets have little or no direct competition between products.

Within eyewear, there are examples of BoP strategies executed successfully, but such successes are few and far between due to the many challenges faced. Nevertheless, the BoP represents a huge untapped market for eyewear players. According to the World Health Organization’s estimates in August 2014, 285 million people are estimated to be visually impaired (suffering from refractive errors, cataracts, glaucoma or blindness). Notably, 90% of the world's visually impaired live in low-income settings.

Why pursue BoP if challenging?

With a target segment that lives in relative poverty, financial viability is the foremost challenge, but not unachievable if a business has diverse revenue markets to cross-subsidise. Besides obvious challenges, such as poor infrastructure to support distribution, there is also the difficult task of changing consumer mindsets and long-held routines. To illustrate this point – a pair of spectacles, no matter how low it is priced, may not gain the buy-in of the BoP because they do not see the point in buying glasses when they have been coping with poor vision for most of their lives. Long-held routines include accommodative behaviours, such as dealing with myopia or presbyopia by doing work at closer or further distances.

Despite these challenges, targeting the BoP has been gaining interest among eyewear players, ranging from large multinational corporations to social enterprises. Besides new growth opportunities, targeting the BoP in emerging markets challenges businesses to innovate in their selling approaches, such as coming up with creative ways of distribution, production and marketing to achieve greater efficiency at a lower cost. This is commonly referred to as “Reverse Innovation”, or trickle-up innovation, where a business approach is tailored to meet the needs of a developing market before being marketed as low-cost innovations in developed markets, thus creating new markets and uses for these innovations.

Viable model used by social vision care enterprises

VisionSpring, previously known as Scojo Foundation, uses a cross-subsidisation strategy to achieve its social objectives while achieving financial viability. It currently operates in India, Central America and Africa, as well as countries such as Afghanistan. By providing low-cost ready-made reading glasses for both the moderate-income urban population and the rural poor, it achieves two objectives – to reach more people who can benefit from reading glasses, while providing additional funding to serve rural clients sustainably. VisionSpring overcomes high distribution and selling costs in India’s rural villages by selling reading glasses to hospitals, health and microcredit NGOs, which channel the glasses through their existing network of community-based vision health workers or microentrepreneurs, making it possible for VisionSpring to penetrate the rural market.

The social enterprise has been widely recognised by the Forbes Impact 30, the World Bank Development Market Place Competition, the BYU Innovator Award, the Duke University's Social Innovation Award, the Skoll Award for Social Entrepreneurship, the Schwab Foundation Social Entrepreneur of the Year Award and many others.

Gaining traction with for-profit businesses and multinational corporations

Realising that consumer mindset is a significant challenge, French-based spectacle lens company Essilor came up with an innovative approach to service India’s BoP. Many living in rural villages saw time spent travelling to an optician outside the village as opportunity cost due to the hourly wage lost. Thus, Essilor partnered with Aravind Eye Hospital, which was operating in outlying districts to screen for cataracts. Specialised mobile vans were added behind the Aravind trucks for Essilor to provide on-the-spot prescriptions for visual conditions and the sale of ready-made spectacles and stock lenses. This approach has boosted Essilor’s sales among India’s rural population. The company has been scaling up over the years to reach out more to the rural population in India, numbered at 854 million in 2014, according to Euromonitor International’s Countries and Consumers data. Essilor also plans to adopt a similar approach in other emerging markets, such as Mexico.

Catering to the needs of emerging markets has also resulted in reverse innovation for several eyewear businesses, with notable success. The co-founder of US-based online spectacles retailer Warby Parker, Neil Blumenthal, originally worked at VisionSpring. His stint at VisionSpring led to the realisation that there was market potential for low-cost spectacles beyond developing markets. The heart of Warby Parker’s business model was to break the eyewear oligopoly by pricing its glasses at an affordable and transparent price point of US$95. It also donates a pair of frames to VisionSpring for every pair it sells – effectively using the revenue made from its US sales to subsidise its sales in developing markets. What was initially meant to help those who could not shell out big bucks for spectacles soon attracted consumers who actually had the money to spend as they bought into Warby Parker’s business objectives. Since its launch, Warby Parker’s growth has been phenomenal. The company announced that it hit its first-year sales goal three weeks after launching in 2010. To date, it has received significant acknowledgement from notable investors such as Tiger Global Management and American Express.

Adlens, a company focused on creating variable focus eyewear, is also another business with successful reverse innovation. From serving underpenetrated markets like Africa, it came up with self-adjusting eyewear that did not require a doctor’s consultation or prescription. Today, Adlens has brought variable focus lenses into developed markets, with the great selling point that these lenses can replace progressive lenses – a significant disruption in the industry.

At the end of the day, it is important to recognise that nearly half of the global population lives in rural markets and is underserved. Targeting the BoP across markets helps businesses unlock large volumes of demand, and with lower levels of competition. While challenging, the pay-offs are great, not least because the concept of Benefit Corporations that pursue profit and social objectives simultaneously are attracting consumers and investors alike.

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