Not infrequently, my patients ask me how I feel about the quality of glasses that are produced by the Costco Optical, which is located approximately 8 feet from the entrance to my office. I believe the unspoken question underlying this query is something to the effect of, “How can Costco possibly provide a high quality product when it costs so much LESS than most nearby opticals?” Glad you asked 🙂
As a disclaimer, I am not personally employed BY Costco or the Costco Optical – I lease space inside of Costco and operate as an independent Doctor of Optometry. As such, I am not privy to the inner workings of Costco, including but not limited to figures such as costs and margins. However, I am generally familiar with principles of optical management, macroeconomics, and Costco’s promise to keep margins low. Upon this knowledge shall I base the rest of this post.
Here’s my short answer to the aforementioned patient question: Costco Optical is fantastic, they have been ranked #1 by Consumer Reports for overall customer satisfaction, and I’m convinced many of my patients really only come to see ME because they want to go to Costco Optical.
As for my answer to the underlying question of “How do they do it?” here’s my take on it. Everything that Costco Optical makes is great quality, but they do have a limited selection of available products. Whereas many independent opticals may choose from 10 or 20 different progressive lens designs, Costco uses maybe two or three. Where some opticals may offer sunglasses in any number of materials and designs, to my knowledge Costco has just polarized polycarbonate (maybe in two different colors?). Where some opticals have thousands of frames on their boards, Costco has…less than thousands – I actually have no idea how many frames they keep on hand.
The point I’m going for here is that Costco doesn’t have as wide of a selection as some independent optical shops, but the products they do offer are top quality at a fraction of the price of most independents. Why such a price difference? Partly due to economies of scale (lower material and production costs when in bulk; and with fewer products to order, each order is bulkier) and partly because Costco’s model is to keep low margins, whereas the standard mark-up at many independent optical shops is in the neighborhood of 2.5 times (as in 250%).
Again, I have no knowledge of Costco’s margins or costs, but assuming an $80 wholesale cost of a Flexon Nike frame, an independent optical may easily mark it up 2.5 times to a retail cost of about $200. Costco obviously doesn’t go for 200% margins, but maybe something closer to 20% (I completely made up that figure for argument’s sake), which would give a price around $100. Same frame, very different price.
I’ve already written about the insane price difference between Costco and most independent eye care providers for an annual supply of contact lenses. Again, economies of scale.
Am I saying there’s no value to independent opticals? Absolutely not. If you value a wider selection of more designer frames or want to make sure you’re always getting the latest and greatest lens material or design, you may be better served by an independent optical shop. But you’ll pay for it. Through the nose. As a very small example, the premium non-glare treatment that Costco Optical includes on all of its lenses at no additional charge would be a $100 upgrade at most independent opticals. I’m just saying…
Costco Eye Doctor 