Marty Bassett.
Walman doesn’t look a day over 100. In fact, the Minneapolis-based company, which is celebrating its centennial this year, doesn’t look or behave at all like a senior citizen.

Although it is the largest independent ophthalmic company in the U.S., and one of the most diversified, Walman is agile and, when necessary, assertive. In recent years, it has grown partly as a result of strategic acquisitions. It also won a lucrative contract in 2013 with Luxottica’s EyeMed Vision Care division, providing lab services to its provider network of 26,000 independent and retail locations covering more than 35 million Americans in funded vision plans.

To mark the start of its second century in business, the company freshened its brand identity, dropping “Optical” from its corporate name in favor of just “Walman.” The move was more than cosmetic. It was intended to focus attention not just on Walman, but on its six operating divisions: the wholesale laboratory business, Walman Optical; ADO Practice Solutions, a buying and practice management group; X-Cel Special Contacts, a manufacturer of custom soft and GP contact lenses; Walman Instruments, a distributor of diagnostic ophthalmic instruments; Imagewear, an eyeglass frame manufacturer and distributor; and Ultra Optics, a specialty coating company.

Marty Bassett has served as Walman’s CEO and president since 2001 after serving in finance and operations. He and his management team have guided Walman’s growth from a regional optical laboratory business into the largest independent wholesale ophthalmic company in the U.S. Walman’s net sales in 2015 are estimated to be $320 million, about 55 percent of which comes from Walman Optical’s prescription lens sales. The company operates in 38 locations that are staffed by about 1,000 employees.

In addition to his role at Walman, Bassett currently serves as the chairman of The Vision Council. Andrew Karp, VM’s group editor, lenses and technology, recently interviewed him at Walman’s Minneapolis headquarters. They spoke about the company’s rebranding, distruptive technologies, retail consolidation and more.

VM: Earlier this year, Walman implemented a corporate rebranding program. In addition to the external aspect was there also an internal component such as streamlining the organization to create efficiencies?

Bassett: Yes. Part of that was also related to aligning and consolidating our ophthalmic divisions. Previously we had been operating as Soderberg, Walman, Rite Style, Harbor Optical, Seoco and Toledo Optical. And we really wanted to consolidate that down to two brands, to clarify to customers what those brands were. We also developed a strong go to market strategy, so it was clear to people who we were, what we stood for, how we were going to market, what were the products we were going to be featuring, what other partnerships we could develop. Also, on a national basis, it made a big difference. Historically, a lot of our customers had been regional. Consolidation allowed us to approach customers that wanted to do business with the entire network. Before consolidation it was difficult because our other brands had separate price lists and separate warranties. So we really needed to get to two brands that we could take to customers and they could use them across the entire network of 31 labs.

We also consolidated our contact lens business as well. so we had HVC (Hydrogel Vision Corporation), which was our disposable contact lens company and we had X-Cel which was our GP and custom soft business. We consolidated them under a single management group and developed a single go to market strategy as X-Cel Specialty Contacts.

Marty Bassett.
With our other divisions, it was really more the opportunity for us also to go to market as a single company so that people would know what the brand stood for in ophthalmic was similar to what the brand stood for in the instrumentation business, so they could be confident in the company that they were dealing with, in the back end support. The policies and procedures and the customer experience would be more consistent.

In a lot of cases, our company was bigger than our brand. So much so, that when I would meet with somebody and talk about all of the various elements of Walman, it was very possible that they were already doing business with us, and they didn’t even realize it was the same company. It is about trying to clarify for the marketplace who Walman is.

VM: That must have been nice for your sales reps, because their accounts would probably say, “Oh, I didn’t know Walman did that, too.”

MB: Even though our instrument reps primarily go to market with instrumentation, and contact lens reps with contact lenses, ophthalmic reps with lenses and frames, it opened the door for the discussion. Going forward, we will be looking at how do we build customer affinity programs that recognize the support of all our business lines.

VM: The eyewear industry is being disrupted by some new technologies, such as mobile and online refraction and additive manufacturing. How are these two specific areas impacting Walman?

MB: There’s actually very little impact right now. Both of those are emerging technologies that are still a ways from market. I know there are some things on the refraction side that are getting closer, but probably aren’t there yet.

When I look at our customer base… we’re trying to make a clear distinction between a refraction and a comprehensive eye exam which are two very different things. We’ve actually benefitted from the innovations in automated refraction technology. It’s one of the fastest growing segments of our instrumentation market. We were just at Vision Expo West and had a tremendous show… over half of our instrumentation sales on the floor at the show were e-refraction technologies. So our customers are seeing the potential in that, to help them be more efficient in the office, to allow them to see more patients in a day, to allow them to restructure the workflow for patients in their practice. We actually think that our accounts are going to accelerate their investment in new equipment and technology because of the innovation that’s available today.

Five or six years ago, we recognized the importance of having automated technology available in our instrument division for sale to customers, and since then we have hired and developed dedicated resources to sell and train our customers on that equipment. And that has really made a difference in how our instrument group goes to market versus some of our competitors. We’ve seen it grow at an almost exponential rate and it’s definitely helped fuel our instrument sales. As far as people refracting themselves online, or going to a kiosk to refract themselves, we’re waiting to see what happens with that marketplace, how it evolves. It can be a good thing for our customers, ultimately. It can generate more prescriptions per year. It may expand the sale of optical products.

VM: So you’re watching that space closely?

MB: Yes. When we go to trade association meetings, or even meet as a group, that’s one of the top three or four things that people are concerned about. It’s an emerging trend in the market that people aren’t clear about, how it’s going to look in four or five years.

VM: On the manufacturing side there have been recent developments such as the 3D printing/additive manufacturing of frames, not only on the prototyping end, but on the final product, and the potential for 3D-printing lenses, which is over the horizon. How do you view these developments?

MB: The prototyping has been going on for a while. That’s something a number of our frame factories have been using for several years. In terms of finished-to-market product, we don’t have any plans to move into that space. In the lens area, additive manufacturing is a lot more interesting and would probably have a bigger impact on our company, long-term. A lot of that will have to do with how the technology evolves. When you hear people discuss what they think will be possible in the next three or four years… being able to produce a lens with multiple indexes of refraction throughout the lens, we’re watching it. We’ve also been exploring what the applications might be as it relates to Ultra Optics as well. I think it has a lot of potential, but it has a long way to go. They’re primarily working with acrylic product, and there are still a lot of challenges with the existing technology that make it a long way from market ready.

VM: But when it happens, it could happen quickly.

MB: Yes. And the challenge will be, will they be able to achieve the kind of productivity that we achieve with our current digital manufacturing, which is extremely productive, puts out a tremendous product. We’re using half of the capability and potential that exists in the technology we have today, in terms of what we can do from a manufacturing standpoint, how much more accurate those lenses could be, how much more precise and personalized they could be. There are a number of things that need to improve in the supply chain, not just “we have a new technology that could go to a hundredth of a diopter, a thousandth of a diopter.” We could theoretically do that now with the equipment we have.

But there are a number of advantages of additive manufacturing, including we don’t generate the kind of waste that we generate right now, it changes the whole dynamic of the inventory that you have to have. There’s all kinds of potential benefits to it.

VM: How is Walman disrupting itself? There are parts of your business that you want to protect, but there are other parts you may want to shake up.

MB: I think the last really good example of that was when we divested our soft contact lens distribution business and decided to acquire a disposable contact lens company and just get directly into the disposable contact lens business. Vertically integrating our contact lens business from start to finish, not distributing somebody’s else’s products. We had a very good distribution business and we had a great customer base. When we looked at what we thought the future of the distribution business was, we looked at the consolidations, we looked at the compression of margin, we looked at how manufacturers were changing their go to market strategy and said, for our company that probably isn’t a market that makes sense for us long term, or if it does, it’s as a manufacturer not as a distributor. That was four years ago.

VM: So your whole business model changed.

MB: Completely. That would be an example of what we’ve done internally, in terms of disruption.

Another example is the Imagewear model. We’ve been working on that for 10 or 15 years now. Instead of distributing other people’s products, we’ve gone out and acquired brands, designing frame products, sourcing the product directly ourselves, having our own direct sales force out in the marketplace. Again, it was a complete 180 from what we were doing before, although we had exclusive distribution for two companies. One company ended up taking the product direct and we didn’t have control of that, and that was a powerful lesson we learned, and the other company went out of business. Again, we felt like two businesses we had built that were very successful that in the end we had very limited control over. So we totally changed what we did.

It’s a hybrid model. We still distribute some product for a few manufacturers because it can help us augment our product offering, or they have a product category that doesn’t make sense for us to pursue on our own.

VM: Many wholesale labs have abandoned the frame distribution business, but Walman has not only stuck it out, but has grown and diversified its frame business. How has Walman done it?

MB: When we were looking at what was happening in a consolidated marketplace back in 1994, ’95, you could see what was happening very quickly. There were a couple of significant transactions that happened in a two-year time frame that completely changed the landscape of the wholesale business. We looked at opportunities to diversify our business, diversify our revenue. We already had a legacy frame business, and we thought we could eventually become a significant player in the marketplace. We had the resources, we could leverage our existing customer base. And that’s exactly why, for about 10 years we were really focused on building our contact lens business, our frame business, our instrument business, our Ultra Optics business and our buying group business, not at the expense of our ophthalmic laboratory business, but to create diversity to our business model so that we weren’t so vulnerable to what was happening in the lab space. What was interesting in that time span, our overall business doubled, our lab business doubled, but we moved that to a smaller percentage of our total revenue. At that point it was about 50 percent of our total revenue, where previously it had been about 80 percent.

An invitation to Walman’s centennial celebration shows workers
grinding lenses by hand 100 years ago.
VM: After witnessing the consolidation on the retail and wholesale sides of the industry, we’re now seeing consolidation of independent eyecare practices by private equity groups. How do you see Walman’s role in this changing marketplace? Will Walman get involved in brokering some of these deals?

MB: Let’s say 75 million pairs of eyeglasses are sold in the U.S. each year. There’s incremental growth, but the market isn’t changing much. So our job is to make sure that we are positioning our company in the future to make sure that we can maintain our share of whatever that pie is. Toward that end, I still think that independent optometry is going to do very well in a consolidating marketplace. Private practice optometrists that are really focused on running a good business, a business that they own, they’re going to be able to compete very comfortably against large, consolidated centralized organizations. They have to be committed to differentiating the experience that their customers get versus someplace else. There’s going to be a bigger burden on us to help them differentiate themselves from the new entities. We’ll also be doing business with customers who traditionally haven’t been part of our customer base. We’re not excluded from doing business with large, consolidated organizations. It’s one of the reasons we thought it was important that we had a national network.

VM: Walman has expanded into new areas of the market such as the managed care sector, most notably through its contract with EyeMed. Is that simply another facet of Walman’s mission to support the independent?

MB: There are 140 million covered lives now that have some kind of stand-alone vision care benefit. I don’t think we’re viable, and I don’t think our customers are viable if we don’t have access to those patients. So we’ve worked very hard with VSP and EyeMed to make sure that we have a good relationship, that we’re on their panels, and that we can provide products for their participants, and that our doctors have the ability to participate in their programs as well.

VM: In today’s market, sometimes customers can also be competitors. How does Walman manage the kinds of complex, multi-level relationships?

MB: VSP is a good example. They’re a customer of Ultra Optics. Their insurance end is a customer of Walman. Marchon and Altair are vendor providers to our ADO practice solutions group. And we also compete with each other in some markets for lab work, as we do with Essilor. We’ve always tried to recognize that as the dynamics in the market move, we’ve got to maintain those partnerships. They’re too important. Occasionally it creates challenges, but I’d say that if you had folks sitting here from Essilor, VSP or Luxottica, they’d say in general that we’re a good business partner and that we’ve been supportive of what they’re trying to accomplish, and that they have also been supportive and have helped make us a stronger company.

VM: In terms of the trends toward mergers and acquisitions in the lab business, Walman has been an active participant, having acquired both Rite Style Optical and Toledo Optical in recent years. Is Walman seeking to make more acquisitions, either in the lab business on in other sectors of the industry?

MB: We would look at lab opportunities or in any one of our other business channels with equal enthusiasm. With us, acquisitions have represented about half of our growth in any business year, so we’ve been active, we’ve been looking. The challenge now is there are fewer companies to acquire. There’s a lot of competition, and now we have private equity as a significant player in the market, so they’re taking deals off the table. But we would continue to view that as one of our key strategies for growth. There are a couple of good opportunities out there, and we’ll work hard in the next 12 months to get that done.

VM: Has Walman itself been courted by any prospective buyers?

MB: I would tell you what I tell every new prospective employee, which is that we think we have a great business model as an independent wholesaler. The board has made it clear to management that we should continue to run Walman as an independent, stand-alone business. We think we’re actually getting to the size where we can really become more of a factor in the market and can be more competitive with some of the larger players out there in terms of the internal resources we can offer our customers. We have a great capital structure with an ESOP (Employee Stock Ownership Program). The shareholders have been very happy with the performance of the company. The board feels as long as we can continue that, there’s no reason why we wouldn’t be a strong, viable entity going forward.

Regardless of what goes on around us, there’s space for an independent in the marketplace.

VM: If J.A.L. Walman walked through the door today, would he recognize the company he founded back in 1915?

MB: Sure, I think he would. In conjunction with our centennial, we’ve been going through old sales brochures and literature, and there are a lot of common themes that run through the company from decade to decade. He was a very customer-centric person, from what we can tell. He expanded the business and there was growth both from opening new labs and from acquisitions. We had a retail component to our business at one time. He may have thought, “Why didn’t that get more thoroughly developed?”

Walman always had a great reputation, they were always a brand that stood for integrity. They had great customer service. Hopefully, those are still the things that run through the business today.