AVCJ Awards 2022: Operational Value-add: Owndays

When L Catterton acquired Owndays alongside Mitsui & Co in January 2019, the Japanese eyewear retailer had conducted millions of eye examinations for customers but had not put the data to good use. Those examinations could not be done online. Post-purchase touchpoints with customers were few. There was no app.

The service was good, however, and the stores stylish. Some international expansion was underway, but the company operated more like a small family-run business than a professional organisation. L Catterton now refers to it as one of the first mid-cap retail businesses from Japan to become truly regional, with revenue and profit mostly derived outside of Japan.

A digital revamp was critical. The company built a robust customer database that could be linked to social media apps in their countries. This started with Line in Japan. Within a year, more than 900,000 customers signed up for online loyalty programmes and the number of active users topped 600,000. Website visits doubled, as did conversions.

Now, in Japan, there are targeted advertisements, and repeat customers – who are better understood – can be catered to more efficiently in-store. Basically, the idea is to make the online and offline channels seamless. Owndays is in the process of rolling out the strategy to the rest of its 4.7m customers.

“In this day and age, the need to leverage online channels and platforms to raise awareness of our product quality and range, facilitate product discovery, and provide customer service cannot be underestimated,” Owndays COO Takeshi Umiyama said.

“At the same time, consumers in our key markets still generally prefer to try on spectacles in person before making purchases, and regulations in many jurisdictions mandate that eye examinations need to be conducted in person by licensed optometrists. Making the whole process fuss-free is key, which is why our quick-simple-and-valuable proposition resonates with consumers.”

L Catterton invested Owndays via its third Asia fund, which makes deployments of USD 50m to USD 150m. At the time, the company was fully owned by its management team and in a profitable, net cash position; it had no pressing need for investors and was not running any auction process.

Ultimately, CEO Shuji Tanaka was attracted to L Catterton’s expertise in fashion and retail and its connection to luxury goods giant LVMH. He was also impressed by a track record that includes turning the likes of Singaporean fashion retailer Charles & Keith into recognised names in Asia.

Building scale

The private equity firm optimised analytics, supply chain, procurement, inventory levels, prices, and operating costs, while entering new markets, expanding the brand offering, and lifting margins. Its exit in June last year to India’s Lenskart, a PE-backed eyewear maker, generated a 3-4x return, according to a source close to the situation.

The deal was a minor breakthrough on several fronts. It was L Catterton’s first investment in Japan and the first buyout in Japan’s mid-cap space involving a collaboration between a global GP and a large local conglomerate. Owndays was also the first Japanese brand to be acquired by a Softbank Vision Fund portfolio company (Lenskart).

Owndays and Lenskart together have approximately 1,500 stores across 13 markets in Asia complemented by their apps, which have achieved over 20m downloads. The merged entity is touted as having offline scale and online reach unmatched by any other similar business in the region.

Scale was a significant component of the Ownday’s plan. L Catterton helped the company enter Hong Kong and the United Arab Emirates (UAE) while cementing footholds in Japan, Taiwan, Singapore, Thailand, Malaysia, Cambodia, Vietnam, Indonesia, India, Australia, and the Philippines. It is now said to be the leading private eyewear brand in Singapore, Taiwan, and Thailand.

Stores were established in prime locations such as Shinsaibashi in Japan, Dubai Mall in the UAE, and Marina Bay Sands in Singapore. The latter location, opened in 2021, is promoted as a global premium concept store that opened by giving guided tours to the media and influencers.

To capture a wider spectrum of clientele, a lower-priced sister brand called Seven Day was test-marketed in Thailand, where it has grown from four locations in 2020 to seven currently. Further expansion will be explored in developing economies. The Owndays footprint went from 216 locations across 10 markets to 460 across 13.

L Catterton introduced benchmarks, assessment methodologies, and reporting protocols for evaluating new store performance. New outlets were profitable from their first year of operation while existing stores continued registering same-store sales growth.

Expert input

Talent injection and leveraging L Catterton’s ties to LVMH were also integral to the plan. LVMH senior advisors Norbert Leuret and Vispi Patel helped with accessing iconic shopping malls known for having a selective tenant mix.

“Norbert and Vispi have decades of experience in the consumer industry across multiple geographies, providing us with tremendous market insights and access to retail networks, as well as a global perspective,” Umiyama said. “They were very affable and also generously enabled us to tap on LVMH’s expertise and resources as needed.”

L Catterton’s network was tapped to fill new roles such as head of financial planning and analysis, head of accounting, and head of store development. Meanwhile, non-Japanese employees were promoted to senior positions to improve management diversity.

“Besides giving employees more opportunities for career progression, it also instilled in them a greater sense of fulfilment and ownership, which led to higher productivity and performance,” said Taka Shimizu, a partner at L Catterton, who led the investment and joined the board.

“In addition, it enlarged the pool of functional experts that Owndays could tap and enabled the company to better serve customers across different geographies based on such employees’ local market knowledge.”

Much of the investment rationale stems from the idea that, although under-digitised and under-professionalised, Owndays was a disruptor of the traditional prescription eyewear paradigm. The company is known for being able to give a customer eye exams and glasses, all in about 20 minutes.

The product range spans frames, sunglasses, contact lenses, accessories, and gift cards. All spectacles and sunglasses come with high-index aspheric lenses that cause less visual distortion, have dust-repellent coating, and offer UV protection.

There is also a range of premium options, including lenses said to be anti-reflection, anti-fog, scratch resistant, and resistant to the blue glare that comes from electronic devices. Some claim to control myopia and offer a wider field of vision by providing vision support for near and far zones.

The company says lenses can be positioned based on individual facial anatomy to optimise visual comfort and performance in every wearing condition. Frames are available in more than 20 special collections, some of which involve crossovers with brands like Pokemon.

Owndays is also a beneficiary and follower of industry trends such as increasing preferences for cross-border brands, personalisation, and made-in-Japan premium products, as well as the bifurcation of value and luxury. To wit, consumers are increasingly buying glasses like lifestyle products rather than mere vision aids.

This is credited with helping drive performance, alongside rising disposable incomes and competitive pricing. Owndays’ one-year repurchase rate – which tracks customers coming back to buy a second pair of classes within one year – climbed 9 percentage points in Japan during the L Catterton hold.

“Spectacles themselves have evolved over time too, with frames now coming in a wide range of shapes, sizes, and designs,” Shimizu added. “There are now more lens types with varying functional benefits as well. Together, these have led to consumers buying multiple pairs of spectacles for use across different settings, to match their clothes and activities.”

Pandemic problems

As a predominantly brick-and-mortar retail business, Owndays’ biggest challenge so far has been COVID-19. L Catterton intervened by helping secure emergency loans and negotiating rental terms, reliefs, and waivers with landlords.

Further initiatives included disinfecting all frames and ophthalmology machines before and after use, implementing strict distancing protocols, and having optometrists wear face shields. Operating hours and working arrangements were restructured – in part to reduce contact between staff – and customer numbers were monitored to maintain social distancing requirements. Manager meetings and staff training sessions moved online.

Still, lockdowns and various restrictions on retail operations and physical stores permeated the company’s core markets, severely impacting operations. The Seven Days rollout in Thailand, for example, was stalled. Regulations differed across countries and kept changing. Support schemes offered by governments were complex.

“It was difficult to navigate all these, juggling financial considerations and our determination to protect our employees’ livelihoods,” Umiyama said.

“Thankfully, the L Catterton team worked with us in the trenches, monitoring and managing our cashflows, supporting negotiations with landlords, working through various governments’ support schemes, and accelerating our digital transformation initiatives. As a result, we were able to not only overcome the challenges without retrenchments or pay cuts, but also grow our business.”

Pictured: Taka Shimizu of L Catterton receives the Operational Value Add award from Alvarez & Marsal's Oliver Stratton

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• Topics
• North Asia
• Buyouts
• Trade sale
• Consumer
• Japan
• L Catterton
• AVCJ Awards