Fielmann AG

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Fielmann AG

Weidestrasse 118a
D-22083 Hamburg
Germany
Telephone: (49)(40) 270-760
Fax: (49)(40) 270-763-99
Web site: http://www.fielmann.de

Public Company
Incorporated: 1972
Employees: 6,950
Sales: DM 1.11 billion ($568.66 million) (1998)
Stock Exchanges: Frankfurt/Main
Ticker Symbol: FIE3
NAIC: 44613 Optical Goods Stores; 339115 Ophthalmic Goods Manufacturing

Fielmann AG, based in Germany, is Europe’s largest optician; more than every third pair of eyeglasses sold in Germany in 1998 carried a Fielmann label. Fielmann operates and franchises eye care retail businesses which sell vision aids of all kinds, including eyeglasses, frames and lenses, sunglasses, contact lenses, and optical accessories. More than four million eyeglasses per year are sold at the group’s 451 branches, some of which are Fielmann Supercenters, in Germany, Switzerland, and Austria, each of which is managed by a certified optician. Fielmann is also a leading producer and vendor of frames for the optical industry and wholesale trade with operations in Germany and France. Further afield, Fielmann frames are also sold in Holland and Denmark, and the company operates lens grinding facilities in Minsk, Belarus, and the Ukraine, as well as through a joint venture in Hong Kong. Moreover, Fielmann holds shares in Italian, French, and Japanese frame manufacturing companies.

1972: The Founder and His First Shop

Günther Fielmann, the founder of Fielmann AG, was born in 1939 in a small village in Northern Germany. As a young boy Fielmann dreamed of becoming an adventurer and revolutionary; he didn’t know yet that he would truly revolutionize a whole industry as an innovative business leader. Upon graduating from high school, Fielmann wanted to become a photographer, but his father insisted on something more down to earth, suggesting he consider a career as an optician, which was also connected with light and lenses.

Fielmann later recalled that as an apprentice optician, he had a hard time getting used to organized workdays and the demands of his exacting boss. However, a newly hired optician’s aide fostered Fielmann’s advancement, and at the end of his apprenticeship he was awarded the highest grade possible and the title of optician’s aide. During this time, Fielmann also worked as a freelance photographer for a Hamburg daily newspaper, but he eventually decided to forgo photography in order to get his master optician’s certificate.

While attending professional school in Berlin, Fielmann made his living selling used cars, honing his business instincts all the while. Once he gained qualification as a state-certified optician, Fielmann traveled the world, working as an optician and salesman in Europe, the Middle and Far East, and North America. At Bausch & Lomb in Rochester, New York, he studied modern American management and marketing.

In 1972 23-year old Fielmann borrowed the money he needed to open his first store in Cuxhaven, a town in Northern Germany. At that time, opticians enjoyed a fairly secure life in Germany. Traditionally, prices for eyeglasses were kept high by opticians who charged their customers between 200 and 1,000 percent of the purchasing price, using anonymously distributed calculation guidelines throughout the industry. People without the means to afford decent and fashionable eyeglasses had the “choice” between three frame styles each for women and men, and just two styles for children, all completely covered by German health insurance and all utilitarian and unattractive. Fielmann, who had to wear eyeglasses from the time he was 16, felt that people with low incomes were being discriminated against and decided to change this situation. From the very beginning he offered a variety of prescription glasses with plastic or metal frames for significantly lower prices. Instead of pulling different models out of hidden boxes as generations of opticians had before him, he presented all available frames openly in his store and let his customers choose them freely. In 1977 Fielmann introduced another industry novelty: a two-year warranty on his eyeglasses, including the models for children, and the warranty was later extended to three years.

1981: A Special Deal

By 1981 there were about 30 Fielmann-owned stores in Germany, and eyeglasses at Fielmann’s were much cheaper than anywhere else. Economies of scale more than made up for the losses caused by lower prices. Fielmann eliminated wholesalers wherever possible and simply sold more eyeglasses than his competitors, which in turn allowed him to buy lenses and frames in bulk from Italy, France, Spain, England, the United States, and Japan.

Next, in the presence of Germany’s Federal Minister of Employment, Fielmann signed a contract with the local branch of the Allgemeine Ortskrankenkasse (AOK), a German national health insurance carrier in Northern Germany. Under the contract, Fielmann agreed to provide 90 different plastic and metal frames for eyeglasses in 640 variations for top quality prescription glasses without charging more than the amount for which AOK would reimburse its customers. If Fielmann’s earlier activities were warning signals for Germany’s opticians, then this was their wake up call. With a wave of delivery boycotts, advertising campaigns, threats to Fielmann employees, and several dozen lawsuits, the industry tried to stop a man who seemed bent on destroying the basis of their lucrative business. Fielmann was disturbed by this wave of hostility, but refused to give up. Only two years after the first contract with the AOK was signed, Fielmann’s business consisted of 76 shops with 800 employees and 177 trainees, each of them with its own profit center. Some of them were managed by independent opticians who decided to run their businesses under the Fielmann brand concept.

In 1982 and 1983 Fielmann opened two flagship optical centers in Northern Germany. The first one in Kiel offered a variety of 7,000 brand-name and designer frames, a range unprecedented in Europe. The new store included the first Fielmann light gallery, where the works of holography artists with an international reputation were exhibited. The second Fielmann megastore, which opened in 1993 in Hamburg, was according to company literature the biggest optical center in the world at that time. It included a second holography gallery and a museum for eyeglasses. In the following years Fielmann also introduced new product innovations. In 1984 the Fielmann money-back guarantee was introduced. Since Fielmann’s advertising was mainly based on the unbeatable low prices, Fielmann customers who found a pair of brand-name eyeglasses cheaper in another store could get their money back from Fielmann. Three years later, all non-prescription Fielmann eyeglasses were also automatically insured against breakage, loss, and theft for 12 months.

By 1988 Fielmann was the single largest employer in the optical industry, and with over 500 trainees it was also the largest provider of training for professionals in the field. However, proper training was not the sole motivation for Fielmann employees. More than 70 percent of them were also Fielmann shareholders. In addition to Fielmann’s activities in promoting holography, the company also spent significant amounts of money for environmental protection. In 1986 Fielmann founded an initiative to plant a tree for every staff member each year, a tradition that has been honored every year since.

1989: Fielmann Goes East

In 1989 the German government passed new legislation that shook the whole optical industry. The new Health Reform Act significantly reduced government subsidies for the rates that national health insurers paid opticians for prescription glasses. In reaction many German opticians were forced to increase their rates. Fielmann stores, however, continued to offer prescription glasses at no extra charge, constantly improving their quality at the same time. Fielmann’s corrosion-proof and non-fading frames, for example, were the first to pass the test for DIN 58199, a new product quality standard.

The fall of the Berlin Wall gave a boost to the stagnant optical market in Germany. In 1990 Fielmann negotiated a contract with the former East German social security administration to provide prescription eyeglasses and three-year warranty without extra charge to Germans from the former GDR. Within a few weeks, more than 30,000 East Germans owned Fielmann eyeglasses. By 1992, Fielmann also employed more opticians and support staff in the new eastern states of Germany than any other business in the industry.

Company Perspectives:

Fielmann acquired market leadership with the motto ‘You are the customer.’ Strictly customer-orientated thinking sent Fielmann to the top. Short-term profit maximization always takes a back seat to long-term business success at Fielmann. The employees of Fielmann learn to see themselves in the customer. They serve the customer as they would like to be served themselves. Fielmann staff do not suffer under the pressure of having to talk customers into buying expensive spectacles. They have the satisfying job of finding the optimum solution for each customer, independent of the price. With the result that 13 million Germans are currently wearing spectacles from Fielmann. Fielmann has repeatedly introduced totally new, consumer-friendly benefits to the sector. With its fair prices, extensive assortment, many years of guarantee, the above-average service and friendly advice, Fielmann has taken over market leadership in the German optical industry.

In 1992, a brand-new production facility for Fielmann eyeglasses was set up in Rathenow, about 80 miles from Berlin. Rathenow had a long tradition of making eyeglasses and a well trained supply of opticians and lens crafters. The new factory, with a production capacity of 200,000 acetate frames a year, was equipped with state-of the art technology in order to react more quickly to fashion trends than competitors. Fielmann’s plan to quickly penetrate the new East German market worked well. While other German opticians saw their sales drop by 15 to 20 percent in the first half of 1993, Fielmann’s revenues went up by 20 percent. When the capacity of the Rathenow factory reached its limit, Fielmann took over another frame production facility in Osterburg in the East German state of Saxony-Anhalt and entered a joint venture for lens grinding in Belarus’ capital Minsk. Fielmann’s investment amounted to about DM 155 million and created about 1,500 new jobs. By 1993, one out of four East Germans were wearing Fielmann glasses. The number of Fielmann stores all over Germany had reached 273. Because an old schoolmate of Fielmann’s, optician Jörg Ruhnke, did business in Berlin, Fielmann stayed out of the Berlin market until later, when Ruhnke died.

1994: Fielmann Goes Public and Keeps Expanding

On June 17, 1994, Fielmann’s business became a public enterprise. In the German stock market’s most successful initial public offering (IPO) that year, Fielmann raised DM 105 million. In the same year Fielmann purchased Rathenow Optische Werke, the top East German producer of eyeglasses, including its well recognized brand name ROW. By the end of 1994, every third pair of eyeglasses in Germany were sold in one of the 296 Fielmann stores. In the second half of the 1990s Fielmann systematically developed the facilities in Rathenow into a high-tech manufacturing center with facilities for frame production, galvanizing and coloring, lens crafting, and a factory outlet. About 1.5 million silicate and plastic lenses were manufactured in the Rathenow lens grinding facility in 1998. Two other lens grinding joint ventures were set up in Belarus and the Ukraine. Because all steps of the eyeglass manufacturing process were concentrated in Rathenow, that city also became Fielmann’s central training location for employees, whose numbers rose from about 5,850 in 1994 to over 7,960 in 1998.

Beginning in 1995 Fielmann concentrated on expanding into Southern Germany, Switzerland, and Austria. That year Fielmann acquired Pro-optik AG, Switzerland’s third largest optician, headquartered in Basel. While the sales of eyeglasses in Switzerland grew into double digits, German health care reform led to another downturn of the German optical retail business. As of January 1, 1997, federal subsidies for prescription eyeglass frames were abolished. Günther Fielmann, a strong believer in the welfare state, had presented a proposal to the German government, showing how to save the expected DM 300 million without abolishing the subsidies, through more efficient organization and rationalization. While Fielmann’s proposal did meet with some approval, the government eventually decided to stick with its original bill. In the aftermath, sales of the German optical industry dropped again by 15 percent in 1997 and stabilized at that level in the year after. Fielmann managed to limit its drop in sales to only five percent and returned to two-digit growth figures thereafter.

By mid-1999 there were 451 Fielmann branches, four of them in Austria and 12 in Switzerland. For the new millennium, Fielmann planned to open more Fielmann superstores, with their selection of 10,000 frames, as well as more outlets in large West European cities. Other growth markets Fielmann chose to focus on included sunglasses, contact lenses, and eyeglasses designed for people working with computers. Fielmann and his management team had ambitious goals; by expanding into those new markets they were aiming at DM 2.5 billion in revenues by 2010.

After 25 years, Fielmann was still very active in his company’s operations, creating many frames out of material he chose himself, as well as contributing slogans and ideas to the company’s aggressive advertising campaigns. According to some analysts, one of the key questions for the company’s future was whether Fielmann would be able to give up his role as the patriarch of a family enterprise in order to make Fielmann AG over into a truly international group of companies. Chances are, he will. Much to the disappointment of his financial controller, Fielmann began spending increasing amounts of time at his organic farm and ranch near Hamburg as the century drew to a close.

Principal Subsidiaries

Fielmann AG (Switzerland); Fielmann Augenoptik AG (Germany); Fielmann-BelOMO Minsk GmbH (Belorus); Fielmann GmbH Wien (Austria); Fielmann-Optic GmbH (Germany); Louvre AG (Switzerland); MBV Modebrillenvertrieb GmbH (Germany); Optic Ladenbau Planungs- und Beratungsgesel-Ischaft mbH; OTR Oberflächentechnik GbmH (Germany); Pro-Optik AG (Switzerland); RA-Optik (Ukraine); Rathenower Op-tik GmbH (Germany); Rathenower Optische Werke GmbH (Germany).