JINS Holdings 3046
ジンズホールディングス
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2022-05-06
2022-04-28
2022-04-11
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Iidabashi Grand Bloom 30F 2-10-2, Fujimi, Chiyoda-ku Tokyo, Japan 102-0071
Summary
Specializes in eyewear business centering on glasses. Offers competitive prices by applying the SPA (Specialty store retailer of Private label Apparel) model to eyewear business. While aiming for further increase in market share in prescription products, it actively seeks to create markets for nonprescription eyewear.
DistributorsSpecialty Retail
Key dates
2010-07-27
Coverage initiation
Executive summary
JINS Holdings’ core business revolves around selling eyewear, namely eyeglasses. A set of the company’s eyeglasses consists of the frame, lens, and an eye exam offered at three main price points: JPY5,000, JPY8,000, and JPY12,000. JINS Holdings’ biggest selling points are clarity in pricing and quick turnaround time from eye exam to eyeglasses delivery. The company says its market share by sales value is roughly 16%. The average pricing for a set of JINS eyeglasses at about JPY8,700 is below the market average of JPY21,000, which means the company’s market share by sales volume (number of pairs sold) exceeds its market share on a value-basis.
The differentiating factor for the company is its application of the SPA (Specialty store retailer of Private label Apparel) business model to the eyewear industry. Prior to the company’s entry, the industry standard was to purchase a third-party manufactured frame, combine it with a pair of lenses purchased from a lens manufacturer, then sell it to the customer. In contrast, JINS Holdings internally develops almost all frames and outsources manufacturing to factories in China, South Korea, and Vietnam. The company purchases frames that meet the needs of consumers (changing preferences) in proper quantities and sells them off until inventory runs out. This allows it to maintain high gross profit margins even at low price points. Occasionally, when demand for a product is considerably higher than expected, the company will place additional orders.
While vision correction may be the primary purpose for glasses, JINS Holdings is also actively developing the market for non-prescription glasses. For example, the company’s JINS Screen glasses block the blue light emitted from PCs and smartphones to reduce eye strain, and by bringing those who do not need vision correction into the eyewear market with products such as this, the company has effectively created a new market. Moreover, it remains focused on further opening the market by taking a different approach from operators in the traditional eyewear market by promoting glasses as a daily fashion item, and advancing glasses that help to prevent the progression of myopia, as well as glasses that can predict drowsiness and measure the ability to concentrate through the use of eyewear-mounted sensors.
The company also operates overseas. While it considers China to be the largest overseas market, it also has operations in the US, Taiwan, and Hong Kong. Overseas eyewear sales in FY08/21 were JPY12.7bn, but only accounted for 19.9% of overall sales, indicating substantial room for overseas growth moving forward.
Earnings trends
For FY08/21, the company reported full-year consolidated sales of JPY63.9bn (+6.0% YoY), operating profit of JPY5.0bn (-10.1% YoY), and net income of JPY3.3bn (+95.1% YoY). Sales improved mainly in the domestic eyewear business amid a reaction to voluntary restraints on business activity in FY08/20 following the nationwide declaration of a state of emergency. However, consumer spending had yet to recover, and sales increased only 6.0% YoY. Operating profit declined due to increased advertising expenses mainly on TV commercials for JINS 1DAY contact lenses. Net income increased, benefiting from the tax impact associated with the liquidation of a subsidiary.
In January 2022, the company revised its FY08/22 earnings forecast. The revised forecast calls for full-year consolidated sales of JPY71.2bn (+11.4% YoY), operating profit of JPY7.2bn (+42.1% YoY), recurring profit of JPY7.0bn (+39.7% YoY) and net income attributable to owners of the parent of JPY4.0bn (+22.5% YoY). Versus its previous forecast, the revised forecast represents increases of JPY455mn for sales, JPY877mn for operating profit, JPY1.1bn for recurring profit, and JPY733mn for net income attributable to owners of the parent. These revisions reflect Q1 earnings that exceeded projections due to COVID-19-related impact that was smaller than the company had anticipated.
Strengths and weaknesses
Shared Research thinks JINS Holdings’ strengths are 1) price competitiveness under the SPA business model, 2) creative strength in the non-prescription eyeglasses market, and 3) a corporate culture focused on continually taking on new challenges. Its weaknesses are 1) inability to capture the volume zone in the eyeglasses market, 2) inventory control, and 3) global development. (For further details, see “Strengths and weaknesses” section.)
Key financial data
Note: Figures may differ from company materials due to differences in rounding methods.
Recent updates
Monthly sales data for April 2022
JINS Holdings Inc. announced monthly sales data for April 2022.
Monthly trends (JINS)
Trends and outlook
Quarterly trends and results
Note: Taiwanese subsidiary was added to consolidated results in Q1 FY08/19. Q3 FY08/20 results include a charge-off of JPY1.2bn for fixed costs under extraordinary losses, these costs having been incurred during the period when the company’s stores were temporarily shut down as a result of the COVID-19 pandemic.
Note: The company exited the Accessories business at end-FY08/20.
Note: Q3 FY08/20 results include a charge-off of roughly JPY1.2bn to cover fixed costs, booking the charge as extraordinary losses as these costs had been incurred during the period when the company’s stores were temporarily closed as a result of the COVID-19 pandemic. The costs were broken down as follows: personnel costs of approximately JPY750mn, depreciation of approximately JPY110mn, and rent expenses of roughly JPY230mn.
1H FY08/22 results
Overview
The company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) effective from the start of Q1 FY08/22. With this change, the company has begun excluding revenue and cost of sales associated with merchandise expected to be returned from recognized revenue and cost of sales. Furthermore, with regard to transactions involving reward point systems managed by other companies, the company has begun calculating recognized revenue by subtracting the monetary values that correspond to the number of points awarded from transaction prices.
Sales rose. The domestic eyewear business and the overseas eyewear business both posted a sales increase. New stores in Japan and overseas contributed to this rise, as did an increase in domestic e-commerce sales, even though comparable store sales fell YoY in Japan.
Operating profit was JPY1.9bn (-28.5% YoY), while OPM was 5.8% (-2.6pp YoY). The profit fell mainly because personnel and rent expenses increased along with the number of stores in the domestic eyewear business. The adoption of the Accounting Standard for Revenue Recognition in Q1 FY08/22 had a downward impact of JPY240mn (the cost of sales and SG&A expenses rose by JPY150mn and JPY90mn, respectively). The profit further declined by JPY383mn because the company was not granted an exemption from social security obligations in China in 1H FY08/22 as it was in 1H FY08/21.
Gross profit was JPY25.6bn (+2.0% YoY), and GPM was 78.1% (-1.1pp YoY). Factors that had a downward impact on profit were the adoption of the Accounting Standard for Revenue Recognition in Q1 FY08/22 (which lowered GPM by about 0.5pp YoY), the yen’s continuous weakness (which lowered GPM by 0.5pp YoY), and sales discounts in Japan. On the other hand, an increase in high-margin, high-priced products as a percentage of sales had an upward impact.
SG&A expenses were JPY23.7bn (+5.6% YoY), while the SG&A ratio was 72.3% (+1.5pp YoY). This was due to an increase in personnel and rent expenses accompanying an increase in the number of stores, as well as a 3.8% YoY decline in comparable store sales in Japan. The adoption of the Accounting Standard for Revenue Recognition in Q1 FY08/22 raised SG&A expenses by JPY90mn.
Personnel expenses: JPY8.2bn (+7.3% YoY). The personnel cost ratio was 25.0% (+0.9pp YoY). Personnel expenses rose mainly because of an increase in the number of domestic stores. Other factors include the hiring of optometrists in Taiwan, as well as social security expenses in China. The company was granted an exemption from social security obligations in China in 1H FY08/21. This exemption, which totaled JPY150mn, was not repeated in 1H FY08/22.
Rent expenses: JPY5.7bn (+4.9% YoY). The increase was mainly due to a rise in the number of stores in Japan.
Advertising expenses: JPY1.3bn (-10.2% YoY). Advertising expenses declined in 1H FY08/22 following an increase in 1H FY08/21, when the company ran TV commercials for contact lenses.
Other SG&A expenses: Settlement fees increased as cashless payments accounted for a larger proportion of total payments. In particular, the company paid commission fees to FITTING BOX in the domestic eyewear business.
Net income attributable to owners of the parent was JPY1.2bn (-JPY218mn YoY). The company posted forex gains totaling JPY182mn as non-operating income, but had an extraordinary loss of JPY235mn as a provision for office relocation expenses. The company also paid higher income taxes.
Progress toward full-year company forecast
The company raised its full-year earnings forecast when it released Q1 FY08/22 results.
At the beginning of FY08/22, the company assumed that the business would be slow in 1H FY08/22 because of the COVID-19 pandemic. However, customer traffic recovered more than expected after states of emergency were lifted at end-September 2021, with the result that sales and profits exceeded the Q1 FY08/22 forecast. The upwardly revised forecast reflects the amount by which sales and profits exceeded the earlier projection. The company has left its Q2–Q4 forecast unchanged.
Sales, operating profit, recurring profit, and net income attributable to owners of the parent were 46.0%, 26.5%, 31.0%, and 29.0%, respectively, of the upwardly revised FY08/22 full-year forecast. (For 1H FY08/21, the figures were 49.5%, 52.7%, 51.5%, and 58.1%, respectively, of the FY08/21 full-year results.) Operating profit missed the 1H FY08/22 forecast by 3.8% mainly because of a profit decline in China.
2H FY08/22 initiatives for achieving the full-year forecast
Market share expansion: The company’s share of the domestic eyeglass market is 16.1% for children (15 or younger), 27.0% for young individuals (main customers), and 5.3% for seniors. The company will increase the number of customers of all ages by offering programs tailored to the needs of each segment.
CoGS reduction: The company switched from a single-supplier system to a system of two main suppliers about five years ago. The company wants to encourage price competition between the two suppliers and achieve a reduction in the CoGS ratio. The company reached an agreement with the suppliers in 1H FY08/22 for lower procurement prices for lenses as the yen continued to weaken, a move that may help ease the forex impact.
Reduction in the SG&A ratio: In 2H FY08/22, the company will seek to lower the SG&A ratio by improving store operations, establishing a distributed processing system, and increasing inventory efficiency.
Q2 FY08/22 (December 2021–February 2022) results
Q2 FY08/22 results are as follows:
Comparable store sales fell 3.8% YoY in Japan, but sales rose because the number of stores increased to 451 (+17 YoY).
Operating profit fell. Gross profit rose, but so did SG&A expenses.
Gross profit: GPM declined because of the forex impact. However, profit rose thanks to increased sales.
SG&A expenses: Personnel and rent expenses increased along with the number of stores. Comparable store sales fell and fixed costs rose YoY.
Segment trends
Domestic eyewear
Sales rose YoY. Comparable store sales declined 3.8% YoY. However, overall store sales rose 0.1% because of an increase in the number of stores, while e-commerce sales rose 10.5% YoY.
Comparable store sales
Comparable store sales declined 3.8% YoY.
Monthly performance: In September 2021, customer traffic declined because of COVID-19, and comparable store sales fell 14.2% YoY. States of emergency were lifted at end-September, with the result that the figure rose 2.7% YoY in October, 4.0% YoY in November, and 3.5% YoY in December, beating the company forecast. In January, the figure declined 0.7% YoY as pre-emergency measures were implemented in the middle of the month mainly in urban areas. In February, the figure declined 17.5% YoY because customer traffic fell in response to an increase in the number of people infected with a new COVID-19 variant and because sales of anti-pollen products were slow as pollen did not begin to spread until later.
Customer traffic: Customer traffic fell YoY in 1H FY08/22. It recovered to pre-pandemic levels in October and thereafter, but the recovery could not offset the September decline. Customer traffic began to fall in the middle of January 2022 following pre-emergency measures. With an eye toward future growth, the company is bolstering efforts to increase customer traffic and the number of items sold. Aside from its main customer base of young individuals, the company will also focus on both children and consumers aged 45 or older while taking measures to shorten their product replacement cycle.
Number of products sold: The company sold 2.8 million pairs in 1H FY08/22 (-2.8% YoY). The number declined YoY ahead of the JIN Screen promotion campaign.
Average spend per customer: Average spend per customer continued to rise. The average amount paid per pair of eyeglasses rose to JPY8,860 (versus JPY8,600 in 1H FY08/21). The share of eyeglasses priced at JPY8,000 increased YoY as a percentage of overall sales, while that of JPY5,000 items fell. In 1H FY08/22, JPY5,000 eyeglasses generated 24.4% of the overall sales (verses 29% in 1H FY08/21), JPY8,000 products 58.6% (52%), and JPY12,000 items 17.0% (17.0%).
Eyeglasses priced at JPY5,000: The share of these eyeglasses, which are reasonably priced for the purpose of attracting new customers, fell YoY as a percentage of overall sales. The company aims to raise the share to at least 30% by improving their quality. The company's consolidated GPM declines as it sells more of these low-GPM products. However, the company will strategically strengthen sales efforts to acquire new customers and increase gross profit. In Q2 FY08/22, some people who used to buy JPY5,000 eyeglasses began to purchase JPY8,000 items, raising the share of the latter as a percentage of overall sales.
Eyeglasses priced at JPY8,000: The share of these glasses rose YoY as a percentage of overall sales. In Q1 FY08/22, the company reduced the price of JINS Switch to JPY8,000 from JPY12,000 and increased its sales volume. The company also saw an increase in the sales volume of Airframe Hingeless, a JPY8,000 flagship product that provides both a good fit and comfort. The company will maintain efforts to promote the sale of this product. As mentioned above, some people who used to buy JPY5,000 products began to purchase JPY8,000 items, lowering the share of the former as a percentage of overall sales.
Eyeglasses priced at JPY12,000: The share of these products was little changed YoY as a percentage of overall sales. High value-added products were popular, including top-of-the-line Ultra Light Airframe (JPY12,000). This means that the company successfully retained its existing customers, who tend to purchase JPY12,000 products.
Store openings and closings
The store count in Japan was 451 (21 new stores opened, four closed) as store openings progressed according to plan. The company usually opens more stores in the first half of the fiscal year because openings and renovations of many shopping centers typically take place during the period that corresponds to the company's Q1 through Q3.
Of the 21 newly opened stores, 10 were suburban roadside stores. While comparable store sales in Japan declined 1.3% from the pre-pandemic level, those at suburban roadside stores increased 27.0%. The company plans to open more suburban roadside stores because their sales are increasing YoY.
The company plans to close five stores during FY08/22, mostly through a scrap-and-build method. In 1H FY08/22, the company closed four stores, mainly urban roadside stores whose sales fell because of a decline in inbound tourist demand.
E-commerce
E-commerce sales grew 18.2% YoY as the company sold more contact lenses. The number of JINS app members reached 10.1 million (+1.4 million from end-August 2021). Japan's eyeglass-wearing population is said to be 80 million. Thus, the company has established points of contact with at least 12% of this population.
Contact lenses: Sales totaled JPY608mn (+39.7% YoY). In 1H FY08/21, the company aired television commercials for the JINS 1DAY disposable contact lenses and conducted a free trial-use campaign. Half of the new customers brought in by the campaign are now making regular purchases, adding to the customer number. More than 60% of the company's contact lens customers are regular purchasers.
Eyeglasses: Sales of eyeglasses grew at a lower rate than those of contact lenses, but the number of customers was on the rise. In 1H FY08/22, sales missed the company forecast because of a decline in sales of JINS Screen. The company will conduct sales campaigns to steer physical-store customers and app members to its e-commerce business as it seeks to secure more customers.
Domestic Eyewear initiatives
The company launched the next-generation model of its JINS MEME eyewear, which uses unique sensor-based technology to capture the physical and mental conditions of wearers and display them through a linked app. The company received positive customer feedback and saw an increase in sales volume.
The second round of JINS Pokemon Model eyeglasses designed based on the company's take on Pokemon was well-received. Strong sales of high-value-added products such as Airframe Hingeless, which offers a combination of fit and comfort, drove sales growth.
Company's approach to revenue structure
The company targets GPM of 75% (the figure has been fluctuating at around 74–77% in recent years), SG&A ratio of 55% (64–68%), and OPM of 20% (8–12%). These figures deviate from the target because sales per store failed to reach the company projection, with the result that fixed costs now weigh heavily on the company. Instead of reducing costs, the company plans to increase sales per store from the current JPY110mn or so to JPY150mn and strengthen e-commerce sales to bolster company-wide sales, thereby lowering the SG&A ratio to 55%.
Gross profit margin
GPM has been trending upward with increased sales of high-margin, high value-added products. However, the company does not plan to raise GPM beyond the current level. JPY5,000 eyeglasses are intended to attract new customers. However, sales at that price point have fallen in recent years, and the company hasn't acquired enough first-time buyers. Against this backdrop, the company is considering expanding its lineup of JPY5,000 eyeglasses and introducing new models to secure customer traffic. The company is even willing to see its GPM fall for this purpose. The company, which recognizes that its strength lies in selling quality products at low prices, will focus on raising the appeal of JPY5,000 products.
SG&A ratio
A high SG&A ratio is another challenge. The company will lower the ratio by opening more suburban roadside stores, which tend to have lower rent than urban stores. Suburban stores with shorter business hours can also rein in personnel expenses.
There is still room for efficiency improvement in backroom store operations, such as the processing and assembling of eyeglasses. The current utilization rate is about 20% for the processing machines at the company's stores. The company aims to raise the utilization rate for both machines and employees by having them process, during store downtime, eyeglasses that customers have ordered online. The centralized processing center for online orders has a capacity to handle JPY200mn worth of eyeglasses per month, and any excess will be processed at stores for shipment. In 1H FY08/22, online orders totaled JPY1.3bn and did not exceed the capacity of the centralized processing center. For this reason, the distributed processing system is yet to demonstrate its effectiveness.
The company will improve its domestic store operations. It will install do-it-yourself eye examination machines at 40 large stores by end-May 2022, enabling a single sales representative to serve two customers at the same time. In the short run, this will lead to an increase in sales by preventing opportunity loss during busy times such as weekends. In the long run, it will lead to a decrease in the personnel cost ratio by improving labor productivity.
Overseas eyewear (July–December 2021)
Sales rose, exceeding the company's 1H projection of JPY7.0bn, even though the business was affected by COVID-19. However, the business posted an operating loss, reversing a year-earlier profit, because of the pandemic.
China: 173 stores (nine opened, six closed)
Comparable store sales were sluggish, but overall sales rose thanks to an increase in store count.
Store count: The company opened nine stores and closed six. The rate of store closing was higher in China than in Japan, even though the company received more inquiries from commercial facilities in China. This is because sales per store in China were just under JPY40mn, lower than those in other regions (JPY110mn in Japan and JPY97mn in Taiwan). In addition, high fixed costs made it difficult for the company to achieve profitability. The company is seeking to establish a profitable business model by adjusting such factors as store locations and product mix through trial and error. It plans to improve earnings while maintaining a scrap-and-build approach.
Comparable stores: The business was affected by lockdowns imposed in Guangdong and other areas after COVID-19 cases were confirmed.
Consumer spending slumped as the government strengthened movement restrictions from summer onward to limit the spread of COVID-19. Further, profit fell in reaction to the boost provided a year ago from reduced social insurance premiums for businesses.
Taiwan: 44 stores (six opened, none closed)
Sales and profit rose thanks to growth in store count. The company opened six stores in anticipation that the pandemic would soon subside.
Operating profit rose YoY. OPM was 12.4% (-3.2pp YoY).
The business was affected by an increase in personnel expenses as the company hired optometrists in accordance with Taiwan’s Optometric Personnel Act. Even so, the business recovered from the impact of the pandemic and posted a profit increase.
Hong Kong: Six stores (none opened, none closed)
Sales increased YoY. Comparable store sales exceeded pre-COVID-19 levels because political demonstrations subsided and because consumption began to recover from a slump caused by the pandemic.
The business posted an operating profit by reversing a loss thanks to the sales increase.
US: Six stores (one opened, none closed)
Operating loss shrank as sales grew. In July–September 2020, the company faced COVID-19-related obstacles in California, such as lockdowns and restrictions on store visits. In July–September 2021, all its US stores resumed normal operations.
The company continued to post operating loss in the US, albeit narrower than in July–September 2020. This is because sales were small and headquarter expenses were high. In pursuit of sales growth, the company plans to cut back on physical store openings while expanding e-commerce sales of eyeglasses. Personnel expenses rose because the company hired e-commerce staff in line with this plan. In the US, eyeglasses are prescribed by state-licensed optometrists, a system that eliminates the need for in-store eye examinations and facilitates online purchases.
Full-year company forecast for FY08/22
Note: Figures may differ from company materials due to differences in rounding methods.
FY08/22 company forecast figures
*Net income attributable to owners of the parent
In January 2022, the company revised its FY08/22 earnings forecast. The revised forecast calls for full-year consolidated sales of JPY71.2bn (+11.4% YoY), operating profit of JPY7.2bn (+42.1% YoY), recurring profit of JPY7.0bn (+39.7% YoY) and net income attributable to owners of the parent of JPY4.0bn (+22.5% YoY).
Versus its previous forecast, the revised forecast represents increases of JPY455mn for sales, JPY877mn for operating profit, JPY1.1bn for recurring profit, and JPY733mn for net income attributable to owners of the parent.
At the beginning of FY08/22, the company assumed that 1H performance in its domestic eyewear business would be sluggish due to COVID-19-related impact. However, customer traffic has recovered to a greater extent than anticipated since states of emergency issued in response to the pandemic were lifted at the end of September 2021, and the company reported that sales and all profit categories exceeded corresponding projections in Q1. The company's revised forecast reflects the amounts by which sales and profits exceeded these projections. The company has not made any changes to its initial projections for Q2–Q4.
Reasons for revision
In the domestic eyewear business, JINS Holdings had expected an ongoing impact from the pandemic through much of the fiscal year, but the nationwide lifting of the state of emergency in October 2021 has seen foot traffic improve more than the company expected, so it looks for sales to exceed its initial forecast. In the overseas eyewear business, the company expects sales to come in largely in line with its forecast, although the impact from the pandemic varies by country and region.
JINS Holdings expects operating profit to exceed its initial forecast due to curtailing SG&A expenses such as advertising, in addition to the higher sales forecast. The company expects recurring profit to benefit from forex gains due to yen weakness as well as higher operating profit. It expects net income attributable to owners of the parent to come in above its previous forecast due to higher recurring profit.
Analysis of FY08/22 earnings forecast
The company expects to generate the majority of its operating profit during 2H. It predicts that performance will improve as the pandemic begins to subside in Q2 and accordingly projects profit expansion in 2H.
The company plans to improve the convenience and functionality of its e-commerce site and app, and introduce new services to encourage customers in their 20s and 30s, the company's main target group, to purchase via the site and use the app. The company will also focus on the development of new products such as eyeglasses-type medical equipment that uses violet light to impede the onset of nearsightedness. In terms of profitability, the company is looking to implement digital transformation (DX) measures in areas such as store operations, product management at the head office, and performance management, and to reduce costs through optimization and efficiency.
Domestic eyewear
JINS Holdings expects sales growth due to improvement in comparable store sales and new stores openings. The company expects 1H sales to be affected by the COVID-19 pandemic. However, it anticipates sales growth in 2H due to store openings and recovery in comparable store sales. The forecast does not factor in so-called revenge consumption (where consumers purchase more freely after escaping the restrictions of the pandemic) or recovery in inbound demand.
Comparable store sales growth
The company projects that comparable store sales for domestic eyewear will grow 12.6% YoY in 2H and at least 3.0% YoY for the entirety of FY08/22. However, compared to FY08/20, before COVID-19 became widespread, it expects comparable store sales to be up just 0.2% in 2H, with full-year FY08/22 ultimately falling short of full-year FY08/20.
The company expects the average customer spend to decline, but plans to sell a larger number of eyeglasses. Since it intends to enhance sales efforts for JPY5,000 eyeglasses to match the timing of recovery in consumer purchasing as the pandemic subsides, it expects the average price per pair of eyeglasses to fall to JPY8,650 (-JPY50 YoY), but aims to sell some 6.24mn pairs (+9.3% YoY).
E-commerce sales growth
JINS Holdings expects e-commerce sales to grow 24.7% YoY to JPY4.2bn, but this will still fall short of the 35.3% growth seen in FY08/21. It believes e-commerce sales will continue to grow for some time, but that the pace of growth will slow.
Store openings and closings
Plans call for 37 new store openings (including 21 suburban roadside stores) and five closings. The company targets more store openings in residential areas. Some of the suburban roadside stores will take time to increase customer traffic and achieve profitability, but the company will enhance its sales promotions with the aim of improving profitability as early as possible. Suburban roadside store profitability is improving and tends to reach the all-store average within two years of opening, and the recurring profit margin tends to exceed the all-store average in three years or so. Suburban roadside stores tend to become integral to the community as time passes, leading to growth in customer traffic.
Profitability
The company projects GPM of 78.1% (-0.8pp YoY). It expects the ratio of eyeglasses sold at the low-margin JPY5,000 price point to increase, and new accounting standards will lead to an increase of approximately JPY200mn in the cost of goods sold.
The SG&A ratio looks set to fall to 69.2% (-1.8pp YoY). Sales growth and an increase in the ratio of roadside stores should result in 0.3pp and 0.7pp declines in the personnel cost ratio and rent ratio respectively. The rent-to-sales ratio is about 14% for stores located in shopping centers, but no more than 10% for suburban roadside stores. The personnel cost ratio is also lower because of shorter business hours at roadside stores.
Overseas eyewear
The company aims to improve customer experience, for example by upgrading the e-commerce site, and is looking to boost profitability by enhancing the ability of brick-and-mortar stores to attract customers and by opening new stores.
China
With a net increase of 10 stores (versus eight in FY08/21), the store count will be 180 at end-FY08/22.
One of the reasons sales growth has been sluggish in China is that many dealers offer low-priced eyewear there, so the company cannot differentiate itself on the basis of price as it does in Japan. Instead, it plans to differentiate itself by supplying made-in-Japan products. To this end, a new Japanese factory built by an affiliated Chinese plant will manufacture eyeglasses domestically and export them to China.
Aiming to grow sales, the company launched its e-commerce site in May 2021 to collect customer data including visit frequency and purchase history. It also operates stores on China’s largest online shopping sites, Tmall.com and JD.com, but securing customer traffic on its own e-commerce site is a looming challenge.
Taiwan
With a net increase of 10 stores (versus eight in FY08/21), the store count will be 48 at end-FY08/22.
Hong Kong
With a net increase of one store (no increase in FY08/21), the store count will be seven at end-FY08/22. The impact of political demonstrations has subsided, and government stimulus measures have triggered recovery from the slump caused by the COVID-19 pandemic, so JINS Holdings is targeting its first profit in Hong Kong in FY08/22.
US
With no new store openings (versus two in FY08/21), the store count will be six at end-FY08/22. The company expects e-commerce sales to grow 156% YoY, while sales at brick-and-mortar stores grow 31%. Customers can try on eyeglasses and see the products up close at physical stores, so the company will retain them for their advertising function, while referring customers from physical stores to its online store.
Although it expects to post an operating loss again in FY08/22, the company aims to move into the black in FY08/23 by enhancing e-commerce sales and curbing head office costs and other overhead.
FY08/22 initiatives
In the Japanese eyewear market, the average price per pair of eyeglasses has been trending downward, but the number of people who need eyeglasses is growing as the myopia rate among young people rises. JINS Holdings seeks to capture demand for low-priced eyewear among young people and recognizes that there is ample room to increase domestic eyewear sales. It plans to expand earnings by enhancing its e-commerce efforts, promoting digitalization, and reducing costs. In addition, it will employ advanced initiatives such as JINS MEME and continue R&D for future growth.
Improving store utilization rates
There is still room for efficiency improvement in backroom operations at stores, such as processing and assembling eyeglasses. The current utilization rate of the processing machines in stores is only about 20%.
The number of online orders has been growing in recent years, to the extent that orders have now exceeded the capacity of the centralized processing center. The company is having those excess orders processed at stores during what would otherwise be downtime, thus improving the utilization rate of both processing machines and personnel. For this reason, the company has no plans to expand the centralized processing center for at least the next three years, despite expecting the number of online orders to continue growing.
Capital and business tie-up with FITTINGBOX S.A.
In June 2021, the company announced a capital and business alliance with France's FITTINGBOX S.A., the digital eyewear company. The companies will work together to promote the digital transformation (DX) of the eyewear purchasing experience and to improve customer convenience by leveraging digital technologies. In this vein, the company is improving the way glasses are sold online with the JINS brand e-commerce site, where customers can access services like a 3D virtual try-on or a Lens Simulator to check their vision while wearing optional lenses. It plans to expand its e-commerce business by introducing the system in China and the US, where e-commerce solutions are expanding.
JINS MEME
In October 2021, the company launched a new model of JINS MEME, a wearable device that integrates a sensor and battery in the nosepiece of a pair of eyeglasses. It links to a smartphone app via Bluetooth, allowing the app to analyze data collected by the sensor to check a user's health and mental state.
The original model came out in November 2015, but sales were sluggish due to its relatively high price (JPY27,300), a small number of frame designs (just three), poor wearing comfort, and limited usage scenarios. The new model of JINS MEME is more reasonably priced at JPY19,800 and revised specifications allow it to be attached to a variety of frames. In addition to allowing users to check information based on complex analysis of posture, time seated continuously, number of steps taken, and other data, the new model allows users to track levels of tension, emotional stability, drowsiness, and concentration based on blink intervals and other factors.
Using research results from JINS MEME, the company established Think Lab workspaces, developed based on the concept of "the best place in the world to concentrate," in Shiodome (Minato Ward, Tokyo) and Ginza (Chuo Ward, Tokyo). It is currently verifying uses of JINS MEME through a series of experimental efforts, intending to develop derivative businesses.
Results versus initial estimates
Note: Figures may differ from company materials due to differences in rounding methods.
Medium-term outlook
The company is not one to put out medium-term business plans outlining specific numerical targets for sales, operating profit margins or ROE. In September 2014, JINS Holdings launched its new brand vision, Magnify Life, and since then has focused on developing eyewear products that would bring new value and managing its operations with the aim of creating a new eyewear market.
Shared Research believes medium- to long-term growth drivers for the company are likely to include: 1) an improved market share in the domestic eyeglasses market; 2) an expansion in the overseas business, largely on the opening of new stores; and 3) the creation of a new eyewear market in the non-prescription field.
Improving the company’s market share in the domestic eyeglasses market
While it has not disclosed a specific timeline, the company has set a target for 500 eyewear stores in Japan. As of end-FY08/21, the company had 434 stores in Japan. Factoring in domestic market and demographic trends, as well as trends at its competitors, management believes it will be able to expand its sales value-based domestic market share to about 20% (JINS Holdings’ estimated domestic market share in FY08/21 was 16%).
Locations for store openings will likely continue to be in shopping centers and train/subway station buildings, largely due to the overlap between the company’s customers and customers visiting these locations. However, starting in FY08/21, the company has also turned its attention to suburban roadside stores, given changes in consumer behavior since the COVID-19 outbreak began. It believes it can eventually expand its store network to 6–700 locations by increasing the range of candidate locations.
Expanding the overseas business, largely through opening new stores
Considering its prospects for medium- to long-term growth, JINS Holdings is particularly focused on the large Chinese and US markets (it estimates the market size for eyeglasses to be JPY1.2tn in China and JPY3.1tn in the US).
China
There are already companies in China operating multiple stores using low prices as a way to attract customers. In Japan, the company has been able to expand its market share following a “lowest-in-the-market, optimal price” strategy, but this approach does not appear to be particularly effective in China. Accordingly, the company aims to accelerate growth in China in three ways. First, management believes the services it has learned to provide in Japan, including fittings, optometry, and other customer services, can prove a factor for differentiation in China. Second, the design improvements enacted by the company appear to have been favorably received by consumers in Japan, and management believes it can position itself as a company offering stylish and popular eyewear in China as well. Third, through its JINS Screen, JINS MEME products, and efforts in medical devices inhibiting the progression of myopia, the company aims to boost awareness of itself as a brand actively involved in new initiatives and products.
JINS Holdings aims at increasing store count in China by a net 10 stores in FY08/22 (it had 170 stores in the country as of end-FY08/21), with sales reaching JPY8.6bn (+12.1% YoY). The company plans to differentiate itself by supplying made-in-Japan products. To this end, a new Japanese factory built by an affiliated Chinese plant will manufacture eyeglasses domestically and export them to China.
Aiming to grow sales, the company launched its e-commerce site in May 2021 to collect customer data including visit frequency and purchase history. It also operates stores on China’s largest online shopping sites, Tmall.com and JD.com, but securing customer traffic on its own e-commerce site is a looming challenge.
US
The company opened its first US store in San Francisco, California, in August 2015. By end-FY08/21, it had opened six stores in the country, all on the West Coast. US sales in FY08/21 reached JPY950mn (1.5% of total sales), making only a slight contribution to consolidated earnings. However, the US market is considered highly attractive, valued at about JPY3.1tn and with about 210mn people wearing glasses.
The company has no plans to open or close any brick-and-mortar stores in the US during FY08/22, choosing instead to focus on e-commerce sales of eyeglasses. In FY08/21, brick-and-mortar and online stores each accounted for 50% of the sales composition. In the US, customers purchase eyeglasses based on prescriptions from board certified optometrists, which eliminates the need for in-store eye exams and facilitates online purchasing. Customers can try on eyeglasses and see the products up close at physical stores, so the company will retain them for their advertising function, while referring customers from physical stores to its online store.
Creation of a new eyewear market in the non-prescription field
The company in the past has promoted eyewear as everyday fashion through its lightweight Airframe products, and with added functional products that protect the eyes of even those without corrective issues, including JINS Screen JINS Moisture, and JINS Pollen Cut glasses, the company continues to offer new eyewear solutions in the non-prescription field.
The company is working to boost awareness and expand applications for JINS MEME, which contains a three-point electrooculography sensor, an acceleration sensor and a gyroscope sensor, as well for JINS Violet+, which allows the transmission of violet light within the 360–400nm wavelength range.
In addition, the company intends to launch a medical device eyewear inhibiting the advancement of myopia. It plans to develop prototypes, conduct clinical trials, and apply for approval with a target product release around 2023 in mind.
Business
Business description
JINS Holdings is an eyewear retailer focused on eyeglasses. The company manages the design, (outsourced) production, distribution, and sales of its products. In FY08/21, sales reached JPY63.9bn, with domestic eyewear accounting for 80% of total sales and overseas eyewear for 20%. The company was founded in 1988, initially focused on the planning, production and wholesaling of fashion accessories and household goods, but it withdrew from the accessories business in FY08/20.
Sales over the past ten years have expanded at an average annual rate of 12.2%. One of the key appeals of the company is its highly efficient level of operation. More specifically, it has gained market share from its rivals by offering low-priced eyewear, including glasses, that can be ready for sale in as little as 30 minutes from the customer’s arrival. Moreover, with glasses no longer seen as exclusively used to correct vision problems, the company has been able to expand its sales, even as the market for eyeglasses stagnates by: 1) positioning glasses as everyday fashion items; and 2) creating a non-prescription glasses market by bringing in people with normal vision as customers for products with added functions.
As of FY08/21, the company’s gross profit margin stood at a strong 78.9%. It should be noted that the company’s roots are in the fashion accessories business. The apparel sector in Japan saw the rapid spread of the SPA (Specialty store retailer of Private label Apparel) business model in the late 1990s, and the company applied that model as it launched its eyewear business in 2001. While outsourcing production, the company conducts planning, development, and design operations in-house, and lowers procurement costs by bulk purchasing its entire order from the manufacturer. The company’s strong gross profit margins appear the result of its ability to rapidly respond to consumer preferences and demand trends and speed up its planning, production, and sales cycle.
The company’s gross profit margin has been trending upward with increased sales of high GPM eyeglasses priced at JPY12,000 per pair; the company does not, however, expect it to exceed the current level. The company’s JPY5,000 eyeglasses are priced to attract new customers, but in recent years the sales mix has deteriorated, and the company hasn't acquired enough first-time buyers. Against this backdrop, the company is considering making model changes and expanding its lineup of JPY5,000 eyeglasses to secure customer traffic. The company is also willing to lower its gross profit margin.
In FY08/21, the company’s operating profit margin stood as 7.9%, while the SG&A ratio stood at 71.0%. Within the SG&A category, the sales ratio was 24.2% for personnel expenses, 17.0% for rent, 9.3% for commissions paid, and 4.4% for depreciation. While the ratio for advertising costs, including for TV advertising, once topped 10%, it has since declined and now stands at 4.9%.
The company aims for a GPM of 75% (in the 74–77.9% range in recent years), an SG&A ratio of 55% (recently in the 64–68.9% range), and an OPM of 20% (recently in the 8–12.9% range). Factors behind the deviation from the company’s targets include sales per store growing more slowly than expected and the increasingly heavy burden of fixed costs. Rather than reducing costs, the company plans to increase sales per store from the current about JPY110mn to JPY150mn and strengthen e-commerce sales to bolster sales company-wide, reducing the SG&A ratio to 55%.
Applying the SPA model and supplying low-priced eyewear
While several eyeglasses retailers maintained business models in which they would purchase frames from manufacturers, and then select, process, and sell lenses based on the vision and preference needs of their customers, the company was groundbreaking in its adoption of the SPA model. With a history in the fashion accessories business, the company had some knowledge of the SPA model. Moreover, it considered eyeglasses to be a daily fashion item, which likely led to an assessment that the SPA model gaining popularity in the apparel sector would also work in the eyeglasses frames business. However, since no company had found real success in applying the SPA model to frames, the company found itself facing a significant challenge in doing so.
The company develops in-house (or co-develops with partner firms) almost all of its frames but outsources production. No longer burdened with development and with no risk that the eyeglasses retailer won’t purchase the manufactured frames, the subcontractor producing the fames can provide them at a relatively inexpensive price. On the other hand, the company can get a feel for changes in consumer preferences and what sells well based on in-store trends, and by reflecting this in its own designs and ordering frames in the required quantity, it can effectively control inventory risk. Moreover, the mass ordering of frames allows JINS Holdings to significantly lower procurement costs. We understand this is a key factor contributing to the company’s differentiation in the sector.
For lenses, the production process is rather complex, and given the scarcity of manufacturers, the SPA model is not considered appropriate. The company previously sourced mainly from HOYA (TSE Prime: 7741), but now counts several companies among its suppliers. Shared Research believes buying from several suppliers and in one of the largest volumes in Japan (annual sales of roughly 6mn sets of eyeglasses) gives JINS Holdings a certain degree of bargaining power in its purchasing.
Providing glasses at easy-to-understand prices
With the exception of a few products, the company sells frames with a set of prescription lenses, including thin aspherical lenses, for either JPY5,000, JPY8,000, or JPY12,000 (tax not included). The company’s prices are well below the average price for glasses in Japan of about JPY21,000.
A key turning point for the company was the 2009 introduction of an all-inclusive price system. Even up to that point, the company had sold glasses at three easy-to-understand price points (JPY5,000, JPY7,000, and JPY9,000). However, from 2009 it moved to a four price point system (JPY4,990, JPY5,990, JPY7,990, and JPY9,990, tax not included) with the price being the same regardless of whether the customer chose aspherical lenses or thin lenses (bifocal lenses and colored lenses were excluded from this system).
At the time, most eyeglasses retailers set frame prices based on procurement costs and lens prices based on the type and diopter power (prescription). The substantial number of variations possible left many consumers with the impression that prices were difficult to understand and that eyeglasses were invariably expensive. Amid such an environment, the company introduced an entirely new pricing system, based on the idea that glasses should be priced the same as clothing, where a particular item would have the same price, regardless of size.
The company launched this all-inclusive pricing system in a limited number of areas on a trial basis in May 2009. The response from consumers in these regions was immense. It introduced the new pricing system at all its stores in August 2009, judging that, given the company’s procurement capabilities, the impact of the new system on the gross profit margin would be relatively minor whereas the prospects for sales increase was substantial. The company renewed the pricing system again in March 2017, introducing the current three price points (JPY5,000, JPY8,000, and JPY12,000). JINS Holdings maintained its policy of no added charges, no matter the prescription or the thinness of the lens, though bifocal lenses and colored lenses were still excluded from the system. The JPY12,000 price level was established for new products, including those with detailed designs and those with materials and parts which were not previously possible under the prior costs structure.
Although the average unit price for glasses at the company is JPY8,700, which is significantly lower than the national average of JPY21,000, the company has been able to maintain strong gross profit margins thanks to the utilization of the SPA model allowing lower costs.
Creating the market for non-prescription eyeglasses
Creating demand for everyday fashion eyeglasses
With a history in fashion accessories and having emphasized eyeglasses as a part of everyday fashion from an early stage, the company has for some time advocated people having multiple pairs of eyeglasses and the wearing of glasses by people who do not need vision correction. The launch of the Airframe models in September 2009 served to accelerate these trends. The Airframe frames are made from TR-90, a lightweight and flexible nylon resin developed by a medical device manufacturer. Reducing the weight to only about 10gand applying less pressure to the wearer’s temples, the frames reduced the bother of wearing glasses and were quickly accepted by those who do not normally wear glasses. Around the same time, the company standardized its store logos and launched a large-scale TV advertising campaign, which together with the new all-inclusive pricing system, increased brand recognition among consumers. By offering affordable glasses for everyday fashion, the company has been able to effectively capture new demand.
JINS Holdings remains focused on developing eyeglasses as a fashion item. As part of this, the company has been working on its JINS Design Project since 2017. The project aims to “design eyeglasses from their very essence” based on dialogue with designers around the world, with the company intent on continuing to provide “eyeglasses that present value in the times to come.”
All of the company’s newly designed glasses are checked to confirm that they are in line with the “Magnify Life” brand vision, which seeks to broaden the richness of people’s lives. Management believes the sum of these efforts will result in a growing appreciation of the company’s designs by consumers.
Developing products with eye-protection functions
JINS Holdings offers eyeglasses with new features and has continued to focus on creating demand for new eyeglasses. As examples, the company in July 2011 introduced the JINS Sports and JINS Golf products. These feature as standard lenses that are highly impact resistant and have contrast functions specific to different sports (for example, lenses making it easy to differentiate the grass and lenses making it easy to see the surface of the water despite scattered reflections). Designed to be lightweight and resistant to slippage even amid intense movement, the frames use the same TR-90 material used in the Airframe frames. These eyeglasses are designed to promote the desire to use glasses for eye protection and improved visibility even among those who did not wear sport sunglasses.
The company launched JINS PC (now JINS Screen) and JINS Moisture in September 2011, and JINS Pollen Cut in January 2012. The JINS PC glasses feature lenses that are able to cut blue light. Emitted from PCs and smartphones, blue light has a relatively short visible light wavelength (350–500nm) and tends to scatter easily, putting the image viewed right in front of the retina. As such, the image can flicker and is often blurred. This causes the eye to try to continually and unconsciously refocus, resulting in the ciliary muscles becoming fatigued and leading to eye strain. Moreover, it is believed overuse of the muscle to reduce light entering the eye can lead to a reduction in tears keeping the eyes moist.
The company has jointly developed with a lens manufacturer a lens cutting blue light and offers glasses with these lenses even to people who do not need glasses for vision correction. With the goal of reducing stress on employees, some companies with a substantial number of office workers offer JINS PC glasses to those workers free of charge.
JINS Moisture glasses come equipped with a small water container on the side of the frame to increase the level of humidity around the wearer’s eyes. The product was developed based on an idea from Professor Kazuo Tsubota at the Keio University School of Medicine. As the time spent looking at a PC or smartphone screen increases, the number of times a person blinks decreases. Moreover, the increased use of air conditioning tends to lower humidity in offices. Based on these conditions, this product was developed for consumers, even those without vision correction needs, concerned over the condition of their eyes.
JINS Pollen Cut glasses are shaped to help keep pollen causing hay fever from entering the eyes. There have been anti-pollen products in the past, including goggles, but the JINS Pollen Cut products are designed to be similar to ordinary glasses. Moreover, the use of the same lightweight and flexible materials used in the Airframe glasses reduces the burdensome feeling of wearing glasses, making them useful even to those who do not normally wear glasses.
Providing new functions
JINS Holdings continues to offer new functions in eyewear.
JINS MEME: The company launched the JINS MEME lineup of eyewear in November 2015. Weighing 34g-35g, the eyewear contains a three-point electrooculography sensor for which the company has secured a patent, an acceleration sensor and a gyroscope sensor. The eyewear, priced at JPY27,300 for the JINS MEME ES model, has a continuous running period of 24 hours in standard mode and 12 hours in real time mode. By transmitting data to devices such as smartphones, JINS MEME allows the measurement of the wearer’s sleepiness, level of concentration, as well as movement of the head and body.
The eyewear offers the possibility of being used in a variety of ways, including in: 1) detecting driver drowsiness and offering encouragement for rest; 2) learning how to more effectively concentrate by continuously monitoring the user’s level of concentration; and 3) estimating muscle mass variations and bodily strain by continuously measuring posture. The use of data in this latter application allows the user, be they a professional athlete, a runner, or elderly, to select an appropriate training program.
In October 2021, the company launched a new model of JINS MEME, a wearable device that integrates a sensor and battery in the nosepiece of a pair of eyeglasses. It links to a smartphone app via Bluetooth, allowing the app to analyze data collected by the sensor to check a user's health and mental state.
Sales of the original model were sluggish due to its relatively high price (JPY27,300), a small number of frame designs (just three), poor wearing comfort, and limited usage scenarios. The new model of JINS MEME is more reasonably priced at JPY19,800 and revised specifications allow it to be attached to a variety of frames. In addition to allowing users to check information based on complex analysis of posture, time seated continuously, number of steps taken, and other data, the new model allows users to track levels of tension, emotional stability, drowsiness, and concentration based on blink intervals and other factors.
Using research results from JINS MEME, the company established Think Lab workspaces, developed based on the concept of "the best place in the world to concentrate," in Shiodome (Minato Ward, Tokyo) and Ginza (Chuo Ward, Tokyo). It is currently verifying uses of JINS MEME through a series of experimental efforts, intending to develop derivative businesses.
JINS Violet+: The company launched newly developed lenses for children in July 2017, changing the name of the product to JINS Violet+ in March 2018. The lenses selectively allow violet light (360–400nm) through while cutting ultraviolet and blue light in the 380–500nm wavelength range. While normal lenses can cut ultraviolet light by over 99%, the cut rate for blue light can be just 3%, with violet light transmission held to 4%. In contrast, the JINS Violet+ lenses cut UV light by 92%, blue light by 15%, while allowing violet light to pass through at a rate of 65%. The lenses were initially sold at JPY15,000, but were reduced to JPY5,000 in March 2019.
While reduced visual acuity in children is becoming a social issue, the exact reason for this deterioration is still unknown. However, studies have shown that the amount of time spent outdoors can be more of a factor in myopia than genetics or time spent doing up-close work. In other words, even if both parents are near sighted, the risk of myopia in a child can be reduced if he or she spends a significant period of time outdoors. Moreover, even if a child spends a lot of time doing up-close work, time spent outdoors may lower the risk of myopia.
Specially appointed associate professor Hidemasa Torii at the Photometabolism Laboratory of the Keio University School of Medicine in December 2016 announced that research using chicks and clinical research with humans had found that violet light serves to suppress the progression of myopia (elongation of the ocular axis). Violet light is abundant in sunlight. In line with this finding, it is believed that children’s glasses equipped with JINS Violet+ lenses, when worn outdoors, could contribute to a reduced risk of myopia as well as preventing a deterioration in existing myopia. Shared Research believes that as awareness increases, the company could see a certain level of demand from parents who want to reduce the risk of myopia in their children.
Moving into the medical device field: The company announced in August 2019 that it would begin developing medical-use eyeglass products to inhibit the progression of myopia as part of its aim to fully enter the medical devices business. The company’s general idea is to go beyond the basic eyesight correction function of eyeglasses and instead offer solutions inhibiting the progression of myopia.
JINS Holdings launched a project aimed at receiving approval for the manufacture and sales of eyeglass-type, controlled medical devices using violet light in the 360–400nm visible light wavelength, which—according to research by the Keio University— is thought to suppress the progression of myopia. The joint project is being conducted with Tsubota Lab, for which Keio’s Professor Kazuo Tsubota is the president. With the first prototype to be developed in FY08/20, clinical testing is set to begin in 2020. Following approval for production and sales, the company aims to commercialize the product sometime around 2023.
The project is aimed at developing a medical device that inhibits the progression of myopia in susceptible children between the ages of six and twelve. The device would be equipped with a light on the inside of the frame that emits violet light. Based on the irradiance range of violet light in an outdoor environment, the device artificially reproduces the illuminance of natural sunlight, with emitted violet light equal to that received when staying outdoors for about three hours. The light is neither directly nor externally visible and the device is designed to look natural and no different than normal glasses. So that they will be easy for children to wear, the frames are to be made with safe, lightweight, and flexible materials.
The company has constructed a low-cost procurement system in the prescription eyeglasses market in Japan, which is relatively limited in size, and by leveraging its pricing strategy, JINS Holdings has been able to expand its market share in the country. In addition, as part of its effort to create a market for non-prescription eyewear, the company is focused on developing products offering new value and providing non-prescription glasses that can be used on an everyday basis. Some of the products introduced so far have proven popular, and some have not, though Shared Research believes it is the company’s willingness to pursue new ideas that has led to its growth.
Online vision testing: In June 2021, the company announced a capital and business alliance with France's FITTINGBOX S.A., the digital eyewear company. The companies will work together to promote the digital transformation (DX) of the eyewear purchasing experience and work to improve customer convenience by leveraging digital technologies. In this vein, the company is improving the way glasses are sold with the JINS brand e-commerce site, where customers can access services like a 3D virtual try-on or a Lens Simulator to check their vision while wearing optional lenses. The company plans to expand its e-commerce business by introducing the system in China and the US, where e-commerce solutions are expanding.
Contact lenses
99% of the company's contact lens sales occur online, and only 22 stores sell contact lenses. To sell contact lenses over the counter, qualified personnel have to be present, but the company does not have an adequate number of such personnel, and the time required to serve customers means that adding personnel would not be profitable, since the profit margin on contact lenses is so narrow. For these reasons, the company is conducting rollout to brick-and-mortar stores on a small scale and instead uses TV commercials to drive customers to its e-commerce site, with the head office handling shipping and other services.
Overseas development
JINS Holdings opened its first overseas store, in Shenyang, China, in December 2010. The company opened its first store in the US in San Francisco, California in August 2015. Finally, it opened its first stores in Taiwan and Hong Kong in November 2015 and September 2018, respectively. While not having a large impact on consolidated earnings, the company launched franchise operations in the Philippines in April 2018. Excluding franchise operations, the company had 220 overseas stores as of end-FY08/21, including 170 in China, 38 in Taiwan, 6 in Hong Kong, and 6 in the US. The overseas business saw FY08/21 sales of JPY12.7bn (19.9% of total sales) and operating profit of JPY162mn.
After opening its first store in China in December 2010, the company, as of end-FY08/21, had 170 stores in the country. Earnings at these stores have been reflected in consolidated results from FY08/15. In FY08/21, sales reached JPY8.1bn, while operating profit reached JPY415mn. The company estimates a population wearing eyeglasses in China of about 600mn, with the market in the country valued at about JPY1.2tn. The Chinese market is larger than the Japanese market (about 80mn eyeglass wearers, market value at about JPY400bn), and shows the potential to be a clear driver for growth if the company can effectively differentiate itself from its rivals.
However, many dealers in China sell eyeglasses at low prices, making it is difficult for the company to differentiate itself on price alone as it does in Japan, which has resulted in sluggish sales. The company plans to differentiate itself by supplying made-in-Japan products. A new Japanese factory built by an affiliated Chinese plant will manufacture eyeglasses domestically and export them to China.