David R. Henderson  

In Praise of Costco Competition

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New glasses.jpeg

I had a wonderful experience at Costco in Sand City, California on Friday. I spent about $50 and saved about $350 and a lot of time.

First, some background. Whenever I travel, I take my pair of glasses that I had before the pair I'm wearing. That's because of an experience I had just before going on C-SPAN in 2001 to discuss my book The Joy of Freedom: An Economist's Odyssey. Twenty minutes before it was to start, a screw fell out of my glasses and the temple fell off. I needed glasses because I wanted to read passages from my book. Fortunately, Mary Theroux of the Independent Institute found a small screwdriver and fixed them. But from then on, I have always traveled with my second-most-recent pair of glasses as backup. They're not perfect--that's why they are my second most recent. But they're better than nothing.

A little over two weeks ago, I was in Jacksonville, Florida to teach a course in person to a group of students on the Navy base there. As I was rushing to leave my hotel, I cleaned my glasses too quickly and the frame broke like a twig. So I used my backup pair.

When I got back in town, I went to my optometrist. The staffer looked up the frames, which had cost me, if I recall correctly, over $200, and found that those frames were no longer available. Moreover, she said, they didn't have any frames that would fit my lenses. So I would need new lenses and new frames, for a grand total of about $400. I decided to live with my new glasses until January so that, if we had a very bad health year in 2016, with large expenses not covered by our health insurance, I might hit the threshold on my itemized expenses for health care. (The threshold is almost totally irrelevant for people with incomes over $100,000 annually and even reasonable health insurance. For people my and my wife's age, it will be 7.5 percent of adjusted gross income in 2016.)

On Friday afternoon, while I was out Christmas shopping, I was near the local Costco. I remembered how well they had done for me in a very thorough hearing test that caused the young woman doing it to conclude that I shouldn't buy a hearing aid, and I recalled that they have a trained staff that sells glasses. So I dropped in, waited only about 5 minutes, and said to Carla, the woman who served me: "I'm trying to decide whether to bring my business from my current optometrist to Costco and whether you can help me will be a big factor in that decision." I showed her my broken glasses and she went over to look at some frames. The first ones she tried didn't work and she said that because so many frames nowadays are square, while my lenses have a little curve to them, she wasn't hopeful. I was ready to resign myself to going back to my current optometrist but Carla persisted and found some frames with more curvature. She took out the plastic lens, unscrewed my glasses to take out my lens, and put the lens in the frames, and voila! The lens fit beautifully. So she put in the other lens and cleaned the glasses. I put them on. The frame needed no adjustment to fit and I suddenly saw clearly. I realized that the hour or so that I had worked less per day for the last two weeks was probably due to my getting tired earlier due to eye strain. Cost to me: $49.99 plus tax.

I will be going back to Costco.

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COMMENTS (9 to date)
Olaf writes:

I also enjoy COSTCO. Their employees are always busy and happy, not standing around idle like many competitors. A manager of one of our 3 Sam's Clubs told us he looked forward to joining COSTCO for better working conditions. COSTCO is a great study in economics from their selection of what they think consumers want, where it's placed (CEO input) down to the $1.50 hot dog: https://www.youtube.com/watch?v=wOwJ4PXt3GM

ColoComment writes:

At my age (~70 yo), I get annual eye exams, but only replace my lenses every other year or so. (I've worn the same frames through several lens changes.) There's never much change in my prescription from year to year, so that works for me. I pay my routine/foreseeable health care expenses from an HSA, so I impose that rationing on myself.

I have never understood why, when there are optometrists on almost every corner, the cost of lenses and frames has not decreased. Contact lenses (which I cannot wear) are available at low cost and via the internet with a prescription.

Even Lenscrafters, which, after all, is a nationwide chain, has not lowered the price of lenses and frames.

Why has market competition failed in this industry? I know nothing about how many suppliers there may be: is it that there are too few for true competition?

Sevesteen writes:

ColoComment, There isn't as much brick and mortar competition as you might think--a huge portion of the eye industry is owned by Luxottica--When I looked Lenscrafters, both Sears and JCPenney optical departments and a bunch of others plus most of the frame brands and Eyemed vision plans were all under the same parent.

I've had very good luck with online glasses especially for spare pairs--but make sure you get your PD in addition to the prescription information, that isn't usually included in the prescription. Prices are somewhere between 1/10 and 1/3 of what local places charge depending on features, and the lens quality seems identical. You really can get decent single vision glasses including lenses for $15 shipped, and my last order included progressive bifocals for $42.85.

David R. Henderson writes:

What is a PD?

ColoComment writes:

Thx, Sevesteen! I will explore that.

I have been hesitant to venture into the online prescription glasses universe for something that I wear all day, every day, and that I could not readily function without. (my computer screen goes blurry at about 18 inches.)
Because I am still working, I have progressive trifocals (the mid-range is for the computer screen distance), in both clear and sunglasses.

David, a google search reveals:
"Pupillary Distance (PD) or interpupillary distance (IPD) is the distance (the industry standard is to measure in millimeters) between the centers of the pupils in each eye. This measurement is used when preparing to make prescription eyeglasses."

Most opticians do those measurements when you order new frames/lenses. I did not know that optometrists might include that as part of the prescription?

David Friedman writes:

I've gotten all of my glasses online for some years, mostly from Zenni.com. Checking my most recent order, it cost $46.75.

For two pair of glasses. Single vision, anti-reflective coating.

I like Costco, but I believe their glasses are considerably more expensive.

Jon Murphy writes:

I did not know Costco did eyes

David N writes:

I love Costco too but for eyeglasses check out Warby Parker. And for backup glasses check out 39dollarglasses.com. I'm not a shill, just a satisfied customer of both firms (and Costco too...)

MG writes:

I did not know COTSCO did hearing tests.

I agree COTSCO's business model adds huge value (not only to consumers but to producers as well), but I think your example highlights more low value added by the Optician's business model.

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