The Eyes Still Have It

Just how many fortunes can Bob Hillman make by starting the same business over and over?
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Inch for inch, Route 4 in northern New Jersey may be the most densely populated shopping district the world has ever seen. The road, which serves as a main thoroughfare into New York City, doubles as the primary shopping area for affluent Bergen County. Almost every regional department store -- Filene's, Macy's, Bloomingdale's -- is there. So are hundreds of other merchants, including, it seems, a disproportionate number of opticians.

Heading west out of Manhattan, you first pass a 7,500-square-foot Eyelab -- probably the country's busiest optical outlet, exceeding $4 million in sales annually. Just down the road, there's Lens Crafters, part of the chain that expects to be the nation's largest by year's end, and farther west is a Pearle Vision Center.

But take a look over at Route 4 eastbound. There, right between Lens Crafters and Eyelab -- where Toolerama used to be -- a new optical store is going up. According to owner Robert S. Hillman, The Eyecare Co. will open soon.

Most folks wouldn't open an optical store where the competition is as easy to spot as the big E on the eye chart. But then Bob Hillman, 45, isn't most folks. Hillman created both Eyelab and Hillman/Kohan, a chain that became part of Pearle Vision Center. Eyelab, the first optical superstore, was the model for Lens Crafters and its kith and kin.

So, Hillman knows eye wear. But why is he starting a third chain? Thanks to Hillman/Kohan, Eyelab, and real-estate investments (he is part owner of The Mall at IV, where a Lens Crafters shop is located), he doesn't need the money.

But money, says Hillman, has nothing to do with it. It is a matter of pride. The people who bought his creations, he says, ruined them -- and now he is going to show them how it ought to be done. He might not have bothered, if he could have found something else to do. But he couldn't, and Lord knows he tried.

"After Eyelab, I took 90 days off. I was going to play tennis. I didn't. Travel a lot. I didn't. I was jumping out of my skin and driving my wife and kids nuts." Maybe buying a specialty retailer would help. But Hillman couldn't find anything he liked. How about a restaurant? Hillman came close to opening one, but backed out at the last minute. "I would have been competing against people who know the restaurant business. I don't. I do know the eye industry. I am a very good optician."

Hillman's apprenticeship began in his father's Paterson, N.J., laboratory, which supplied local optomertrists. There he learned technical skills. Travel exposed him to marketing. An optician in Indiana, for whom Hillman worked while attending Evansville College, offered a huge selection of frames. Another, in California, had his own lab so he could promise his customers same-day service.

Hillman remembered all this when he suggested to fellow optician Larry Kohan, who did wholesale prescription lens work on the side, that they open their own optical shop. Kohan took some convincing. What Hillman kept describing, in 1966, had never been done. Instead of the typical 500-square-foot optician's shop, Hillman wanted 2,500 square feet -- and he wanted to carry 5,000 frames, not 500. They would make glasses in one hour, he said, and sell them cheaply: for $15 instead of the then-going rate of $25. Hillman, who had all of $5,000 to his name, needed Kohan's help and money. He got it. What would become the first Hillman/Kohan store opened on Market Street in Saddle Brook, N.J., not all that far from Route 4.

Hillman dreamed of selling 80 pairs of glasses a day. They were doing that within six months, and soon customers had to take a ticket for service -- just as they would at a bakery on Sunday mornings. By 1971, Hillman/Kohan had 15 stores in New Jersey and Long Island, N.Y., $6 million in sales, 25% pretax margins, and one very large problem. What do we do now? Competitors loomed. It was either expand or sell. They sold. Hillman/Kohan became part of Pearle Vision Center. The total price: about $7.5 million, which Hillman -- then all of 28 -- and Larry Kohan split evenly.

Hillman stayed on at Pearle, but grew disenchanted. They weren't his stores anymore. Prices climbed, and it just wasn't fun. He left and started an optical wholesale business while he waited for his noncompete clause to run out. After it did, he started Eyelab in 1980.

In essence, he re-created Hillman/Kohan. The stores were even bigger this time, 10,000 square feet, holding even more frames, with Hillman stressing designer names. He moved the lab to the center of the store and enclosed it with glass. Soon, customers were again taking tickets. By the time he had four Eyelabs open, Then Quaker Oats Co. came courting, and he sold, he says, for "in excess of $10 million."

Again Hillman stayed, and again he became unhappy. But this time it took months, not years. "We were Quakerized. We had an office building that housed Eyelab's 50 or so corporate people," Hillman recalls, "and Quaker doubled that. They wanted focus groups, vice-presidents of marketing, finance, computers. I told them we didn't need that. They were saddling us with a structure designed for $100 million in sales, when we were just at $20 million. Profits were being pissed away."

Quaker eventually sold Eyelab to Cole National Corp. for an estimated $43.5 million, claiming the chain no longer fit corporate strategy. Cole National won't say how the business is doing today. But Hillman says that if you want to know, just walk around a store.

As soon as Hillman pulls his pearl-black Mercedes 560 convertible into the parking lot of the Eyelab store on Route 4, he starts complaining. There are a couple of gum wrappers on the ground and an empty soda bottle sitting on a window ledge. "I know those are little things, but it tells you if people care or not," When Hillman sees the bottle is still there an hour later, he picks it up himself.

Inside, Hillman is even more critical. Nobody comes over to ask if the visitors need help, and telephones go unanswered. Three salespeople talk in one part of the store, while customers wait for service in another. There are holes in the display cases where frames are supposed to be, and the store manager is nowhere to be found. "If Eyelab was at 100% when we owned it, it is now at 70%, and that's just not good enough," says Hillman. The Eyecare Co. will be.

It is Hillman/Kohan all over again, but with a 1980s "sense of theater and fashion." A restaurant designer has drawn up the blueprints for the store, and a Broadway lighting director will make sure it is bright enough. As expected, the laboratory will be in the center, but this time the optical equipment will be color coordinated with the decor. Also new: one-of-a-kind designer frames at prices up to $1,000 -- lenses not included. Because he thinks the superstores offer shoddy service, Hillman will be hiring experienced help. (On a tour of the Eyelab and Lens Crafters stores, several people -- unsolicited by Hillman -- hint they might be available.) And, of course, he is going to discount. "When the average price of a pair of glasses is $100, people are getting ripped off. That's just wrong. I'm in favor of making money, but I can do it by discounting 40% to 50%."

Can he? Cece Smith, now a partner in a Dallas venture capital firm and formerly Pearle's executive vice-president and chief financial officer, can't get Hillman's numbers to add up. "The reason the superstores have reduced inventory and switched to smaller stores is to control costs," Smith says. "How is he going to hire better people, carry more stock in a larger store, and still make money by selling for less?"

And, muses E. Dean Butler, president and chief executive officer of Precision Lens Crafter, should Hillman even be worrying about price? Since there is little product overlap between stores, it's hard to comparison shop for frames, and most people don't try, says Butler. "Only 15% to 20% of people buy on price." That's why Lens Crafters stresses one-hour service in its ads, he says, adding, "What is my likely response if he competers with me on price? I'm going to go out and meet him. Discounting makes you extremely vulnerable."

Hogwash, says Hillman, who adds he heard all this when he was starting both Hillman/Kohan and Eyelab. "Yes, if you hire better people, you have to pay more. My labor is 20% of sales. But let's say I pay 10% more. That costs me an extra 2%. But better people are going to be more productive and serve customers better. That means I have to advertise less to get your friend. You will have told him about the good experience you had at my store."

Besides, Hillman points out, selling a couple of $300 or $400 frames a week per store can go a long way toward boosting margins. His projections show him earning 15% pretax. While that is less than the 25% he says he earned in the past, it's still not shabby. And as volume increases, those margins should climb, he says, because overhead will be spread over greater sales.

So Hillman isn't worried about the skeptics. When asked where his funding is coming from -- after all, it will cost $1 million to open each store, and he expects to have four by next summer -- Hillman reaches into his pocket and pulls out a wad of bills.

"From here," he says, pointing to the money. "I don't mean to sound arrogant, but it's my ass that's on the line."

And Hillman -- you get the feeling -- doesn't think it's much of a gamble.

Last updated: Nov 1, 1987

PAUL B. BROWN | Columnist

Best-selling author (and Inc. magazine columnist) Paul B. Brown's latest book, Own Your Future, has just been published. Brown's blog appears every Tuesday, Thursday, and Sunday.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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