Let’s talk about hearing aid retail. Last week, we discussed Sonova’s announcement that would consolidate its U.S. retail hearing aid operations under a single banner – and the surprising revelation that it had quietly managed to acquire over 300 locations in the first-place, operating under 47 distinct retail banners.
But first quick word about the “Big Six” manufacturers. Although there are a large number of hearing aid brands in the marketplace, the reality is that somewhere between 90% and 95% of hearing aids are manufactured by just one of six companies, according to The Hearing Review.
The "Big 6" Hearing Aid Manufacturers
The "Big 6" hearing aid companies are:
- Sonova (Phonak and Unitron hearing aids)
- William Demant (Bernafon, Oticon and Sonic hearing aids)
- GN ReSound (Beltone, ReSound hearing aids)
- Siemens (Siemens, Hansaton hearing aids)
- Widex (Widex hearing aids)
- Starkey (Starkey hearing aids)
Sonova, William Demant and GN are all public companies, so there is a lot of information available about their hearing aid operations.1
But not all that much information about their retail businesses! As we’ve noted before, these companies fear impairing their relationships with audiologists – so they are generally quiet about their retail operations, which in effect make them direct competitors with their own customers (the audiologists)
Still, let’s take them one by one.
Hearing Aid Retail, By Hearing Aid Manufacturers
Sonova: Hearing Aid Retail
Sonova operates Connect Hearing as a global retail chain in countries including the United States (300 locations), Canada, Mexico, Australia, Belgium (under the Laperre brand), Austria (under the Hansaton brand – no relation to the hearing aid brand with the same name), Brazil (under the Audinum brand).
Additionally, Sonova has established a joint venture with UK health & beauty retailer Alliance Boots, which in just 12 months has managed to become a leading hearing care provider in the UK, with a 27% share of the private market
William Demant – Hearing Aid Retail
Unlike Sonova, William Demant has yet to consolidate its operations under one brand. But that doesn’t mean it hasn’t been active in the space!
In 2010, William Demant purchased Otix, manufacturer of Sonic Hearing Aids, and in the process acquired Hearing Life, a U.S. retail operation with around $10 million in revenues and 40+ locations.
In 2012, retail sales grew based on “both organic and acquired growth”
In 2013, the group’s retail activities realized a double-digit growth rate, “which was to a large extent driven by acquisitions”
All signs point to these activities continuing. On the company’s most recent conference call, President & CEO Neils Jacobson suggests that “We have allowed capacity for continuing… bolt-on acquisitions in the retail area.”
GN Store – Hearing Aid Retail
GN seems to be a bit different, preferring to work through larger retail channels. In 2013 it became the main supplier to Costco, ousting Rexton (about which more in a future blog post). It also renewed its cooperation agreement with Amplifon, the world’s largest hearing aid retailer and operator of the Miracle-Ear chain, with over 3,000 franchisee locations in the U.S.
In fact, according to its public documents, “GN ReSound generally does not want to own and manage retail.”
But haha maybe they don't really mean it? There's also this: "On September 27, 2013, GN announced that it – through its Beltone subsidiary – had entered into an agreement to acquire Dansk HøreCenter, a Danish hearing-aid retailer” with more than 20 locations.
What Does This All Mean For Hearing Aid Distribution?
We’ll talk a bit more about this in the coming weeks, but there is a strong argument that traditional audiology faces an impending crisis as the world’s population of independent audiologists ages and retires, and isn’t replaced by new entrants.2
So hearing aid manufacturers are in a bind. On the one hand, they are effectively propping up traditional retail, by purchasing locations from retiring owners 3, in recognition that traditional audiology still represents the lion’s share of the market, and will for a few years to come.
But on the other hand, they are hedging their bets on independent retail by investing in partnerships with big-box retailers (Costco, Boots) and constructing branded retail chains of their own (Connect Hearing).
And these bets are increasingly hard for the traditional audiology community to swallow – because they suggest, very strongly, that hearing aid manufacturers don’t believe that customers need to buy through an independently-owned audiologist clinic in order to ensure a good experience.
From their endorsement of these new channels, it’s clear that manufacturers know the industry winds are shifting. But traditional distribution is still very profitable for them! So profitable that they are even propping up the traditional system by buying out retiring owners.
Unfortunately for consumers, hearing aid manufacturers seem to be shying away from risky bets on new approaches to distribution (e.g., online). If there aren't enough independent audiologists left to own and manage the aging brick & mortar distribution system, it looks like the manufacturers may be perfectly happy to step in and do it themselves.
What Does All Mean For Hearing Aid Prices?
Industry consolidation often means higher prices -- so every time a manufacturer buys up another clinic, we understand why consumers may feel uneasy. For the time being, it looks like it's up to Embrace Hearing and other non-traditional companies outside the Big 6 to push for increasing hearing aid access by keeping prices affordable.
1. While Siemens is also a public company, it understandably discloses less about its hearing aid business so it can focus its corporate communications on diversified industrial stuff like trains and wind turbines↩
2. Younger generations' reluctance to enter the profession perhaps indicates their skepticism that a professional audiologist will always be seen as necessary for the adjustment of what some see as a consumer electronic device?↩
3. GN purchased Dansk HøreCenter, for example, because its owners wanted to retire and there presumably no one was lining up to replace them as owner-operators.↩