SmileDirectClub: A Cautionary Tale for Hearing Aid Users

December 10, 2023

In the evolving landscape of healthcare, disruptive business models aim to revolutionize traditional practices by offering cost-effective and convenient solutions. One such innovation was SmileDirectClub, a company that promised to transform orthodontic care by eliminating the need for in-person visits to orthodontists.

However, the sudden closure of the company has left numerous customers in a difficult situation, without any assistance, adjustments, refunds, or their "Lifetime Smile Guarantee". This serves as a reminder of the potential risks associated with new business models, which may or may not be sustainable.

As the hearing aid industry embarks on a similar journey with the introduction of over-the-counter (OTC) hearing aids, it's crucial to reflect on the lessons learned from SmileDirectClub's journey.

The Bold Promise of SmileDirectClub

SmileDirectClub emerged on the scene with a daring proposition: to offer straighter teeth at a fraction of the traditional cost, sans the orthodontist visits. Their website painted Orthodontists as the greedy middlemen in their industry. “Don’t feel bad for the middle man!”, one blog post proclaimed. Their business model revolved around mail-order clear aligners and telehealth support, a concept that piqued public interest and led to an impressive IPO valuation of nearly $9 billion in 2019.

However, despite the initial success, the company faced criticism from dental professionals and regulatory bodies, including the American Dental Association. Concerns were raised about the quality of care and patient safety, following several customer complaints about the treatment results. SmileDirectClub argued that it’s lower prices and accessibility were necessary to combat low adoption rates for people needing teeth straightening.

The Downfall and a Cautionary Tale

Despite its promising start and having over 2 million customers, SmileDirectClub struggled to turn a profit, amassing nearly $900 million in debt. The final blow came on Friday, December 8th, when they announced the abrupt termination of operations, replacing their website with an list of FAQs about the closure. This move left customers stranded with pending orders, incomplete treatments and voided guarantees. The company's promise of a "Lifetime Smile Guarantee" ended up being an empty one, with SmileDirectClub recommending that customers seek help from the very professionals they were told they wouldn’t need. To make make matters even worse, they are expecting their customers to continue making payments on their incomplete treatments.

See FAQ below.

FAQ from SmileDirectClub
Closure FAQs on SmileDirectClub's website

The Emerging OTC Hearing Aid Market

Similar to SmileDirectClub's attempt to democratize orthodontic care, the FDA's recent rule change for OTC hearing aids aims to make hearing care more accessible. The new regulations allow adults with mild to moderate hearing loss to purchase hearing aids without a prescription. This regulatory shift opens the market to new entrants, offering cost-effective solutions outside traditional medical channels - and it will result in more DTC-type options offering to “cut out the middleman” like SDC did.

However, the SmileDirectClub saga serves as a stark reminder of the potential risks associated with such disruptive models. The allure of convenience and affordability might come at the cost of quality, reliability and sustainability. Recently, a number of startups in the hearing care space have struggled as well and we simply cannot ignore the financial challenges posed by these new hearing care models. Here are just a couple of recent examples:

Eargo, a DTC player in the hearing aid industry, has reported significant losses and as a result, has lost 82% of it’s stock value (and over 99% from it’s all-time high). In 2022, their revenue was $37.25 million, but they faced losses of $157.49 million. According to my analysis their latest annual report, they lost around $6500 PER CUSTOMER.

BuyHear, a popular online retailer that promised lower prices on name-brand hearing aids and remote hearing care, shut down after only a few years, leaving their customers without service (and reportedly in some cases, without a valid warranty).

Lively, another entrant in the hearing care market, was recently acquired by GN Hearing and now operates as JabraEnhance. At the time of acquisition, press releases reported a projected a revenue of around DKK 100 million in 2021 but an EBITA loss of DKK 170M (around 25M USD). In GN Hearing’s latest annual report, they list a loss of DKK 187M, but have lumped JabraEnhance in with their “Emerging businesses”, so it’s difficult to know precisely how much that project is losing.

The stock price for Innerscope Hearing Technologies, a publicly traded company on the OTC markets that had acquired iHearMedical and HearingAssist, has shed over 99% from it's peak value, despite touting partnerships with Walmart, BestBuy and RiteAid. And now at least one of the companies that the direct-to-consumer company acquired is claiming breach of contract and attempting to recover its assets.

These examples highlight the financial challenges that even “successful” companies face in this evolving segment.

Risks, Considerations, and Advice for Consumers

The examples of SmileDirectClub, BuyHear, Eargo, and Lively and others underscore the perils associated with emerging "disruptive" healthcare companies. These businesses may promise innovation and affordability, but their financial sustainability and ability to deliver on promises remain questionable. For some, it appears that they are better at raising capital from investors than they are at creating a sustainable business for their customers.

I'm not saying that people shouldn't consider over-the-counter (OTC) hearing aids. However, consumers seeking a dependable solution to their hearing problems should also take into consideration that the promises made by new startups are often not fulfilled.

Good healthcare isn't cheap or easy – it's an investment in one's well-being. It's crucial to trust established, reliable healthcare providers, even if it comes at a higher cost. This applies to dental care, and it also applies to hearing care.

A Word of Caution and a Disclaimer

The evolving landscape of healthcare, marked by technological advancements and regulatory changes, presents both opportunities and challenges. While innovation in healthcare delivery is vital, it should not compromise the quality of care. Consumers must approach new healthcare solutions with informed caution and trust in established, reliable healthcare providers.

Disclaimer: I most certainly have bias as I have worked in hearing healthcare for over 22 years - in various roles including clinical settings, the manufacturing sector, and with digital agencies supporting audiology clinics. Additionally, I have personal experience shopping for hearing aids for my parents. I am currently the co-founder of Audflow, a marketing agency that specializes in Audiology practices. I also serve as the Chief Marketing Officer of HearingTracker, an independent company that reviews hearing aids and provides hearing aid resources, comparisons, sound samples and more. I also work with Dr. Cliff on HearingUp, a provider network of hearing care professionals committed to using evidence-based best practices in hearing care.

(My) Final Word

With over two decades of experience in this industry, I have observed numerous attempts by companies to disrupt our field. While I welcome the efforts of others to enhance the patient experience, I have also witnessed companies making bold promises, only to vanish within a few years. It is important to recognize that hearing healthcare, like orthodontics, may appear simpler from the outside than it truly is.

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