Luxottica: How it Enjoys the Monopoly in the Eyewear Industry

Let me ask you a quick question: How do you perceive light? You will say, of course, through your eyes. Excellent, John, that's correct. The eyes are the only organs in the human body that can detect light, and they identify it before your brain assigns meaning to the information. They can also adjust automatically to varying levels of light; contracting in bright conditions and expanding in low-light settings.

While it may be needless to say, the eyes are vital and require proper care. This need has given rise to a thriving industry, which has grown considerably in the past and is expected to continue to do so in the future - the Eyewear industry.

The eyewear industry has seen a massive transformation in recent years, with the emergence of several new players and the introduction of innovative products. However, one company has remained a dominant force in this field, controlling over 80% of the major eyewear brands - Luxottica. As a global leader in the eyewear industry, Luxottica has been able to enjoy a near monopoly-like status, thanks to its vertically integrated business model and its strategic acquisitions. In this blog, we will take a closer look at how Luxottica has been able to establish and maintain its dominance in the eyewear industry, and the impact it has had on consumers and competitors alike.

“Believe nothing you hear, and only one half that you see.” - Edgar Allan Poe

History of Spectacles
Eyewear Industry: Now
About Luxottica
The History and Establishment of Luxottica
The Geography and Spread of Luxottica
Brands under Luxottica
Infamous Mergers of Luxottica
Hype Analysis of Luxottica
Luxottica Facts
How Did Luxottica Become the Dominant Player in the Eyewear Industry?
How Does Luxottica's Monopoly Affect Consumers?

History of Spectacles

Poor eyesight has bothered humans since time immemorial. Roman orator Cicero in the history allegedly complained of being dependent on slaves for reading. The first ever lens was ground from quartz in 750 BCE, that is present day Iraq. The ancient Greeks filled glass spheres with water to see clearly.

Arab polymath Ion al-Haytham laid the laws of optics in 1021, it is said. Most agree that spectacles were first made in Pisa, Italy. The first mass production took place on the land of Munaro, Venice.

In around the years of 1440, a smart person named Gutenberg invented the printing press. Which was a hit at that time. It increased the number of books everywhere, making the process of writing and manufacturing books efficient and fast. This made more people read books and more people getting eyesight issues. Which in turn made eyeglasses popular, and the need for reading glasses increased substantially. You can see the cause and effect relation in all these events.

Are you finding history dull? Let's shift our focus to the present scenario.

Eyewear Industry: Now

While sunglasses are generally used to protect human eyes from Ultraviolet radiation of the sun. Branded corrective glasses and sunglasses are expensive. If you are a person who wear glasses then you would find this relatable. In today's modern world, when we all are glued to our screens, glasses are a form of necessity.

With the technology boom that the world is witnessing right now, the glasses or eyewear industry is also seeing a massive scale. In this section, we will discuss the magnitude and forecasted studies around the sector.

This is a forecast about the global eyewear markets. All the values are in billions, Yes sir billions. The global eyewear market, which is made up of spectacles, contact lenses, sunglasses, and other eyewear products, was estimated to be worth around 140 billion U.S. dollars in 2020 and was forecast to reach a value of 165 billion U.S. dollars by 2025.

Two eyewear executives recently told the Los Angeles Times columnist that quality frames can be made in the range from 4$ to 8$ and if you want designer and customized frames and glasses, that could be made in well under 15$. Then why such a huge markup on price?

According to an IBISworld report, the top four companies manage more than 60 percent of the eyewear industry revenue, following almost a decade of mergers and acquisitions.

These skyrocketing numbers tell one this for sure, that it is one of the hottest businesses out there. The companies providing this product are getting massive and massive. One of the biggest makers of eyeglasses in the world is Luxottica.

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About Luxottica

Luxottica is a multinational eyewear conglomerate based in Italy. The company was founded in 1961 by Leonardo Del Vecchio and has since become the world's largest eyewear company, controlling over 80% of the major eyewear brands.

Luxottica designs, manufactures and distributes eyewear for various brands, including Ray-Ban, Oakley, Persol, Vogue Eyewear, and many others. The company also owns retail chains such as LensCrafters, Sunglass Hut, and Pearle Vision.

Italian eyewear behemoth Luxottica is considered to play a dominant role in the glasses industry all over the globe. It is in fact the largest maker of glasses in the world. It owns several big names in this line of products. It signs exclusive manufacturing and licensing deals with in-fame designer names, like that of Prada, Coach, Chanel. It even owns Eyemed, the biggest eyes insurance provider in the world. So, you see quite a big party !

History and Establishment of Luxottica

Leonardo Del Vecchio, founded Luxottica in Italy in 1961. The name is simply the combination of the Italian words for light (Luce) and optics (Ottica). It manufactured components for the optical industry. Leonardo soon shifted from being a supplier of equipment and components to manufacturers of eyewear. And in 1971 they launched their first line of house-made glasses.

In the 1980s, eyeglasses began to evolve from being a necessary medical device to becoming a fashion accessory. Luxottica recognized this trend and capitalized on it by partnering with various fashion brands. Through these licensing agreements, Luxottica would take inspiration from the fashion brands and design matching eyewear to complement their collections.

Luxottica's first major partnership in this regard was with Giorgio Armani, the renowned Italian fashion designer, in 1988. Following this successful collaboration, Luxottica continued to acquire other major players in the industry, such as Vogue Eyewear, Ray-Ban, and Oakley. The company also ventured into retail, acquiring Cole National, LensCrafters, and Sunglass Hut.

These strategic mergers and acquisitions have helped Luxottica establish a dominant position in the eyewear industry and expand its offerings to include a vast portfolio of brands and retail outlets.

Geography and Spread of Luxottica

In total the brand has around 9000 stores worldwide. Their owned subsidiary EyeMed has over 28,000 eye professionals and the insurance provider covers 39 millions in America alone.

It has its manufacturing units everywhere, I mean almost everywhere, ​​Latin America, and, of course, its native Italy, as well as manufacturing facilities in the U.S., China, Brazil, Italy, and two units in Japan and India. In 2018, Luxottica had net sales of just under 9 billion euros. That's about 10 billion U.S. dollars and an increase of 22 percent since 2013.

To put it straight forward: if a brand wants to sell glasses, they want to be on Luxottica's huge network of stores, and if a store wants to sell popular brands, they'll want to offer Luxottica products, You know them already, Ray-Ban, Chanel, and Bulgari.

Some argue that Luxottica's unreasonable size plus power stifles competition and establishes it as a monopoly, causing the whole industry to fester. The profits in this industry are relatively obscene.

To tackle the trend of eyeglasses being expensive, online retailers like Warby came to the rescue. In an interview, Warby’s founder shared a funny anecdote about once forgetting his pair of glasses and thought about the prices of those glasses. It was ridiculous to pay about 700$ for specs. So, with this inspiration he and his brother led the founding stones to build an online retailer for affordable eyewear. It became an instant hit that after opening their first store in 2013, they have grown to more than 90 stores by now.

Brands Under Luxottica

Luxottica has a lot of brands working under this big umbrella organization. The brands we know and which have a strong presence in the luxury items market. We will only speak of the most notable ones like Ray Ban, Vogue, Oakley, Chanel, Coach, Ralph, Prada and Versace and many more. These names are close synonyms to fashion accessories but these are not all where Luxottica has a stronghold.

Luxottica also owns retail brands to sell its products directly to customers. The enlisted brands are - David Clulow, EyeMed, LensCrafters, Sunglass Hut, Optical, Laubman & Pank, Pearle Vision, and more. These brands and retail stores ensure that Luxottica sells the majority of frames they make successfully to the public. Even if you want and try to go with your favourite eyewear brand, there is a good probability that you will be paying your money to Luxottica.

The above image shows Global revenue of Luxottica, starting from 2007 to 2020. The figures stated are in million euros. This graph is quite evident of the hold that the company has in this product segment.

Infamous Mergers of Luxottica

The company is famous for not only buying retail or fashion stores, it is also known to have had big mergers in the past. These were immensely successful partnering's that bore fruit to every volunteer in the group.

EssilorLuxottica is an Italian and French vertical integrated multinational corp. It is based in Paris and was founded in 2018 from the merger of Luxottica with the French Essilor. The group designs, markets and produces ophthalmic lenses, equipment and prescription glasses plus sunglasses.

The merger company EssilorLuxottica has a portfolio of licensed brands like Ray-Ban, Oakley, Michael Kors, Varilux, Crizal, and LensCrafters. The company has reported 14.4 billion euros in revenues.

Hype Analysis of Luxottica

The success of the brand is not just because of the big spread that the company has. It is just one factor to the overall success.

Partnering with designers

The initial hype was induced by Luxottica by partnering with designers. In fact it was the first corporation to do so. Successful partnerships with designers like Armani and the like made the company sales go skyrocket. They know how to ride the wave of fashion swiftly.

Ray-Ban stories by Facebook

In the recent past, months from now, Facebook partnered with a brand Ray-Ban to introduce “Ray-Ban stories”. They were a sort of smart glasses that could instantly capture moments as videos and pictures to share on social media. These glasses were made keeping in mind the instantaneously sharing of media on social networks. Facebook chose Ray-Ban to partner for the glasses due to their wide reach.

Luxottica Facts

Here are some facts about Luxottica:

• It is the largest eyewear company in the world.
• The name of the company is derived from the combination of two Italian words, Luce (light) and Ottica (optics).
• They were the first to work with designers to turn glasses into accessories of fashion.
• They have over 28 eyewear and 19 retailer brands in their portfolio.
• Luxottica has a vertically integrated business model, which means it controls the entire supply chain from design and manufacturing to distribution and retail.
• Climate change once affected Luxottica eyewear sales in Europe. Reason being late summer.
• The company has faced criticism over the years for its dominant market position and for its pricing practices, particularly in the United States.
• In 2020, Luxottica was ranked number 76 on Forbes' list of the world's most valuable brands, with a brand value of $9.2 billion.

How Did Luxottica Become the Dominant Player in the Eyewear Industry?

Luxottica became the dominant player in the eyewear industry through a combination of strategic acquisitions, vertical integration, brand power, and retail presence.

• Aggressive Acquisition Strategy - One of the key factors behind Luxottica's success is its aggressive acquisition strategy. Over the years, the company has acquired many of the world's most iconic eyewear brands, including Ray-Ban, Oakley, and Persol. By acquiring these brands, Luxottica was able to capitalize on their popularity and build a loyal customer base, giving it a significant competitive advantage over its rivals.
• Vertical Integration Strategy - Another reason behind Luxottica's success is its vertical integration strategy. Unlike many other eyewear companies, Luxottica controls the entire supply chain, from design and manufacturing to distribution and retail. This means that the company has complete control over the production process, allowing it to maintain a high level of quality and consistency across its products.
• Brand Power - Luxottica's brand power is another factor that has contributed to its dominance in the industry. The company owns some of the most iconic and recognizable eyewear brands in the world, including Ray-Ban and Oakley. By leveraging the popularity of these brands, Luxottica has been able to charge premium prices for its products, further solidifying its position as the dominant player in the industry.
• Retail Presence - Luxottica's strong retail presence is another key factor that has helped it maintain its monopoly in the eyewear industry. The company operates over 9,000 retail stores worldwide, including LensCrafters, Sunglass Hut, and Pearle Vision.

How Does Luxottica's Monopoly Affect Consumers?

Luxottica's dominance in the eyewear industry has had a significant impact on consumers. With little competition in the market, consumers are forced to pay higher prices for eyewear, which can be a significant burden, particularly for those on a tight budget.

Critics argue that Luxottica's monopoly also limits innovation in the industry, as there is little incentive for competitors to invest in new technology or designs when they are unlikely to be able to compete with Luxottica's economies of scale.

Conclusion

Reading the article above, one thing is clear, Luxottica is a big player in the eyewear industry. Its recent merger with Essilor is making the company stronger. However the FTA (Federal trade commission) tends to be easy going or sympathetic to vertical mergers. Vertical mergers are mergers between two companies at different areas of the supply chain. In this case, Luxottica makes and sells frames whereas Essilor makes and sells lenses.

Senate Democrats condemned the Essilor-Luxottica merger as an example of corporate consolidation gone too far. This merger will further strengthen the hold that Luxottica already enjoys in the market. So surely this merger is getting on some experts' nerves. This is seen as a group that will almost establish a monopoly in the eyewear industry.

A good thing around all this scenario is that eyewear companies like Warby, are trying to make glasses cheaper for the general public. As it is not a mandate for everybody to go for expensive pairs of glasses or to jump into the fashion line. This will be a game changer for sure in the future as it is already welcomed by the public.

Luxottica will mostly dominate the fashion line with its brands and retail chain. It is forecasted that the corporation will earn billions in this decade, seeing its size and mergers. It is amazing to see a brand as big as this, moulding the industry in such ways, and many people don't even know about the name. Started with humble beginnings, now it is here. It’s truly an eye opener in the story of spectacles.

FAQs

What does Luxottica do?

Luxottica is an Italian eyewear conglomerate that designs, manufactures, and distributes eyewear products. The company owns many popular eyewear brands and retail stores.

Who is the founder of Luxottica?

Leonardo Del Vecchio founded Luxottica in 1961.

Who is Luxottica biggest competitor?

Luxottica's top competitors are Specsavers, Pair Eyewear, TJX and FGX International.

What companies do Luxottica own?

Luxottica owns brands such as Ray-Ban, Oakley, Vogue Eyewear, Persol, Oliver Peoples, Arnette, Costa del Mar and Alain Mikli, as well as licensed brands including Giorgio Armani, Burberry, Bulgari, Chanel, Coach, Dolce&Gabbana, Ferrari, Michael Kors, Prada, Ralph Lauren, Tiffany & Co.

How does Luxottica's monopoly in the industry affect consumers?

Luxottica's monopoly in the industry can lead to higher prices, reduced access to affordable eyewear, limited innovation and choice, and anti-competitive practices.

Are there any alternative eyewear companies that consumers can turn to?

While Luxottica is the dominant player in the industry, there are still some independent and smaller eyewear companies that consumers can turn to for more affordable and diverse options.