Which is your favourite eyewear brand? Prada, Chanel, Dolce & Gabbana, Versace, Burberry, Ralph Lauren, Tiffany, Bulgari, Vogue, Persol, Coach, DKNY, Ray-Ban, Oakley? Well, the obvious answer for most people would be Ray-Ban. But do you know, you can buy eyewear from any of these brands, and the profits will be reaped by one Italian entity? That’s right. Have you heard about Luxottica? Chances are, you have not. Luxottica owns the global optical and eyewear industry. It defines a monopoly. In fact, monopoly and Luxottica are synonymous with each other.
In the United States, branded eyeglasses cost $400-500 on an average – without lenses, of course. The frame itself costs hundreds of dollars. But why is a plastic frame so expensive? Well, because one – it is branded, and two – no brands are offering lower prices – because all eyewear brands are owned by one company. So, Luxottica controls the global eyewear industry and can charge consumers as it deems fit. There are no alternatives, which is why consumers are psychologically tricked into believing that making the frames would be an inherently expensive task for ‘manufacturers’.
But it is not. A normal frame costs close to $4 to make, while a designer or branded one can cost the manufacturer $15. Add to that logistics, overhead expenses, and a decent profit margin – a branded frame should not cost more than $50 in the United States. And yet, people end up paying $700 for it. Why? Because Luxottica chooses to make an astronomical profit and has a monopoly over the eyewear industry. It rules the market because there is nobody which can challenge it. Luxottica is what economists call a ‘price maker’.
As of 2014, Luxottica estimated that at least half a billion people around the world were wearing their glasses. But their name was not on those glasses, mind you. They were sold under different names – Ray-Ban being the most popular among the lot. In 2014, Luxottica controlled 80% of the major brands in what was back then a $28 billion global eyeglasses industry.
Currently, Luxottica produces about 70% of all name brand eyewear. Interestingly, Luxottica is a master at business. Luxottica is not a single price monopoly, as it practices a form of ‘price discrimination’ by having multiple brands aimed at different consumers. So, a Ray-Ban costs more than, say, an Oakley frame, even if they are made in the same factory, by the same worker. This helps Luxottica cater to a wide array of consumers, whose financial strengths are very diverse.
Hold your breath. There’s more. Not only does Luxottica control 70% of the world’s eyewear manufacturing, but it also has a monopoly over the distribution and sale of its own products (which are named differently)! Therefore, if you decide to buy a spectacle frame in the United States from a showroom – that showroom will be owned by Luxottica too! This way, Luxottica does not have to pay dealers to sell its products. It manufactures eyewear and sells it on its own.
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Do you know what this also does? It kills competition. Since all eyewear stores in America and other major countries around the world are owned and operated by Luxottica, other companies that manufacture eyeglass frames are required to pay a significant cut to the Italian optical giant. If they do not, the company refuses to sell their products.
Are you ready for some more revelations? Luxottica owns the second-largest American optical insurance company – EyeMed, as a result of which, it also controls part of the buyers’ market. Luxottica Retail has about 9,100 retail locations in the United States, Latin America, Canada, India, China, Australia, New Zealand, South Africa, the United Kingdom, and the United Arab Emirates. By the way – Luxottica also owns all major lens brands. Crizal, for example, is owned by the company.
In January 2017, the company agreed on a merger with the French Essilor. The deal also offered a succession plan for Leonardo Del Vecchio, the company’s founder. On 1 October 2018, the new holding company EssilorLuxottica was founded, resulting in a combined market capitalization of approximately €57 billion.
In India, Luxottica has a tie-up with Titan, which is owned by the Tata Group. No matter which eyeglass frame you purchase, or which sunglass you fancy – one company will reap the profit, and that is Luxottica.