By Tiana Luo
During my last trip to the department store, I stopped by LensCrafters to check their prices. Sure enough, the plainest, most innocuous pair of glasses cost a hundred and fifty dollars. And I thought I was getting ripped off when I purchased my prescription glasses this summer for $56! Turns out, I got lucky. If you don’t go to Walmart or Costco, you could easily be paying $200 or more for a new pair of glasses. When shopping for a new pair of sunglasses, the price is much the same. Why would a combination of wire, plastic, and glass cost half a fortune?
The secret lies on a mountainside in northern Italy, where a small tool shop opened in 1961 selling spectacle parts. It has since expanded to the world’s largest, multi-billion eyewear conglomerate on earth: Luxottica, a company whose name is as little-known as when it first started 60 years ago. Today, it controls an estimated 60-80% of the eyewear industry.
Its founder, Leonardo Del Vecchio, is now the second-richest man in Italy. From the tool shop in 1961, Luxottica went through a period of rapid expansion through Europe. It became publicly listed on the New York Stock Exchange in 1990. The listing raised money for the company, which began buying out its rival brands, starting with the Italian brands Vogue Eyewear and Person.
Luxottica revolutionized how we see glasses by making licensing deals with designer brands, starting with Armani in 1988. Thirty years ago, glasses were medical devices worn only by nerds and old people-- but after Luxottica partnered with stylish brands like Prada, Chanel, Dolce & Gabbana, Ralph Lauren, Tiffany, Versace, and Coach, it turned eyeglasses into high fashion. As part of their licensing partnership, the brands send in their sketches for inspiration. Luxottica itself designs the frames: threaded leather for a “Chanel-bag” look, the Gucci double-g’s, the Ralph Lauren polo pony. The resulting frames sell at more than 20 times the price they cost to make. Would people still pay the same amount-- upwards of $500-- if they knew the designer brands they love did not actually design their glasses?
Luxottica’s best seller, however, is not a fancy designer label-- it’s a brand they acquired in 1999, Ray-Ban. Created by American company Bausch + Lomb, Ray-Ban sold out to Luxottica for a pittance of $640 million, considering how well it’s doing today. In 1999, Ray-Bans cost $29 and you could get them at the corner drugstore. Now, the iconic (and historic) Wayfarer and Aviator sunglasses are $150.
In 1995, Luxottica launched a hostile takeover of the United States Shoe Corporation with the goal of acquiring its subsidiary, LensCrafters. Its ownership of LensCrafters, the largest optical chain in the US, and Sunglass Hut, which it acquired in 2001, played an important role in their hostile takeover of Oakley. The Californian sports equipment manufacturer had a price dispute with Luxottica in the early 2000s, and, as a result, Luxottica stopped carrying Oakley from their stores. This included Sunglass Hut, the largest sunglass chain in the world. In consequence, Oakley’s shares dropped 33% in price, and Luxottica bought it in 2007 for $2.1 billion.
Besides LensCrafters and Sunglass Hut, Luxottica also owns Pearle Vision, Oliver Peoples, and several boutique chains. It runs department store subsidiaries Target Optical and Sears Optical. Luxottica is what is called a price-maker, a company that sets the industry-wide price for others to follow. It’s tough to compete with Luxottica: if you’re a manufacturer, you want your glasses to be sold at LensCrafters or Sunglass Hut. If you’re a retailer, you want to have Ray-Bans and Oakleys in your stores. Luxottica’s biggest competitors are Walmart, Costco, and online companies like Warby Parker. It combines the monopolizing strategies of horizontal integration-- buying out competitors like Oakley-- with vertical integration-- controlling all stages of production, designing to manufacturing to distributing. Luxottica even owns EyeMed, the nation's second largest vision-care insurance company, covering eye exams and glasses. In other words, a near monopoly-- which helps explains why glasses in general are so expensive. Luxottica can charge as high a price as it wants.
And why wouldn’t they? Glasses are something people wear on their face every day. They’re a feature people associate with their identity-- perhaps as a result of Luxottica’s marketing-- and people are willing to pay hundreds of dollars per frame, even if it only cost $30 to make. Sure, some of that money goes into hidden costs like wages, overhead, research and development… but there’s no denying that profit margins are huge. What do you think? Is Luxottica a classic example of capitalism gone wrong, an unfair exploiter of unaware consumers? Or is it an intrepid trailblazer, transforming the negative societal stigma of wearing glasses?
In 2014, Luxottica partnered with Google to develop Google Glass-- web-connected eyewear. In 2017, it announced a merger with Essilor, the second-largest company in the industry, which specializes in prescription lenses-- an area of the field Luxottica has until recently left unexplored. Each year, Luxottica makes 77 million pairs of sunglasses and optical frames. At least half a billion people are wearing their glasses right now. Are you?