Monopolistic Tendencies in the Prescription Glasses Industry

Dated Jan 22, 2019; last modified on Mon, 05 Sep 2022

Luxottica - Queen of the Seven Kingdoms

Luxottica owns and licenses Armani, Brooks Brothers, Burberry, Chanel, Coach, DKNY, Dolce & Gabbana, Michael Kors, Oakley, Oliver Peoples, Persol, Polo Ralph Lauren, Ray-Ban, Tiffany, Valentino, Vogue and Versace.

Italy’s Luxottica also runs EyeMed Vision Care, LensCrafters, Pearle Vision, Sears Optical, Sunglass Hut and Target Optical. It also merged with the world’s leading maker of prescription eyeglass lenses and contact lenses, to form EssilorLuxottica.

I wonder if there’s a chart of the super companies that exist using different names. I’ve noticed this enough times, e.g. Xfinity being another face for Comcast. Funny that Luxottica doesn’t crack the list of corporate acquisitions (en.wikipedia.org) . The mergers and acquisitions also happened in the EU whose regulations are usually more consumer-first than US ones.

The acquisitions make Luxottica a major player in the seller’s market (production, distribution) and the seller’s market (vision insurance). EssilorLuxottica controls about 30% of the global market share.

The Markup

While the true price of acetate frames is \(\ge\) $10, the average cost of the finished product is \(\approx\) $231. Precision work for lenses is automated too. Reasons given for the markup: fit, comfortability, precision work.

In the 90s, producing quality frames cost \(\approx\) $10 - $16 and lenses went for \(\approx\) $5 - $15. LensCrafters then sells these at $99, and independent opticians then increase the price too. Despite advancements, LensCrafters now sells at hundreds of dollars. $800 is just a total rip-off.

The more intermediaries there are, the higher the rip-off - and therefore the chance to undercut the incumbents. Warby Parker is certainly way more affordable, but it’s not like they’re bleeding money. Luxottica had a gross profit of €5B and a net income of €0.9B in 2018 . Because Warby Parker is still private, it’s hard to know what they made. I doubt it’s enough to make a dent on Luxottica’s bottomline.

References

  1. Why are glasses so expensive? The eyewear industry prefers to keep that blurry. David Lazurus. www.latimes.com . Jan 22, 2019.
  2. Column: How badly are we being ripped off on eyewear? Former industry execs tell all. David Lazurus. www.latimes.com . Mar 5, 2019.
  3. Luxottica - Criticism. en.wikipedia.org .