60 Minutes - Luxottica. Do you know who makes your glasses?

Summary

The video highlights how eyewear prices have skyrocketed over the years, with Luxottica, a dominant player in the industry, controlling a significant portion of the market. The company owns popular brands like Ray-Ban and Oakley and also controls major retail chains like LensCrafters and Sunglass Hut. Despite this control, Luxottica denies monopolistic practices, claiming that high prices reflect the quality and craftsmanship of eyewear. However, critics argue that Luxottica’s dominance stifles competition and inflates prices, making eyewear much more expensive than it should be.

Takeaways

• 👓 Glasses have become significantly more expensive, with some pairs now costing hundreds of dollars, compared to $30 ten years ago.
• 🛍️ Luxottica, an Italian company, controls a large part of the eyewear market, owning many popular brands such as Ray-Ban, Oakley, and designer labels like Prada, Chanel, and Versace.
• 🌍 Luxottica manufactures millions of glasses annually and exports them to countries like China, India, Brazil, and the U.S., holding a global dominance in the industry.
• 💸 Luxottica can charge a high markup, with some glasses selling for up to 20 times the cost of production due to the incorporation of luxury branding.
• 🎨 The company designs thousands of pairs of glasses each year and works closely with fashion houses to integrate designer elements like Chanel’s logo or Versace’s stones.
• 🕶️ Luxottica’s Ray-Ban brand was originally American and has been turned into a premium product after the company bought it and raised its prices.
• 🏢 Luxottica also owns major retail chains like LensCrafters, Sunglass Hut, and Pearl Vision, allowing them to control both the production and distribution of glasses.
• 💼 Oakley, a competitor of Luxottica, was forced to merge with them after being dropped from their retail stores, highlighting Luxottica's market power.
• 🛒 Luxottica’s dominance has led to little competition in eyewear pricing, with other competitors like Walmart, Costco, and Warby Parker being relatively small players.
• 💲 Luxottica sets the prices for glasses, making it a 'price maker,' and critics argue that the variety of brands is merely an illusion of choice, as many are owned by the same company.

Q & A

Why have the prices of glasses increased so much in recent years?

The prices of glasses have increased significantly due to the dominance of one major company, Luxottica, which controls a large portion of the eyewear market. They set higher prices because of their control over both production and distribution.

What is Luxottica, and why is it important in the eyewear industry?

Luxottica is the largest eyewear company in the world, responsible for designing, manufacturing, and selling many major brands of glasses. Their influence spans across production and retail, with ownership of brands like Ray-Ban and Oakley, as well as retail chains like LensCrafters and Sunglass Hut.

How does Luxottica justify the high prices of its glasses?

Luxottica justifies the high prices by emphasizing the functionality, aesthetics, and fit of their glasses. They argue that glasses need to be worn for long periods each day, which requires precision in both design and craftsmanship.

Why are glasses no longer considered just a medical device?

Glasses have transformed from a simple medical device into a fashion accessory or 'face jewelry,' thanks to Luxottica’s collaborations with high-end fashion brands. This shift allowed them to charge higher prices for stylish designs.

What role do fashion brands play in Luxottica's business model?

Fashion brands such as Prada, Chanel, and Versace partner with Luxottica to create designer eyewear. Luxottica designs the glasses, and fashion brands contribute inspiration, brand identity, and design elements.

How does Luxottica's dominance impact competition in the eyewear market?

Luxottica’s dominance in the market suppresses competition by controlling both the production and retail sides of the business. Brands like Oakley, once a major competitor, struggled to compete and eventually merged with Luxottica.

Do customers get a price break on glasses from Luxottica at stores like LensCrafters?

No, customers do not receive a price break at stores like LensCrafters, even though Luxottica owns both the stores and the brands. The prices remain high despite their vertical integration.

Why do people still pay high prices for glasses despite the markup?

Consumers are willing to pay high prices for glasses because they perceive them as luxury items, particularly due to the association with high-end fashion brands. The combination of functionality and brand value justifies the expense for many buyers.

What happened between Luxottica and Oakley?

Luxottica and Oakley had a pricing dispute, leading Luxottica to drop Oakley from its stores, which hurt Oakley’s sales. Oakley’s stock price collapsed, and the company eventually merged with Luxottica in 2007.

How has Luxottica's acquisition of Ray-Ban impacted the brand?

Luxottica bought Ray-Ban in 1999 and rebranded it as a more upscale product. The company temporarily pulled Ray-Ban off the market and raised its prices, transforming it into the top-selling sunglass brand in the world.

Outlines

00:00

👓 The Shocking Price of Glasses: What's Behind the Cost?

Glasses have become significantly more expensive over the past decade, with many people surprised at how much they now cost. Even though they are still made of basic materials like plastic, wire, and glass, prices have surged. This increase is largely attributed to the dominance of a single company, Luxottica, which controls much of the eyewear industry, allowing it to set high prices for both prescription and non-prescription glasses. Luxottica's influence on the market has kept prices high despite the availability of many brands and styles.

05:01

🕶 Luxottica's Influence on Eyewear Fashion and Branding

Luxottica revolutionized the eyewear market by turning glasses into fashionable accessories, rather than just medical devices. Collaborating with brands like Prada, Chanel, and Versace, the company transformed glasses into 'face jewelry,' justifying higher prices due to branding and design details. Despite the existence of cheaper alternatives, premium brands command a significant markup, largely due to the added prestige of designer logos and aesthetics. Luxottica designs thousands of glasses each year, incorporating brand sketches into their final products.

10:03

💼 Luxottica's Control Over Eyewear Distribution and Pricing

Luxottica not only manufactures top eyewear brands but also owns major retail chains such as LensCrafters, Pearl Vision, and Sunglass Hut. Despite this vertical integration, consumers do not benefit from lower prices. LensCrafters' president avoids addressing why the company doesn’t offer lower prices despite owning both production and distribution channels. The eyewear market appears diverse, but Luxottica's dominance means it can set prices for glasses across its chains, making it difficult for competitors like Oakley to survive independently.

🌍 The Illusion of Eyewear Competition: One Company, Many Brands

Luxottica's dominance over the eyewear market creates an illusion of choice. Although it owns many brands and stores, consumers may not realize the lack of real competition. The company’s control extends to vision care plans, like EyeMed, making it nearly impossible for independent brands to compete. Luxottica claims that customers appreciate diversity in brands, but critics argue that the company's control results in high prices and limited genuine choice for consumers. Despite the high costs, people continue to pay for designer glasses, seeing value in the brands they trust.

Keywords

💡Luxottica

Luxottica is the largest eyewear company in the world, highlighted in the video for its dominance in the market. The company designs, manufactures, and retails glasses, controlling a vast portion of the global eyewear industry. This monopoly is a central theme, as Luxottica's control allows it to set high prices on eyewear, leading to inflated costs for consumers.

💡Eyewear

The term 'eyewear' refers to glasses and sunglasses, which are no longer viewed as simple vision-correcting devices but rather as high-fashion accessories. Luxottica helped transform the perception of glasses into 'face jewelry,' allowing them to charge premium prices. This shift from function to fashion is crucial to understanding why prices have surged.

💡Monopoly

A monopoly is when one company controls an entire market. Luxottica's near-monopoly in the eyewear industry allows it to set prices at will, impacting consumers by limiting competition. The script emphasizes that while there seems to be a wide variety of brands, they are mostly owned by Luxottica, thus reducing true competition.

💡Ray-Ban

Ray-Ban is one of the most famous brands owned by Luxottica. Initially produced for the U.S. Army, the brand was bought by Luxottica in 1999 and elevated from a $29 product sold at drugstores to a high-end, $150+ luxury item. This example illustrates how Luxottica enhances brand value and profitability through strategic rebranding.

💡Price Markup

Price markup refers to the substantial difference between the production cost and the retail price. Luxottica's eyewear, which costs little to produce, is sold at prices up to 20 times higher. The video emphasizes this practice, particularly in designer frames, where branding justifies extreme markups.

💡Brand Licensing

Luxottica's business model involves brand licensing, where it designs and manufactures eyewear for prestigious fashion labels like Chanel, Prada, and Versace. These collaborations allow Luxottica to offer high-end products under renowned brand names, further driving up prices by associating eyewear with luxury fashion.

💡Face Jewelry

The term 'face jewelry' is used to describe how glasses have been redefined from a necessary medical device to a fashion statement. Luxottica is credited with this transformation, which allows them to charge more by making glasses a desirable accessory rather than just a tool for better vision.

💡Competition Illusion

The 'competition illusion' refers to the false appearance of choice in the eyewear market. While many different brands seem to compete, the video reveals that most of these brands, retail chains, and even vision care plans are owned by Luxottica, creating a facade of competition and maintaining high prices.

💡Oakley

Oakley is another high-end brand discussed in the video that initially competed with Luxottica but was later acquired by the company. This example shows how Luxottica absorbs its competitors to further monopolize the market, ensuring its control over both premium sports eyewear and everyday fashion glasses.

💡Vision Care Plans

Vision care plans are insurance services that help cover the cost of eye exams and glasses. Luxottica's ownership of iMed, the second-largest vision care plan in the U.S., is highlighted as another way the company controls the eyewear market from manufacturing to retail to insurance, further limiting competition and consumer choice.

Highlights

Glasses are significantly more expensive today, with prices rising from $30 ten years ago to hundreds of dollars now.

One company, Luxottica, controls a significant portion of the eyewear industry, contributing to high prices.

Luxottica produces glasses for many well-known brands such as Ray-Ban, Oakley, Prada, Chanel, Dolce & Gabbana, and Versace.

Luxottica revolutionized the perception of glasses by turning them from a medical necessity into a fashion statement.

Luxottica designs thousands of glasses for various brands, but despite their similar appearance, details like brand logos justify the price differences.

The company sells its glasses at significantly higher prices, with some pairs marked up 20 times what they cost to make.

Ray-Ban, originally made for the US Army, was rejuvenated by Luxottica and is now the top-selling sunglasses brand in the world.

Luxottica owns not only brands like Ray-Ban and Oakley but also large retail chains like LensCrafters, Pearl Vision, Target Optical, and Sunglass Hut.

Oakley once tried to compete with Luxottica but failed, and was later acquired by the company.

Luxottica's dominance in the eyewear market allows it to set prices, influencing the entire industry.

Even insurance companies like EyeMed, the second-largest vision care plan in the US, are owned by Luxottica.

The illusion of variety in the eyewear market is largely created by Luxottica, as many brands and retailers are under their ownership.

Despite owning a large portion of the market, Luxottica doesn’t publicly brand itself, focusing instead on maintaining distinct brand identities.

Consumers are willing to pay high prices for eyewear because Luxottica has turned glasses into luxury items and status symbols.

Prescription glasses can cost upwards of $400 to $600, even though the production costs are significantly lower.

Transcripts

have you bought a pair of glasses lately

bet your eyes popped when you saw the

price tag if you don't go to places like

Walmart or Costco you could easily be

spending hundreds and hundreds of

dollars for a pair that cost $30 10

years ago talk about sticker shock and

it's not as though things have changed

that much they're still made of a couple

of pieces of plastic or wire some screws

and glass why should a pair of glasses

cost more than an iPad

well one answer is because one company

controls a big chunk of the

business the story will continue in a

moment never has there been so much

Choice Ray bands Oakleys glasses for

running and skiing and even reading

oh no a staggering variety of colors and

designers you think the competition

would force the prices down wow look at

that one reason it hasn't is a little

known but very big Italian company

called luxa if you own a nice pair of

specks or Shades they're probably theirs

luxottica is the biggest eyewear company

on Earth it shuns publicity but CEO

Andre aguera invited us in for a look

and it was eye openening do you have any

idea how how many people in the world

are wearing your glasses right now at

least half a billion are wearing our

glasses now luxottica started here as a

small tool shop in a gordo a DOT of a

town in the Italian Alps when frames

were still made of mountain goat horns

this was the factory in

1961 this is what it looks like

today last year laxaa made some 65

million pairs of sunglasses and optical

frames they don't make prescription

lenses and we saw mountains and

mountains of glasses and boxes headed to

China India Brazil and above all to the

US but they're very expensive they can

be very expensive they can but this is

one of the very few objects that are

100% functional 100% aesthetical And

they need to fit your face for 15 hours

a day not easy and there's a lot of work

behind them luxa's product manager

Isabella Sola explained that the company

revolutionized how we see glasses you

think I look cool I think so I think I

look cool too it wasn't that long ago

that glasses were

uncool you'll only wore them if you

absolutely had to I can remember not

that many years ago my mother telling me

that men will never ask me out out if I

wear my

glasses I was to go blind if I wanted

dates but laxaa took this medical

device and turned it into high fashion

by making deals to conceive and create

high quality stylish specs for nearly

every brand and label you can think of

we have Prada we have Chanel we have DOL

gabana we have verace we have Burberry

we have Ral Lauren we have Tiffany we

have bulgary they're not even called

glasses anymore they're

eyewear do people really wear this yes

once glasses became face jewelry luxa

could charge a hefty markup but you know

something I know that that there are

some less expensive glasses that look

very similar to the very expensive for

example this is this is your vog line

which is not that expensive yes and this

is coach coach which is much more

expensive if two women walk down the

street with these

on yes they almost look the same almost

look the same almost it's not the same

not the same because of details on the

frames like the little Chanel C's Polo

ponies or Tiffany blue luxa wouldn't

tell us their markup but glasses like

these can sell for up to 20 times what

they cost to make

and all the glasses are designed by

luxa so you design thousands of pairs of

glasses that's what I do yes where does

Tiffany come into it Tiffany comes in at

every stage basically the fashion houses

send in sketches of their new

collections as

inspiration and down on the factory

floor you can see the work that goes

into differentiating the brands plain

plastic temples go through a painting

machine and come out

Versace stones are inserted one by one

into the DOL gabana and leather is

carefully threaded for that Chanel bag

look if people begin to know that Chanel

glasses were designed by

luoda would it change the way they think

about Chanel glasses you know that would

be totally wrong that would be crazy but

why isn't the luoda name name a brand

name are you in any way hiding it hiding

it yeah not at all we're listed listed

on the New York Stock Exchange where

luxottica Shares are soaring the company

raked in $8 billion last year but their

bestseller wasn't a fancy fashion house

label it was a brand they outright own

Rayban originally made by bouan LOM for

the US Army since JFK nearly every Pres

president has warned them not to mention

Tom Cruz in Risky Business it's like

University of

Illinois and Top Gun but the brand was

poorly managed cheapened and eventually

put up for sale the Italians bought it

in

1999 and had a strategy to turn things

around we stopped selling sunglasses of

from Ren for more or less a year when

you bought it you could buy them for I

don't even know how little money $29 $29

at the drugstore at a gas station and

you took them off the market we

refurbished everything and made them

upscale today those $29 pairs can cost $

150 and more an Rayban is the top

selling sunglass brand in the world when

Americans go to buy these glasses I'll

bet 99% think they're buying an American

brand it is an American brand what's

wrong with it I mean it's an American

brand owned by Italians I think the

world is the world is this it is the

world and we don't realize it that's the

thing before I started working on this

story I'd never heard the name luoda

yeah which is all the more surprising

since lexota not only bought

Rayban they also bought LensCrafters the

largest eyewear retail chain in North

America so now they make them and they

sell them it's great for business but is

it great for the consumer I asked lens

crafter's president Mark wiel how many

non lexotica brands do you sell here we

probably have a few brands that aren't

are not luxotica mostly luxotica mostly

luoda yeah so since luoda owns you does

the consumer get a break on glasses made

by them in Lens Crafters what the

customer gets at LensCrafters is a

variety of services and products

including this broad assortment of

frames that Mark you're not answering my

question I'm asking if if you charge

less for frames made by luxotica since

you're the same company uh I think every

competitor every retail Optical brand

determines what their price is and

whatever their brands are that's a no

customers do not get a break at

LensCrafters the average cost for a pair

of frames and lenses is about $300

you may think well there's choice in the

mall for other glasses but luxottica

doesn't only own the top eyewear chain

in the country it owns another large

chain Pearl Vision and Oliver Peoples

and several Boutique chains and it runs

Target Optical and Sears Optical and

we're not done luoda also owns Sunglass

Hut the largest sunglass chain in the

world so is there a free market in

eyewear no I don't think there really is

I think one company has uh excessive

dominance of the market smartmoney.com

columnist Brett aens says the appearance

of variety is an optical illusion the

reality is it's like you know it's like

pro wrestling competition it's actually

fake competition consider what happened

to Oakley the world famous maker of

Advanced Sports eyewear Oakley was a big

competitor and they had a fight with Lux

and luxa basically said we're dropping

you from our stores and they refused to

sell their glasses in it was a dispute

about pricing and they dropped Oakley

from the stores and Oakley stock price

collapsed how is Oakley going to reach

the consumer if they can't get their

sunglasses in Sunglass Hut there were

some issues between the two companies in

the beginning of the 2000s but both of

them understood that it was better to go

along better to let you buy them uh I

wouldn't say this we merged with Oakland

in 2007 you bought talking they tried to

compete and they lost and then you

bought them I understand your theory but

they understood that life was better

together so now luxottica owns the two

top premium sunglass brands in the world

Rayban and Oakley but luxottica points

out there are other players who's your

biggest competitor in the United States

you could say Walmart also Costco and

emerging online companies like Warby

Parker but other competitors told us

luxottica has them in a Chokehold if you

make glasses you want to be in their

stores and if you have stores you want

to sell rayb band so luxottica can set

the prices as high as it wants Loda

dominance uh it's what's called a price

maker which means that essentially it

can set prices in other people will

follow in its make which she says is why

glasses in general cost so much even at

your local Opticians the whole point of

a luxury brand is to persuade people to

pay $200 for a product that cost $30 to

make well let me show you something why

why is it any different than my shoe

well to some extent may there's actually

a lot of comparisons the difference is

actually that there is you know the

entire shoe industry isn't made by one

company and the same company doesn't

also own all the shoe stores you think

well surely insurance companies covering

vision would complain but guess what

luxottica also owns the nation's second

largest Vision Care plan iMed covering

eye exams and glasses what don't you own

a lot of things not really you seem to

really why not combine everything under

one name I think people love diversities

people love to have have different

brands people have to have different

experiences it's an illusion of choice

if you're all owned by the same company

uh I think this is totally wrong the

question is what kind of choice consumer

has it's not a question of how many you

own how does the consumer benefit from

all of this your prices are still

high if you go to a shoe company would

you say that their prices are high

you're trying to tell me it's all worth

all that money everything is worth what

people are ready to pay and you know

what he's right it seems people are

ready to pay a lot I bet they cost a

Fortune they're not too expensive they

cost almost

$400 with prescription lenses the price

could jump to 600 or more