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.