Luxottica Group S.p.A. is an Italian eyewear conglomerate based in Milan. As a vertically integrated company, Luxottica designs, manufactures, distributes, and retails its eyewear brands all through its own subsidiaries. The company, presently organized as a subsidiary of EssilorLuxottica which formed when the Italian conglomerate merged with the French optical firm Essilor, is the world's largest company in its industry, both prior to and after its merger with Essilor.[5][6][7]
Luxottica was founded in Agordo by Leonardo Del Vecchio in 1961 as a sunglasses manufacturer selling and branding under its own name. Del Vecchio quickly acquired numerous businesses in the pursuit of vertical integration, buying distribution companies rapidly and signing its first designer licensing agreement with Giorgio Armani. In 1990, the company listed American depositary receipts on the New York Stock Exchange where it traded until 2017.
Luxottica retails its products through stores that it owns, predominantly LensCrafters, Sunglass Hut, Pearle Vision, Target Optical, and Glasses.com. It also owns EyeMed, one of the largest vision health insurance providers. In addition to licensing prescription and non-prescription sunglasses frames for many luxury and designer brands including Chanel, Prada, Giorgio Armani, Burberry, Versace, Dolce and Gabbana, Michael Kors, Coach, Miu Miu and Tory Burch,[8] the Italian conglomerate further outright owns and manufacturers Ray-Ban, Persol, Oliver Peoples, and Oakley. Luxottica's market power has allowed it to charge price markups of up to 1000%.[9]
In January 2017, Luxottica announced its merger with Essilor, in which Essilor would buy Luxottica while Del Vecchio would become executive chairman of the combined company, as well as co-lead the company with then-Essilor CEO Hubert Sagnières.[10][11] The combined entity would command more than one quarter of global value sales of eyewear.[12][13] In March 2018, the European Commission unconditionally approved the merger of Essilor and Luxottica.[14] On 1 October 2018, the new holding company EssilorLuxottica was born, resulting in combined market capitalization of approximately $70 billion.[15] The merger with Essilor additionally gave Luxottica control of Foster Grant and Costa Del Mar, sunglasses brands acquired by Essilor prior to the merger.[16][17]
History
[
edit
]
Foundings of Luxottica
[
edit
]
Luxottica Carlos sunglasses, produced by Luxottica prior to its licensing deals with fashion housesLeonardo Del Vecchio started the company in 1961,[18] in Agordo north of Belluno, Veneto; today the company is headquartered in Milan, Italy.[13]
Del Vecchio began his career as the apprentice to a tool and diemaker in Milan, but he decided to turn his metalworking skills to making spectacle parts. In 1961, he moved to Agordo in the province of Belluno, home to most of the Italian eyewear industry.[19] The new company was Luxottica s.a.s., a limited partnership with Del Vecchio as one of the founding partners.[19] In 1967, he started selling complete eyeglass frames under the Luxottica brand, which proved successful enough that by 1971 he ended the contract manufacturing business.[20]
Vertical integration and acquisitions
[
edit
]
Convinced of the need for vertical integration, he acquired Scarrone in 1974, a distribution company.[19] In 1981, the company set up its first international subsidiary, in Germany, the first in a rapid period of international expansion.[19] The first of many licensing deals with a designer was struck with Giorgio Armani in 1988.[21]
The company listed in New York in 1990,[22] and in Milan in December 2000,[23] joining the MIB-30 (now FTSE MIB) index in September 2003.[24] The listing raised money for the company and allowed it to use its shares to acquire other brands, starting with Italian brand Vogue Eyewear in 1990, Persol and LensCrafters in 1995, Ray-Ban from Bausch & Lomb in 1999 and Sunglass Hut in 2001.[19] Luxottica later increased its presence in the retail sector by acquiring Sydney-based OPSM in 2003, Pearle Vision and Cole National in 2004.[25]
Luxottica acquired Oakley in November 2007 for US$2.1 billion. Oakley had tried to dispute their prices because of Luxottica's large marketshare, and Luxottica responded by dropping Oakley from their stores, causing their stock price to drop, followed by Luxottica's hostile take over of the company.[26]
In August 2011, Luxottica acquired Erroca for €20 million.[27] In March 2014, it was announced that Luxottica would partner with Google on the development of Google Glass and its integration into Luxottica's eyewear.[28]
Reorganization and merger with Essilor
[
edit
]
On 1 September 2014, a new organizational structure was announced, composed of two co-CEOs, one focusing on market development and the other overseeing corporate functions. After the exit of former CEO Andrea Guerra, Enrico Cavatorta was appointed CEO of Corporate Function and Interim CEO of Market (until new and permanent appointment to this role).[29][30][31] Cavatorta left the company 40 days after being appointed CEO. In 2016, it was reported that Luxottica had lost its third chief executive in a year and a half, as Cavatora's replacement, Adil Mehboob-Khan stepped down one year after he gained the position.[32] Upon the departure of Mehboob-Khan, Del Vecchio reclaimed executive powers and became much more active in the company.[33]
In January 2017, the company agreed to a merger with Essilor.[34] The deal also offered a succession plan for Leonardo Del Vecchio, the company's founder.[35] Shortly before the merger completed, reporter Sam Knight wrote in The Guardian, "in seven centuries of spectacles, there has never been anything like it. The new entity will be worth around $50bn (£37bn), sell close to a billion pairs of lenses and frames every year, and have a workforce of more than 140,000 people."[36] On 1 October 2018 the new holding company EssilorLuxottica was founded, resulting in combined market capitalization of approximately €46.3 billion as of the date of the merger announcement.[37]
Eyewear brands
[
edit
]
Persol sunglassesLuxottica's two main product offerings are sunglasses and prescription frames. The company operates in two sectors: manufacturing & wholesale distribution, and retail distribution.[38]
The house brands include the following:[39][4]
The company also makes eyewear under license for the following designer labels:[39][4]
These brands are sold in the company's own shops, as well as to independent distributors such as department stores, duty-free shops, and opticians.[13]
Retail
[
edit
]
Luxottica Retail has about 9,100 retail locations[4][44] in the United States, Latin America, Canada, India, China, Australia, New Zealand, South Africa, the United Kingdom, and United Arab Emirates.[25] The headquarters of the retail division is in Mason, Ohio, United States (North America).[25] Their retail banners include the following:[45]
Luxottica is the largest optical retailer in the United States, with 7.3% of US retail sales in 2015.[47] With its merger with Essilor in 2018 the company owns Coastal/Clearly, an online contacts and glasses retail giant bought in 2014 that ships to over 200 countries beside its original North American market.[citation needed]
Medical managed care
[
edit
]
Luxottica also owns EyeMed Vision Care, a managed vision care organization in the United States.[48] As of 2014, it is the second-largest vision benefits company in the United States.[49][50][51]
Philanthropy
[
edit
]
Luxottica is affiliated with the charitable organization OneSight, formed in 1988.[52] In August 2018, Luxottica restored Accademia Bridge in Venice.[53] In March 2022, EssilorLuxottica announced the launch of the OneSight EssilorLuxottica Foundation to unify the group's philanthropic efforts, primarily providing vision services to underserved communities.[54]
Criticism
[
edit
]
Monopolistic pricing practices
[
edit
]
The company has been criticized for the high price of its brand-name glasses, such as Ray-Ban, Oakley, and several others. A 2012 60 Minutes segment focused on whether the company's extensive holdings in the industry were used to keep prices high. Luxottica owns not only a large portfolio of brands (over a dozen[55]) such as Ray-Ban and Oakley but also retailers such as Sunglass Hut, Lenscrafters and Oliver Peoples, the optical departments at Target and Sears, as well as key eye insurance groups including the second largest glasses insurance firm in the US, EyeMed. It has been accused of operating a complete monopoly on the optical industry and overcharging for its products; for example, temporarily dropping then-competitor Oakley from its frame design list, then, when the company stock crashed, purchasing the company, then increasing the prices of its Ray-Ban sunglasses. In addition, it has been argued that, by owning the vision insurance company EyeMed, it also controls part of the buyers' market as well.[50]
The company has said that the market is highly competitive, and that their frames account for ≈10% of sales worldwide and ≈20% in the United States.[56][55] Euromonitor International estimated that Luxottica's market share was 14% worldwide, with the second-largest company in the industry, Essilor, holding a 13% market share. The third-largest player was Johnson & Johnson, with a 3.9% market share. In October 2018, Luxottica and Essilor merged into a single company, EssilorLuxottica, which now occupies nearly 30% of the global market share and represents almost a billion pairs of lenses and frames sold annually.[57]
The HBO series Last Week Tonight with John Oliver has criticized the company as a prominent instance of corporate consolidation,[58] as has the TruTV series Adam Ruins Everything.[59]
In 2019, LensCrafters founder E. Dean Butler spoke to the Los Angeles Times, admitting that Luxottica's dominance of the eyewear industry had resulted in price markups of nearly 1,000%. In the interview, Butler noted "You can get amazingly good frames, with a Warby Parker level of quality, for $4 to $8. For $15, you can get designer-quality frames, like what you'd get from Prada." When told that some eyeglasses cost as much as $800 in the United States, Butler remarked, "I know. It's ridiculous. It's a complete rip-off."[60][61][62]
[
edit
]
The list of Luxottica shareholders with more than 2% of holdings, December 2014.[63]
See also
[
edit
]
References
[
edit
]
As my fellow four-eyes will know, buying new glasses can be an expensive undertaking. The fanciest frames at LensCrafters often sell for $400-500. Holding those little assemblages of glass, metal, and plastic that cost $25-50 to make in your hand, you might wonder how exactly you were roped into paying so much.
The answer is basic economics. Most frames are manufactured by a single company, named Luxottica. The Italian company makes frames and sunglasses for an amazing list of brands and stores, including:
Prada
Chanel
Dolce & Gabbana
Versace
Burberry
Ralph Lauren
Tiffany
Bulgari
Vogue
Persol
Coach
DKNY
Rayban
Oakley
Sunglasses Hut
LensCrafters
Oliver Peoples
Pearle Vision
Target Optical
Sears Optical
The company also makes Google Glass – though 79-year-old Luxottica founder Leonardo Del Vecchio recently commented that he’d be embarrassed to wear the Google eyewear outside of a disco, and that his disco days are over.
Meet the four-eyed, eight-tentacled monopoly that is making your eyeglasses so darned expensive. Luxottica estimates that at least half a billion people around the world are currently wearing their glasses. I don’t know about you, but I am pushing them up my nose right now.
Luxottica controls 80% of the major brands in the $28 billion global eyeglasses industry. This monopolistic structure of the market leads to profits that are “relatively obscene,” says Tim Wu, a professor of law at Columbia University and the author of The Master Switch. In a speech given at this year's annual conference for New America, a Washington, D.C.-based think tank, Wu remarks that products in some industries seem to only get better and cheaper -- laptops, for example -- while other products, like eyeglasses, remain strangely pricey, with only superficial innovation.
The difference is due to market structure. Because it controls so many prominent brands and retail chains, Luxottica is what economists call a price maker. That means it can set the price of its goods near the highest amount that consumers would be willing to pay for them, unlike more competitive industries, in which competition both encourages constant innovation and forces the price of goods down toward what they cost to manufacture. Having control over the pricing of a huge variety of different brands means Luxottica can also carefully engineer the prices of different brands to encourage you to shell out an additional $80 for that beloved logo or streak of Tiffany blue.
In certain industries, monopolies can be appropriate and natural – the power sector, for example, where it costs less for one company to set up and run a power grid than it would for multiple companies to set up competing power grids. But monopolies have no place in a low-tech consumer product market like that for eyeglasses. In this environment, monopolies create a very cynical form of capitalism – giving consumers merely the illusion of choice rather than choice itself, and extracting a lot of money from them in the process.
The easiest way to bust a monopoly like this is for consumers to recognize that they are being overcharged and patronize competitors. Warby Parker, which is mainly an online sales room for glasses, is putting up some competition, but the atmosphere remains rarified.
Many people, Luxottica representatives included, often explain away the high price of glasses by arguing that consumers are willing to pay a lot for something they wear on their faces 15 hours a day. But even if consumers are willing to pay high prices, that doesn’t mean that they should. Prices are determined in large part by the structure of the market.
1/10/17 update: We received the following statement from a representative for Luxottica:
"We’re proud to make some of the most beautiful and highest quality eyewear in the world, but we are in no way a monopoly. In reality, the optical industry is very competitive and fragmented. Of the close to 1 billion pairs of glasses sold worldwide last year, only 93 million of them were produced by Luxottica - less than 10%. Also, there are literally thousands of eyewear brands available to consumers today and Luxottica makes eyewear for around 30 different brands, only a few of which we actually own. Even on the retail side, half of all glasses sold in the U.S. are done so by independent opticians. The other half are sold by chains including Costco, Walmart, Solstice and many other non-Luxottica brands. So yes, while we have a fantastic portfolio, it is false to say we control the market."