Are they that good at taking advantage of positional goods and marketing? Are they litigious? Do they use kickbacks effectively? Are they buying out competition, and, if so, how are they doing it and why is new competition not emerging?
A situation like this appears to be a complete affront to nearly any economic model I can think of, and demands attention.
Additionally, we in the startup community should all be sitting around and thinking: "Wait, high margins, simple product and I can sell it online... Wait, what?"
So it's basically vertical integration (exclusive manufacturing rights and retail presense) + economies of scale. They made themselves a very powerful intermediary and signed some very lucrative exclusive contracts to compound that advantage.
There are people taking advantage of this. Namely, Warby Parker.[1] They opened retail stores to combat Luxottica's market share in that arena, manufactured their own eyeglasses, and raised $41mm in funding to do so. They're growing rapidly, but still a relatively small part of the overall market. They originally were going to price their glasses at $50, but found that consumers branded their products as cheap so they artificially raised the price to $100! Still enough to undercut the competition, but shows you how the current market has skewed consumer perceptions of price/quality.
http://www.masoneyewear.com/buy-eyeglasses-online-purchase-g...
You have correctly identified Luxottica's value proposition: "You don't know how to get into eyewear, but we are experts on it. Partner with us!"
However, to even move the needle for Luxottica, that brand partnership has to be worth many millions of dollars.
Warby Parker is not competing against Luxottica. They are not trying to do white-label eyewear for other fashion brands. Warby is simply another fashion brand. They are competing with the other brands that Luxottica is making glasses for.
There is another company (which I used to work for, called Eponym, Inc.) who is a closer competitor to Luxottica in terms of trying to capture the market of fashion who want to get into eyewear. Though the success of selling glasses to individual customers is important, Luxottica is more of a B2B partnership whereas Warby is B2C.
It's being a 2 sided market,same like ebay - a meeting place between most brands and most consumers.And we know that those types of businesses are very tough to attack, and probably even more so offline.
In a way, similar to walmart, but luxury brands don't fight through lower prices, so it might enabled luxxotica to ask them not to sell lower at any other place. In a sense this luxxotica monopoly is great for luxury brands, so i could even imagine a scenario where luxxotica tells to each brand "we're building a monopoly on glasses in the u.s., and we want this place to be the ideal place to sell luxury goods ... , please help us" - why won't they help ?
So if you control the retail chain, you've got the monopoly.
They said their competition was walmart. And that they bought Oakley after refusing to stock their product.
"In 2013, French lens manufacturer Essilor purchased a majority stake in EyeBuyDirect": http://en.wikipedia.org/wiki/EyeBuyDirect
"France’s Essilor International and Italy’s Luxottica Group, the two largest optical companies in the world, have ended merger talks that took place in secret over the past 18 months." http://www.insightnews.com.au/_blog/NEWS_NOW!/post/essilor-a...
Okay, competition's alive for now. How long will that last?
I'm SUPER satisfied with them and have been telling everyone I know to use them.
It's very difficult to find ones that are fitted exactly right and look the way you want. If you re-order exactly the same frame style and size as you've had previously, then you can do alright, but it's hard to get the same experience as with a physical store.
Also, people often put off getting new glasses until they have to, and it's convenient to get it all done in one shot.
Additionally, the business is still sitting on some convenient anti-competitive regulations that exist at the state level in most places.
Another big factor is insurance. Health insurance often covers enough of the cost of eye exams and glasses, people end up not caring how much it actually costs.
The fact that there are many places to buy glasses online but they still have a very limited marketshare is perhaps the best evidence that it's not really a comparable experience.
Offhand, it seems like this stuff isn't that difficult to make. After all, it's just frames made out of plastic, right? But it is at this point we get a glimpse into what it takes to manufacture products.
The basic design of glasses - like any accessory - is a skill in itself! We look at the shape, the materials, used, the colors, the hinges, the nose-pads, and the aesthetic of frames. Many of us can look at a pair of glasses and "know" that they are styled for men or women, and different frame shapes and colors are better suited for different face shapes and skin tones.
This is all to say that, even before we start manufacturing, one has to find talent who understands all of these aspects of accessory design in order to produce a great product. Parallels to software engineering suggest themselves.
When it comes to manufacturing, most all of it is done outside the US in China. Physical manufacturing is difficult. There is a years-long iterative process of choosing materials, manufacturing samples, working with the vendors, and ensuring quality. Maybe you are importing acetate from another country. Oh, and it is February - you planned for Chinese New Year, right? Import these frames into the US and let them sit in customs for a month. Etc. Physical manufacturing is hard.
What if you're making eyewear for another brand? Now you have to design things which are consistent with that brand's aesthetic.
Then you have to find an optical lab to fulfill prescriptions. A lab which is reliable, does not ship products with scratches on lenses, and has strong inventory controls. Optical labs, incidentally, are really expensive operations to run because the machinery is so specialized.
And then there is the shipping, logistics, and customer service pipeline.
At a unit level, it is true that glasses are pretty cheap to make. In that sense, because it is easy to get into the market - which is relatively unregulated compared to, say, payment processing - you deal with a lot of unscrupulous businesses and middlemen trying to peddle bad-quality goods.
Eyewear may have recurring customers, but perhaps not so much brand loyalty. Many customers want to physically try on frames before buying, which increases customer acquisition costs (either via home-try-on programs or physical showrooms.)
Companies like Luxottica, I have heard, sell their eyewear to mom-and-pop optometrists and use sales data to figure out the size of the market. Then they plop down with a Lens Crafters.
This is all to say... it is a difficult business, there are many competitors, it is hard to wade through the crap, it is hard to find good talent, and things like aesthetics and brand recognition are important - and take time to develop. Not as easy as it seems!
So, why is that?
jbert said above: "people want to try on several pairs of glasses and see which ones they look best in." That seems like a very good reason that is different from any other industry.
> 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 Ray-Bans! So Luxottica can set the prices as high as it wants.
But, in the UK I could choose to buy luxury glasses, but places like specsavers will always offer affordable GBP 20 frames with free lenses as well. And of course the eye test is also free in Scotland.
It's like if Gucci not only was the most common retailer of clothing—and by an enormous margin—but also owned the tailors conveniently located next door.
The part I like best about Zenni is the oleophobic hard AR coating option. It doesn't cost an arm and a leg, and actually lasts a fairly long time without scratching. (If you wear glasses you know that no matter how carefully you clean your glasses, they scratch. And the expensive coatings flake off.) Now I clean my glasses with soap and warm water in the morning, and the water just shakes off at the end. The anti-reflective aspect is somewhat lacking, but the ease of cleaning is what makes it for me.
You can also get cheap sunglasses ex:
http://www.amazon.com/Matte-Reflective-Color-Rimmed-Sunglass...
It's basically the same thing as the watch market you can get cheap (<10$) watches but 'nice' quickly becomes hundreds of dollars. IMO, this has little to do with manufacturing costs it's all about the design, sale, and marketing costs.
It should not come as a surprise that they mostly come from China--apparently the natural enemy of the trademarked luxury brand.
This is why if you have a "vision plan" through your employer, you can't get new glasses the same day, from anywhere. They show inflated US prices on the invoices, but behind the curtain, you're probably getting the same inexpensive goods from China as if you had just ordered them yourself.
You can go a lot of places and just get a simple optometrics prescription for $10. Then you can take that to the web, and order 2 regular sets and one tinted set for less than the price tag on the cheapest, ugliest frame in your optometrist's office. All those frames are different brands of Luxottica.
You are being preyed upon, in the same way that a lot of other people in the US who require durable medical equipment to maintain quality of life are being preyed upon.
If you doubt this, search the web for prices on "underarm aluminum crutch". There is not a lot of variation in design for these. They are essentially a fixed length of a standard size of aluminum tube, cut, bent, and drilled by machines, and bolted together along with some rubber and foamed plastic parts. There are no patent encumbrances. Yet the price varies from less than $20 to over $120 for exactly the same thing. This is, in large part, due to health insurance rules.
And this is why Wal-Mart and Costco and Warby Parker will eventually eat Luxottica's lunch. Because in a competitive market, you have to set your price based on the per-unit cost. Only a monopolist or oligopolist can charge based on what people will pay.
This is the money quote: "Andrea Guerra: Everything is worth what people are ready to pay."
And that is only true when the producers have pricing power, which only occurs in a non-commodity market. You don't have to be Isaac Newton to grind your own lenses. You can make a lens/mirror grinding machine out of washing machine parts and a controller like an Arduino.
It should be impossible for a product that can be created in a nerd garage to be anything other than a competitive commodity market, shouldn't it? Will "open source eyeglasses" ever become a bona fide project?
For eye exams, I used to pay the optometrist $153 ($117 refraction + $36 dilation). I later found out that Costco often has an optometrist on site in a tiny office and will charge just $50 (and add +$20 for dilation). That's less than half the cost of most other optometrists. A bonus is that the tiny Costco office has no frames so there's no sales pressure to guide you towards his limited selection of frames. Therefore, he always just prints out your Rx and gives it to you without any dirty looks. Costco (the warehouse) has frames but you have to walk next door into the main retail floor to try them. The optometrist has no idea whether you buy glasses from them. You don't need to be a Costco member to use the optometrist at Costco.
For lenses, I used to always pay ~$400 for 2 pairs of glasses. For Eyemasters, Lenscrafters, Visionworks, etc, it didn't matter if they had "2-for-1 sale on lenses" or "2nd pair frames free". The total (when including desirable features such as AR coatings, etc) always came to ~$200 for each pair. I've come to believe the sales promotions at eyewear chains are as meaningless as the "sales" at mattress stores.
Now, I buy from zennioptical.com. Each pair is always less than $35. That's even cheaper than Costco and Walmart.
I think my recommendation won't work for people who are very sensitive to fashion and want to try all the stylish frames at their fingertips. (Ralph Lauren, Calvin Klein, etc.) At my age, eyeglasses are just functional things and I'm fine with picking out a no-name classic style from zenni.
I'm in Australia, so the options are not quite so wide. 'Name brand' frames, as well as grinding the glass, suffers the same, seemingly artificial, premium that everything else does on this side of the pond.
My first eye test was free, but the frame + lenses were upwards of A$300. Yes, it seemed horrendously expensive at the time. (Trying to find an online retailer of the same model glasses that I bought - with a view to buying a slightly different style or colour - is next to impossible. i-spax (brand), colin (model) ... I can find it on the company web site, but evidently no one sells these things online, which in 2015 just seems perverse.)
In terms of comfort and vision I'll pick the expensive glasses every time.
I reordered the same frames this past year and they seem to be fine, so I don't know if they changed up the nose pads in any way or if I managed to adjust the frames properly this go around.
For sunglasses I go with with Luxottica because of the premium polarized lenses. I wear sunglasses 11 months out of the year so I definitely agree on getting a quality pair.
I'm looking forward to the flat optics future when a holographic lens gives you the same correction but without the weight, depth, or chromatic abberation of a "normal" lens.
I'm guessing you have a strong prescription. I was always jealous of people who had a comparatively 'weak' prescription being able to get glasses from PearlVision or what not for $99.
> Your eye care provider must give you a copy of your contact lens and eyeglass prescriptions — whether or not you ask for them.
http://www.consumer.ftc.gov/articles/0116-prescriptions-eye-...
I received my prescription from the optometrist without asking.
The only thing missing is the pupillary distance measurement. There is not even a place for it on the prescription form I received. I didn't know it was something I'd need until reading this thread and checking out zennioptical.com.
I will be calling them tomorrow to get that.
Some optometrists are a little hesitant to give you your prescription data, but it's yours. When in doubt, ask them up front whether they're willing to give it to you after the exam; if not, walk away.
This looks like a good place for 3D printing to start chipping away at traditional manufacturing.
[Edit] I am talking specifically about printing the overpriced frames sold by Luxottica. Not the lenses.
But some old washing machine parts and an Arduino can grind out any lens shape you might need from a printed blank. Building a garage lens grinder using a volume printer wouldn't be any more complicated than replicating a RepRap.
You really could make a pair of glasses from one type of plastic. If you need the temple pieces to fold (if it even has temple pieces), the same hinge design used by whittlers to make pliers from a single piece of wood would suffice, and could probably be cut with a laser of the correct wavelength.
Actually, I'm not. I'm talking about printing frames as opposed to buying them from Luxottica.
There may be obvious online sales channels, but optical prescriptions are only available in person, and Luxottica has done an excellent job at making sure the most convenient optometrist is also an affiliate stocking their eyewear.
They don't only own the Lens Crafters peddling Chanel and Prada frames, but also Sears and Target Optical selling "discount" versions with only slightly reduced margins.
There's also a law requiring a prescription less than one year old to purchase eyeglasses or contact lenses, to send consumers back to the sales floor as often as possible.
See above for people discussing how difficult it can be to even get a copy of your prescription to order online with, despite it being federally mandated.
If people "need" to have branded goods, let them pay.
glasses are cheap at the drugstore.
I get high quality glasses with contemporary styled frames at WalMart for next to nothing. Not only that but the WalMart optometrist is more competent and does a better job getting my prescription right than the private optometrist I used to see.
It's not as if WalMart is some exclusive club only available to the elite.
Anyone who wishes to do so may shop there and purchase their glasses.
They also have a very nice warranty. One pair got run over by a lawnmower, which was entirely my fault. Free replacement.
It is a choice to pay $400 or more for the same glasses you can get for $60. And as long as people are willing to pay $400, why not charge them that. Good for the price gougers. They only exist because people prefer to go to price gougers, since there is definitely not a quality improvement. Customers are simply paying more because that's what they want to do.
[1]http://www.forbes.com/sites/rickungar/2013/11/18/walmart-sto...
That's a truism. The question is why are people willing to pay that much? Why hasn't cheaper competition gained a bigger market share?
People are willing to pay half a million for tiger bones in order to cure "diseases". You can't go around selling tiger bones for $2, they would obliviously not work.
Same thing for glasses. Same thing for walking canes.
I've been buying my glasses online for the last 2 years now. 39dollar and Coastal. Quality control for the frames aren't as good, but they work. On average I pay ~40 vs 200+.
Of course the answer is that employer subsidized insurance has created in industry that can engage in predatory pricing when the bulk of the customers aren't directly paying out of their wallet.
8000 yen, ready in 30 minutes. (Bells and whistles will cost extra: like thinner lenses, etc. and some things have to be special ordered.) Stylish, durable, perfect.
I can get a free cleaning and new nose pads at any JINS outlet. Did that twice already with the current pair.
Getting your glasses from an independent doctors office was insanely expensive. It always seemed like a scam. Cheaper at the places in the mall, but still could be hundreds of dollars.
I've seen the ads for $9 glasses online but good luck with the fit (they have directions to follow to measure yourself) but you're going to still want to see a doctor to have them checked and all. Best case, poor fitting glasses are going to give you a wicked headache. I'm not sure what the long-term damage to your eyes could be.
That's what I do.
Costs more for fancier options.
It's not really any cheaper, but at least you can go with the "underdog", as it were.
I live in Pakistan and have never worn a pair worth more than $30 (and that includes the price for the lenses).
myopticalshop.com
You can get rimless glasses for $50 and high-index (1.71) lenses with frames for $200.
