London - It’s not uncommon to fork out over R3 000 for a pair of luxury sunglasses, and now, it has been revealed why.
Luxottica, a “little-known but very big Italian company” appears to have gained total domination over the world’s eyewear production; making prescription frames and sunglasses for nearly every designer brand, from Prada and Chanel, to Ralph Lauren and Versace.
Recently, an investigation on CBS’s 60 Minutes programme revealed that half a billion people own a pair of Luxottica-made glasses, a fact that has resulted in an eyewear market monopoly.
In the segment, reporter Lesley Stahl interviewed Luxottica CEO Andrea Guerra, who revealed his company also owns Ray-Ban, which they “refurbished” from a $29-a-pair (R250) petrol station brand into the top-selling sunglasses in the world, as well as Oakley and Oliver Peoples.
In addition to making the glasses, Luxottica also owns nearly every major retail outlet that sells eyewear, including prescription eyewear chains. It owns Sunglass Hut – the world’s largest sunglass chain.
What started as a small tool shop in the Italian alps has turned into a company that last year made 65 million pairs of frames, bringing in $8billion.
Brett Arends, a columnist for SmartMoney.com, said: “One company has excessive dominance in the [eyewear] market. The appearance of variety is an optical illusion.
“Oakley was a big competitor,” he continued. “Then they had a fight with Luxottica, a dispute about pricing, so Luxottica basically said, ‘We’re dropping you from our stores’. [Oakley’s] stock price collapsed. How is Oakley going to reach their consumer if they can’t get their glasses into Sunglass Hut?”
Luxottica bought Oakley in 2007.
As Stahl said to Guerra on the programme, “Oakley tried to compete, they lost, so Luxottica bought them.”
Guerra contends that there are “lots of things” his company doesn’t own – in the US Walmart, Warby Parker and Cosco are its main competitors – but Stahl said it continues to hold its competitors hostage.
Arends explained: “If you make glasses, you want to be in their stores. If you have a store you want to sell their glasses. So Luxottica can set its prices as high as it wants and other people have to follow in its wake.”
This lack of competition results in routinely pricing glasses at $200 (R1 700) or more that cost less than $30 (R260) to make, he added.
Guerra’s explanation? “Everything is worth what people are ready to pay”. – Daily Mail