Those who follow the eyewear industry in depth know that Luxottica dominates the market. Not only does the Italian conglomerate own most of the big prescription eyewear brands, but they also dominate high-end sunglasses and corporate optometry services. Thank goodness they don’t own it all.
There is something to be said about market consolidation. When markets are consolidated, you generally end up with improved efficiency and better standards. But consolidation isn’t all good. One of its downsides is that it encourages artificial price inflation. You can clearly see that with Luxottica.
Ray-Ban is just one of Luxottica’s many brands. Decades ago, Ray-Ban was a Bausch & Lomb brand. Way back then, Bausch & Lomb products were reasonably priced to compete in a less consolidated market. Once Luxottica bought them up, things changed. Now Ray-Bans are among the more expensive brands.
1.How Retail Sunglasses Work
As a customer, what you know about sunglasses is probably limited to name brands and price points. You go to your local boutique and expect to pay a steep price for Ray-Bans, Oakleys, or other Luxottica products. But if you go to a big box department store, you know you’ll find off-brand products at considerably lower prices.
Here’s how it all works: retailers buy wholesale sunglasses from larger distributors. Those distributors purchase from worldwide importers or direct from manufacturers. Every player in the supply chain marks up the price in order to earn a profit. Who ultimately covers all those markups? You do.
2.Markups and Quality
What must be understood is that markups in no way reflect product quality. Markups are based on a certain percentage of the price paid. Let’s say you are wholesaler operating on a 75% markup. You charge the retailer $1.75 for a product you paid $1.00 for.
This all matters because it goes back to the manufacturer. Luxottica knows people are willing to pay hundreds of dollars for their products. So you can bet they charge the highest possible price when they sell to their distributors. The price of those products is already high before they reach the second level of the supply chain.
That higher cost is passed on from manufacturer to wholesaler to retailer to customer. You ultimately pay hundreds of dollars because everyone has marked up along the way. Even so, you were destined to pay a higher price when Luxottica chose to charge more.
If there is a lesson to be learned from Luxottica’s dominance of the eyewear industry, it is this: price and quality are not always commensurate. Put another way, you don’t always get what you pay for. If you don’t believe that’s true, just compare your favorite Luxottica brand with any brand from Olympic Eyewear.
Olympic Eyewear is a Utah-based distributor of men’s and women’s wholesale sunglasses. They distribute more than two dozen brands sold at department stores, pharmacies, convenience stores, and boutiques all across the country. A side-by-side comparison clearly reveals that their quality is just as good as higher-priced brands.
Luxottica’s dominance is viewed by some people as a good thing. By controlling the lion’s share of the eyewear market, Luxottica is able to set the standard everyone else follows. On the other hand, being such a dominant force allows them to artificially inflate prices. Because their competition is limited, they can charge more and get away with it.
As a consumer, be thankful that Luxottica doesn’t control at all. Be thankful that companies like Olympic Eyewear offer comparable products at lower prices. That at least forces Luxottica to compete on some level.