4 min read · Jan 31, 2023
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Introduction
Luxottica is an Italian eyewear conglomerate that owns roughly 80% of the world’s eyewear brands, including Ray-Ban, Oakley, Sunglass Hut, and LensCrafters. In 2017, the company announced a merger with French eyewear company Essilor, resulting in the world’s largest eyewear company, valued at approximately $54 billion. Luxottica’s retail and eyewear manufacturing expertise will be combined with Essilor’s lens production and distribution capabilities. Luxottica’s dominance in the eyewear industry, which has grown even stronger as a result of the merger, has given the company significant clout with its customers.
Poor Working Conditions and Outsourcing
Luxottica owns 143 factories, the vast majority of which are in China and India. In order to increase profits, the company outsources the majority of its frame production to these countries. However, workers in these factories are underpaid and work in deplorable conditions. One Ray-Ban factory in China, for example, was discovered to be using child labour.
Customer Service and Lean Production Issues
Luxottica employs a “lean manufacturing” system, which means that they keep very little inventory and only produce what is ordered. While this system is efficient and reduces costs, it also means that if a product fails, customers must wait a long time for a replacement. Luxottica also employs less expensive materials in its products, such as lead, a toxic metal that can cause brain damage. The company has also been chastised for its lack of investment in R&D, having only filed for 20 patents in the last 20 years, compared to Samsung’s 5,000 in the same time period.
Luxottica has also been accused of misleading marketing, selling counterfeit goods, and employing high-pressure sales tactics. In Europe, the company was fined €135 million for preventing online retailers from selling their products at a discount, and in the United States, the company was sued for $5 million for allegedly overcharging customers for lenses.
High Prices and Monopolistic Influence
Despite these issues, Luxottica is still profitable due to its monopoly in the eyewear industry. The company has a 500% markup on its products, which means that if a pair of glasses cost $20 to make, they will be sold for $100. Luxottica’s various brands enable them to charge varying prices for similar products, with luxury brands such as Ray-Ban costing more than sports brands such as Oakley. (See the image to see how similar these products look)
Right is Ray-Ban, and Left is Oakley
Furthermore, Luxottica has devised a system in which it is the sole seller of certain products. For example, if you want to buy Ray-Bans, you must visit a Sunglass Hut, and if you want to buy glasses from a store that is not a Luxottica partner, that store will not have access to Luxottica brands or licensed brands like Chanel and Prada. (See the Image for Brands)
Luxottica’s monopoly power in the eyewear industry has only been strengthened by the merger with Essilor, as the combined company now controls an even larger share of the market. This increased dominance raises concerns about the company’s ability to continue exploiting its customers through high prices and dubious business practices.
Conclusion
Because of Luxottica’s monopoly in the eyewear industry, the company has been able to exploit its customers through high prices, poor working conditions, and questionable business practices. The merger with Essilor has only consolidated this power, making Luxottica an even stronger market force. While Luxottica provides a wide range of eyewear products, its market dominance should be cause for concern. The company’s monopoly power gives it significant control over eyewear product prices and availability, and its history of questionable business practices raises concerns about its treatment of customers and workers. Consumers must be aware of Luxottica’s monopoly and the potential impact it will have on the eyewear industry.
Cite:
- “Luxottica Group S.p.A.: Private Company Information — Bloomberg.” Bloomberg.com, www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=263958.
- “Luxottica Group — Annual Report 2015.” Luxottica Group — Annual Report 2015, www.luxottica.com/content/dam/luxottica/corporate/investors/2015/Annual_Report/AR2015_En.pdf.
- “Luxottica Group — The Italian Monopoly.” Luxottica Group — The Italian Monopoly | Blog, www.luxottica.com/blog/luxottica-group-the-italian-monopoly.
- “Eyewear Giant Luxottica Caught Using Lead in Glasses.” Ethical Consumer, 20 Sept. 2016, www.ethicalconsumer.org/latestnews/entry/eyewear-giant-luxottica-caught-using-lead-in-glasses.
- “Luxottica Fined €135m for Antitrust Violations in Europe.” Ethical Consumer, 20 Sept. 2016, www.ethicalconsumer.org/latestnews/entry/luxottica-fined-e135m-for-antitrust-violations-in-europe.
- “Luxottica Sued for $5m in the US for Allegedly Overcharging Customers for Lenses.” Ethical Consumer, 20 Sept. 2016, www.ethicalconsumer.org/latestnews/entry/luxottica-sued-for-5m-in-the-us-for-allegedly-overcharging-customers-for-lenses.
- “Luxottica and Essilor to Merge in €48.4bn Deal.” BBC News, BBC, 9 Jan. 2017, www.bbc.com/news/business-38537362.
