Global Market For Sunglasses

When a person goes in search of sunglasses, are faced with a wide range of brands, sizes, lenses and prices.

Ray-Ban, Oakley, Prada, Chanel, Versace … there seems to be a lot of variety. But not quite.

Glasses of all these brands are designed and manufactured by a single company: Luxottica Italian, unknown by most consumers, but the protagonist of the brand glasses market.

 

According to the magazine Forbes , 80% of luxury brands in the world market for sunglasses, worth $ 28 billion a year, is controlled by the Italian firm based in Milan.

 

Luxottica not only owns brands such as Ray-Ban and Oakley, but also has a license to produce glasses of major brands in the fashion world.

In addition to Luxottica, the market there are other companies like Safilo (which makes Gucci, Dior, Hugo Boss and Carrera, among others), Marchon (Nike and Lacoste, among others) and Marcolin (Mount Blanc, Guess and Diesel).

But no threat the empire of the Italian giant. The reality is that there is little competition in the luxury eyewear market.

Lack of transparency

The market “operates largely as an oligopoly, with a small number of dominant vendors,” said a report by pauldigo.com in 2014 analyzing company Euromonitor markets.

Analysts say the lack of competition hurts consumers, who end up paying hundreds of dollars for sunglasses.

And harms the industry itself, considered “stagnant”. Unlike the computer industry, where in general the products improve and become ever cheaper, the glasses does not have technological changes and yet, prices rise.

“The profits of this industry are almost obscene,” he said in a 2014 lecture Tim Wu, a professor at Columbia University, an expert on monopolies and who now works for the US government.

Wu highlighted the wide margin of benefit to manufacture a well whose production cost is estimated at between $ 25 and $ 50 and sells for hundreds of dollars when added design and the brand name.

‘Missed opportunity’

Luxottica was in the sights of US and European antitrust authorities, but it was never possible to prove any violation committed by the company.

This despite the controversial purchase of Oakley in 2007.

The brand was rival Luxottica, which also controls the distribution channels, with chain stores with Sunglass Hut, present in several countries.

At one point, the Italian company has decided not to display or sell Oakley in their stores. Thus, he was drowning competitor until finished buying it.

“These acquisitions in the past were missed opportunities by regulators Antimonopoly to impose conditions that would ensure a more competitive market,” he told BBC World George Georgiev, a law professor at the University of California at Los Angeles (UCLA, its acronym in English).

According to Tim Wu, the antimonopoly rules are clear, but difficult to apply. And companies are able to dodge them.

The expert points out that Luxottica would be what is known as a “price fixing”, the company that controls many known brands and distribution stores that can set a high price for their products.

“The best remedy is to introduce competition,” says Wu.

The rebirth of Ray Ban

Thanks to his appearance in the film the faces stars like Audrey Hepburn or Tom Cruise, the glasses of Ray-Ban American brand became popular around the world.

But in 1999 they were sold in the US gas stations for $ 19 and its quality was low. That year, Luxottica bought the company.

The first step was to remove the glasses of 13 thousand points of sale. Sacrificed short-term benefit and thanks to its experience in luxury brands, it has been improving the quality and design of the glasses.

In 2000, Ray-Ban generated for the Italian brand US $ 273 million; in 2014, were US $ 2.2 billion.

As the product improved, Luxottica raised the price: the glasses now cost $ 79, then $ 89 and now the basic model to pay at least $ 129.

Thus, the Ray-Ban was recovering the glamour and fame earned in films such as Breakfast at Tiffany’s (Breakfast at Tiffany’s) and Top Gun – Top Gun .

New rivals

The American company Warby Parker is one that is trying to gain market share despite the established power of the big luxury brands.

“We want to have more access to information and consumers will realize that what they believe is Armani or Prada is produced by another company. What they think about what these logos mean,” he told BBC World Neil Blumenthal, co-founder of Warby Parker.

The arrival of this and other new businesses could threaten the dominance of Luxottica.

Arun Sharma, professor of Marketing at the University of Miami in Florida, believes that Luxottica is “under tremendous pressure”.

“This dominance will not last in the long term,” Sharma said.

He cited the example of Windows (Microsoft), the dominant operating system for years on computers and now competes with the iOS (Apple) and Android (Google).

Good deal

But for now Luxottica – which declined to be interviewed for the BBC – no need to worry, especially in North America, which concentrates 60% of their income.

And Latin America, especially in Brazil and Mexico, is the market in which it seeks to expand, with the purchase of other companies and chain stores. See more faqs.

In the first half of 2015, the revenues of the Italian company has grown by about 20% and profit by about 29%, according to Euromonitor.

Sales reached $ 10 billion, according to Forbes.

Nothing indicates that in the near future, consumers resolve to give up the power of brands to choose cheaper sunglasses.

For now, the business of Luxottica and other companies seems solid.

 

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