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What would be interesting to me is an in-depth look at how this company is able to sustain its near monopoly on the business. They do not appear to be leaning

What would be interesting to me is an in-depth look at how this company is able to sustain its near monopoly on the business. They do not appear to be leaning on government intervention, and the product can be delivered via e-commerce (zappos, etc.) so they can't control the sales channel that much. The product is not that complicated to manufacture, has huge and recurring volume and, as of right now, preposterous margins. 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?"

jbert 12y ago
People want to try on several pairs of glasses and see which ones they look best in. 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.
- josu 12y ago
  I think that it has more to do with "which ones they look best in". Luxotica, somehow, seems to decide which ones look best.
yincrash 12y ago
I use 39dollar, but I think Warby Parker has done the best job at stealing marketshare away from the monopoly. The startups are out there, and they are working. It just takes time to tear away from status quo.
memset 12y ago
I spent a few years in the eyewear industry. 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!
- carsongross 12y ago
  Sure, everything in life is harder than it seems on first glance. But compare with, say, consumer electronics. Or knife-making. And so on. They have all these same problems and more, and no one company dominates in this same fashion. So, why is that?
  - hammerandtongs 12y ago
    Perhaps reality and the market are not as its been described to you? http://www.amazon.com/Cornered-Monopoly-Capitalism-Economics-Destruction/dp/0470928565/ http://www.amazon.com/Cornered-Monopoly-Capitalism-Economics...
    - carsongross 12y ago
      Sure. I am not a free market zealot. But compare and contrast with, for example, shoes. Why the difference? Is it sustainable? This seems like a particularly interesting case study, perhaps not fitting well into any particular ideological framework.
      - hammerandtongs 12y ago
        Eyeglasses are an example directly from this book, which at least one of the news organization has likely read. This problem is across every industry, but because of the way branding, shell corporations etc work people do not notice. Ask yourself whether shoes is truly different? How many places around the globe produce a _lot_ of shoes? How about hard drives? Refrigerators?
  - memset 12y ago
    I think there are many sectors where just one or two companies really dominate the industry. PayPal seems like one, especially for international payments. iPhones and Androids. Windows. Cargill for food. Granted, I am having trouble coming up with companies where "just one" company dominates the market, but overall this seems more common than one would like to think. You are correct in that "it is difficult" would not be sufficient to explain why there are so few competitors. But I think I feel similarly about these other industries as well.
countrybama24 12y ago
As far as I can tell, Luxottica is like a book publisher who also has a significant retail presence. They buy licensing deals with all the major eyewear brands, likely at prices competitors can't afford because only they can sell through their retail channels (7,000+ stores in the US alone, and keep in mind the U.S. is by far the largest market for luxury consumer goods). Eyewear designers want to get their glasses in front of as many consumers as possible, so the alternative of not signing a licensing agreement would mean forgoing all those retail channels (and a big chunk of the U.S. market). 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-glasses-online-sunglasses-prescription/luxottica-competition-warby-parker/ http://www.masoneyewear.com/buy-eyeglasses-online-purchase-g...
- memset 12y ago
  I would characterize Warby Parker's relationship to Luxottica a bit differently. 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.
genericacct 12y ago
Luxottica is _very_ litigious. 10+ years ago they would sue anybody selling their products on the web.
- emmelaich 12y ago
  Guessed as much. They're a lot like GoreTex.
sp332 12y ago
Well there is http://www.eyebuydirect.com http://www.eyebuydirect.com My brother has a few of their frames and they're not junk.
- lsaferite 12y ago
  I literally just used them and bought 2 pairs of normal prescription glasses and 2 pairs of prescription sun-glasses for less than I paid for my last pair of prescription glasses. I'm SUPER satisfied with them and have been telling everyone I know to use them.
- mlrtime 12y ago
  There is also zennioptical
- woodchuck64 12y ago
  Hmm... "In 2013, French lens manufacturer Essilor purchased a majority stake in EyeBuyDirect": http://en.wikipedia.org/wiki/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-and-luxottica-end-secret-18-months-long-merger-talks/ http://www.insightnews.com.au/_blog/NEWS_NOW!/post/essilor-a... Okay, competition's alive for now. How long will that last?
InclinedPlane 12y ago
Buying glasses online is a definitively sub-par experience. 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.

jbert 12y ago

People want to try on several pairs of glasses and see which ones they look best in. 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.

josu 12y ago
I think that it has more to do with "which ones they look best in". Luxotica, somehow, seems to decide which ones look best.

yincrash 12y ago

I use 39dollar, but I think Warby Parker has done the best job at stealing marketshare away from the monopoly. The startups are out there, and they are working. It just takes time to tear away from status quo.

memset 12y ago

I spent a few years in the eyewear industry. 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!

carsongross 12y ago
Sure, everything in life is harder than it seems on first glance. But compare with, say, consumer electronics. Or knife-making. And so on. They have all these same problems and more, and no one company dominates in this same fashion. So, why is that?
- hammerandtongs 12y ago
  Perhaps reality and the market are not as its been described to you? http://www.amazon.com/Cornered-Monopoly-Capitalism-Economics-Destruction/dp/0470928565/ http://www.amazon.com/Cornered-Monopoly-Capitalism-Economics...
  - carsongross 12y ago
    Sure. I am not a free market zealot. But compare and contrast with, for example, shoes. Why the difference? Is it sustainable? This seems like a particularly interesting case study, perhaps not fitting well into any particular ideological framework.
    - hammerandtongs 12y ago
      Eyeglasses are an example directly from this book, which at least one of the news organization has likely read. This problem is across every industry, but because of the way branding, shell corporations etc work people do not notice. Ask yourself whether shoes is truly different? How many places around the globe produce a _lot_ of shoes? How about hard drives? Refrigerators?
- memset 12y ago
  I think there are many sectors where just one or two companies really dominate the industry. PayPal seems like one, especially for international payments. iPhones and Androids. Windows. Cargill for food. Granted, I am having trouble coming up with companies where "just one" company dominates the market, but overall this seems more common than one would like to think. You are correct in that "it is difficult" would not be sufficient to explain why there are so few competitors. But I think I feel similarly about these other industries as well.

countrybama24 12y ago

As far as I can tell, Luxottica is like a book publisher who also has a significant retail presence. They buy licensing deals with all the major eyewear brands, likely at prices competitors can't afford because only they can sell through their retail channels (7,000+ stores in the US alone, and keep in mind the U.S. is by far the largest market for luxury consumer goods). Eyewear designers want to get their glasses in front of as many consumers as possible, so the alternative of not signing a licensing agreement would mean forgoing all those retail channels (and a big chunk of the U.S. market). 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-glasses-online-sunglasses-prescription/luxottica-competition-warby-parker/ http://www.masoneyewear.com/buy-eyeglasses-online-purchase-g...

memset 12y ago
I would characterize Warby Parker's relationship to Luxottica a bit differently. 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.

genericacct 12y ago

Luxottica is _very_ litigious. 10+ years ago they would sue anybody selling their products on the web.

emmelaich 12y ago
Guessed as much. They're a lot like GoreTex.

sp332 12y ago

Well there is http://www.eyebuydirect.com http://www.eyebuydirect.com My brother has a few of their frames and they're not junk.

lsaferite 12y ago
I literally just used them and bought 2 pairs of normal prescription glasses and 2 pairs of prescription sun-glasses for less than I paid for my last pair of prescription glasses. I'm SUPER satisfied with them and have been telling everyone I know to use them.
mlrtime 12y ago
There is also zennioptical
woodchuck64 12y ago
Hmm... "In 2013, French lens manufacturer Essilor purchased a majority stake in EyeBuyDirect": http://en.wikipedia.org/wiki/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-and-luxottica-end-secret-18-months-long-merger-talks/ http://www.insightnews.com.au/_blog/NEWS_NOW!/post/essilor-a... Okay, competition's alive for now. How long will that last?

InclinedPlane 12y ago

Buying glasses online is a definitively sub-par experience. 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.