A Campus In Style: Market monopoly means sunglass misfortune
Global high fashion comes with a unique set of characteristics. Centered in cities like Paris, Milan and New York City, fashion has always found pride in a wide variety of designers and styles. One very specific and expensive facet of high fashion has always been glasses. Whether sunglasses in the summer or sophisticated reading glasses, frames are an accessory which everyone around will surely notice.
Of course we have brands such as Ray-Ban, Chanel, Prada and Oakley, but what if I told you there was one worldwide company that not only owned the production of those brands, but also owned the worldwide stores that they were sold in? Sounds certainly like a monopoly, and Luxottica has recently come under great scrutiny for their absolute market dominance of the eyeglass market.
Brought to light in an October episode of 60 Minutes, the Italian company Luxottica Group S.p.A. is as close to a monopoly as one can find in today's global market. Founded by Leonardo Del Vecchio in 1961, this company has continued to grow bigger, richer and more powerful. What is remarkable about Luxottica is that they not only own the rights to design and production of a number of different brands, but they also own the stores that they sell them in. The in-house brands include Ray-Ban, Oakley and Persol. Designers that the company creates eyewear for under license include Chanel, Versace, Prada, Burberry and Ralph Lauren. The retail operations that the company owns is just as impressive, with chains such as Sunglass Hut, LensCrafters, Pearle Vision, Sears Optical and Target Optical. So in summary, all your favorite eyeglass designers are all owned, manufactured and sold by the same company.
This one company owns numerous designers and various retailers. Why should anyone care? Luxottica's dominance in the eyeglass market almost cuts off anyone from entering that market. There really isn't a free market system in place, because anything eyewear-related must go through this one company. The only company to fight Luxottica has been Oakley. For a brief stint, Oakley denied being bought out by the company, ending with Luxottica refusing to sell Oakley in their stores. Remember, almost all eyeglass retailers are owned by Luxottica. Therefore, Oakleys stock plummeted so low that they had no choice but to give in to Luxottica.
In owning both manufacturing and retail operations, Luxottica has complete ability to set as outlandish prices as they wish for eyeglasses, as anyone who was in the market to buy a new pair knows. With Walmart Optical being the only distant competitor, there is no market competition that could even remotely force the company to lower prices. In the documentary, CEO Andrea Guerra claimed the functionality and importance of well-manufactured glasses for the extreme pricing. Though undisclosed, glasses are estimated to be marked up 20 times from production costs to retail costs.
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