Why Are Glasses So Expensive?
With summer just around the corner, new sunglasses may be on your mind, but the price you pay may not be as fair as you think. In fact, the price for any glasses is way too high. An Italian company named Luxottica owns 80% of all major glass brands and stores. Ray-ban, Prada, Chanel, Oakley, Target and Sears optical, lenscrafters, and sunglass hut to name a few. Luxottica also owns the 2nd largest glasses insurance company in America, and the factory that produces 70% of Luxottica glasses. Owning all of these elements allows for Luxottica to markup the price of their glasses by 20 times the price of production. For example, before Ray Ban was acquired by Luxottica, they were one of the main mass market glasses companies for everyone, but once acquired, Luxottica quintupled the price of a pair. Ownership of most major glasses retailers also allows Luxottica to bully other companies into obeying them. Oakley once had a pricing dispute with Luxottica, so Oakley was dropped from all Luxottica stores destroying their sales. After Oakley’s sales and stock price collapsed, Luxottica bought them out. As for competition, Luxottica and Essilor, another major optometry company, are now in the final stages of a merger.
The glasses market contrasts other industries where as time moves on products become cheaper with innovation. Computers have dropped severely over the last two decades and continue to have better features, while glasses have consistently remained expensive with no real improvements except slight variations instyle. This is possible because Luxottica controls so much of the market, they have no reason to invest in innovation or improve production in order to lower cost, whereas technology companies have plenty of competition which force innovation.
Monopolies like Luxottica can be necessary in certain industries. In the power industry, it makes more sense for one company to control a region and set up one power grid than it does for multiple companies to set up multiple power grids. A single power grid in an area reduces the amount of power lines in a certain city or region, however there is no benefit for Luxottica holding such a large portion of the industry.
CEO of Luxottica, Francesco Milleri, justifies insane price markups by saying, “everything is worth what people are ready to pay.” Sadly, this is true.Despite the high price of glasses, I still buy overpriced pairs that are not much better than a budget pair. Unlike new technology where customers may pay high prices for technological advancement, in eye-wear you are paying for the brand on the side of the frames. This allows Luxottica to continue to jack up prices without doing anything innovative, because the only thing people really care about is the brand.
By Jake Bogartz