As I’ve neglected actually writing here, this is a long-ee…
The eyewear industry is multifaceted. This is not just in the point of sale, design, manufacture and material cost, but all aspects of the from product point of sale. The frame and lenses have to be developed perfectly, separately. This form of industry is known as a Vertical integrated player, where the company oversea every step of the chain.
A good example of this, in eyewear, would be Essilor Luxottica.
This company overseas: lens tech, production, optical labs, frame production, brand licensing and retailing distribution.
Essilor Luxottica was founded by Leonardo Del Vecchio, who wished to create an all-encompassing eye-wear company, that oversees the whole process. In other words, an exaggerated vertically integrated eyewear company!
Their revenue was effectively like a holding company that focusses on eyewear, acquired through acquisition, consolidation and leveraged scale to drive profits. This enhanced profit share was due to the royalties
For developing the products, Luxottica’s industrial processes are straightforward to produce, in being fairly basic, but has a high yield, quickly. Over consolidation of this industry looks at how modern tech, now, will be incorporated into eyewear.
Looking at the history of this industry, leaves anticipation as to how it will evolve, in both reaction to human evolution and technological enhancement.
The initial acquisitions was in 1980, but in the run up to that, in 1970s saw the collaboration of medicine vs fashion, and with that emerged competition, where if you get prescription you can take elsewhere
It was around 1960, when the eyeglass industry evolved from a medical device to a fashion accessory. This added point came with a price, and the markup equalled 1000%. With this medical acclaim, buying this may not br needed, but people are willing to pay more, for the brand.
Armani and Luxottica collaborated to make eyewear a luxury product, by releasing “Armani eyewear”. Other luxury clothing brands expanded into products, other than garments, like towels by Halsten and cook wear Pier Cardin.
In this initial example of a vertically integrated company, it included lens tech, production, optical labs, frame production, brands licensing, retailing distribution, vision insurance, software, 3rd party optical labs and other retailers, equipment, and Armani eyewear, started this objective. Ther acquired eyewear brands you may know by the which are a vertically integrated include Ray-Ban. and all Oakly products at lower prices.
Continuing to invest in vertically integrated companies to deliver healthy margins, cheaper for customers, this objective, they continue to grow, $100000000000 ($100 billion) with a market cap $25000000 revenue, resulting in $5000000 profits. This totals ¼ global market share of prescription eyeglasses owned by Essilor Luxottica brands.
With this approach, the cost of raw material (frames/ plastic etc) is rather slim, but has a huge mark up due to the brands’ acclaim, making then raw material price just $20 (at best), but the RRP for $100s+++.
In a product point of view, talking about eyewear, will the technology in lenses become better? There is so much research into the aero-space industry, but comparatively there is no innovation, in eyewear yet.
Amongst any industry, it’s easy to disregard the governmental implication of the chosen actions. A less “product” focussed point of view, would be the law. This came into the forefront: in the 2010s, there was no longer challenges by government mergers (a merger being key to economic consolidation), as elections blocked allowance to mimic competition.
Two important legislations regarding business law are the Sherman act (1890), and the Clayton act (1914). Sherman’s law; disallows anti-trust (effectively gossip); which is untrue theories that restrain trade. This includes lies about wages, and details about competition including agreements and prices.
Clayton’s act was more concerning mergers, and discouraging competition. An example of a recent violation of this act, which is recognisable; the incident where Facebook and Instagram merged, with the aquation of Instagram was to battle Twitter and Google. This would eliminate all rivals.
The justice department sued Ticketmaster and parent “live nation” for monopolisation (because it thwarts competition in live entertainment). This law aims to promote fair competition and prevent unfair business practices that could harm consumers. It prohibits certain actions that might restrict competition, like tying agreements, predatory pricing, and mergers that could lessen competition.
A product, which was invented 800 years ago, has an amazing, interesting evolution. It now has a global annual revenues $150,000,000,000, growing.
Initially, this started in the Arabic world, and the early stages of improving vision was a reading stone (like a spyglass). As time progressed, early modern art symbolises glasses negatively, equalling devil wearing glasses. This associated the product with aging/death.
The future of this industry could be how the “Warbey Parker” business style works: It’s online, and has low prices around $55. A typical physical eyewear shop NO PRICESTAGS, so can be easily upsell. It is likely the consumer has no idea (information a-symmetry) about what they’re buying.
Warbey Parker sell directly to customers, and allow the consumer the most control of the product; you have a “home try-on kit”, and put in prescription lenses.
Understanding the history of this product, as just an example of how the economic journey plays out. And with this example, can make it easier to predict aspects of the direction it may go (in other industries, too).
