Sticker shock: Why are glasses so expensive?
Have you bought a pair of glasses lately bet your eyes popped when you saw the price tag. If you don’t go to places like Wal-Mart or Costco you could easily be spending hundreds and hundreds of dollars for a pair that costs 30 dollars 10 years ago. Talk about sticker shock. And it’s not as though things have changed that much they’re still made of a couple of pieces of plastic or wire some screws and glass. Why should a pair of glasses cost more than an iPad. Well one answer is because one company controls a big. Chunk of the business. Never has there been so much choice. Ray Bans. Oakleys. glasses for running and skiing. And even reading. A Staggering variety of colors and designers. You’d think the competition would force the prices down. Wow, look at that. One reason it hasn’t is a little known but very big Italian company called Luxottica. If you own a nice pair of specs or shades they’re probably theirs. Luxottica is the biggest eyewear company on earth. It shuns publicity. But CEO Andrea Guerra invited us in for a look. And it was eye opening. Do you have any idea how many people in the world are wearing your glasses right now? At least half a billion are wearing our glasses now. Luxottica started here as a small tool shop in Agordo. a dot of a town in the Italian Alps, When frames were still made of mountain goat horns. This was the factory in 1961, This is what it looks like today. Last year Luxottica made some 65 million pairs of sunglasses an optical frames. They don’t make prescription lenses. We saw mountains and mountains of glasses in boxes headed to China. India. Brazil. And above all to the US. But they’re very expensive. They can be. Very expensive. They can. But this is one of the very few objects that are 100% functional. 100% asthetical. And they need to fit your face for fifteen hours a day. Not easy and there’s a lot of work behind them. Luxottica’s product manager Isabella Sola. Explained that the company revolutionized. How we see glasses. You think I look cool. Yes I think so. I think I look cool too. It wasn’t that long ago that glasses were uncool. You only wore them if you absolutely had to. I can remember not that many years ago my mother telling me that men will never ask me out if I wear my glasses. I was to go blind. if wanted dates. But Luxottica took this medical device. And turned it into high fashion. By making deals to conceive and create high quality stylish specks for nearly every brand and label you can think of. We’ve Prada, We’ve Chanel, We’ve Dolce Gabbana we have Versache, We have Burberry, we have Ralph Lauren. We have Tiffany we have Bulgary. They’re not even called glasses any more, they’re Eyewear. Do people really wear this yet once glasses became face jewelry. Luxottica could charge a hefty markup. But you know something I know that that there are some. Less expensive glasses that look very similar to the very expensive. For example this is this is your Vogue line which is not that expensive, and this is Coach. Which is much more expensive. If two women walked down the street with these on. Yes they almost look the same, almost look that is almost. It’s not the same. Not the same because of details on the frames like a little Chanel C’s. Polo ponies. Or Tiffany blue. Luxottica wouldn’t tell us their marker with glasses like these can sell for up to 20x what they cost to make. And all the classes are designed by Luxottica. So you design thousands of pairs of glasses, That’s what we do, Yes, where does Tiffany come into it. Tiffany comes in at every stage basically. The fashion houses send in sketches of their new collections as inspiration. And down on the factory floor you can see the work that goes into differentiating the brands. Clean plastic temples go through painting machine and come out Versace. Stones are inserted one by one into the Dolce Gabbana. And leather is carefully threaded for that “Chanel bag” look. If People begin to know that Chanel glasses. Were designed by Luxottica. Would it change the way they think about Chanel glasses. You know that would be totally wrong. That would be crazy. But why isn’t the Luxottica name. A brand name are you in anyway hiding it. Hiding it? Yeah. Not at all we’re Listed on the New York Stock Exchange where Luxottica shares are soaring. The company raked in 8 billion dollars last year but their best seller wasn’t a fancy fashion house label. It was a brand they outright own Ray Ban. Originally made by Bosch and long for the US army since JFK nearly every president has worn them. Not to mention Tom Cruise in Risky Business . . And top gun. But the brand was poorly managed cheapened, and eventually put up for sale. The Italians bought it in 1999. And had a strategy to turn things around. We stopped selling sunglasses up from Ray Ban for more or less a year. When you bought it you could buy them for I don’t even know how little money , 29 dollars at the drugstore at a gas station. And you took them off the market. We refurbished everything. And made them upscale. Today those 29 dollar payers can cost a 150. And more. And Ray Ban is the top selling sunglass brand in the world. When Americans go to buy these glasses I’ll bet. 99%. Think they’re buying an American brand “It is an American brand what’s wrong with it.” I mean it’s an American brand owned by Italians. I think the world is this. It is the world and we don’t realize it that’s the thing. Before I started work on this story I’d never heard the Luxottica Yeah. Which is all the more surprising since Luxottica not only bought Ray Ban. They also bought LensCrafters. The largest eyewear retail chain in North America. So now they make em and they sell em. It’s great for business but is it great for the consumer. I asked LensCrafters president Mark Weical how many Luxottica. Brands do you sell here? We probably have a few bands that aren’t Luxottica. Mostly Luxottica, yeah. So since Luxottica owns you. Does the consumer get a break on glasses made by them and LensCrafters. What that customer gets at LensCrafters is a variety of services and products including this broad assortment. Frame, Mark you’re not answering my question I’m asking if if you charge less for frames made by Luxottica since you’re the same company. I think every competitor every retail optical brand determines what their price is. From whatever their brands are. That’s a No. Customers do not get a break at LensCrafters the average cost for a pair of frames and lenses is about 300 dollars. You may think well there’s choice in the mall for other glasses. But Luxottica doesn’t only own on the top eyewear chain in the country it owns another large chain Pearl Vision. And Oliver Peoples and several boutique chains. And it runs Target Optical. And Sears Optical. We’re not done Luxottica also owns Sunglass Hut the largest sunglass chain in the world. So is there a free market in eyewear? No, I don’t think there really is. I think one company has. Excessive dominance the market. Smart money.com columnist Bret Arens says “the appearance of variety is an optical illusion”. The reality is it’s like you know it’s like pro wrestling competition in its actually fake competition. Consider what happened to Oakley. The world famous maker of the advanced sports Eyewear. Oakley was a big competitor and they had a fight with Luxottica And Luxottica basically said we’re dropping you from our stores. And they refused to sell their glasses. It was a dispute about pricing. And they dropped Oakley from the stores and Oakley stock price collapsed. How is Oakley going to reach the consumer if they can’t get their sunglasses. In Sunglass Hut?. There were some issues between the two companies. In at the beginning of the 2000s. But both of them understood that it was better to go along. Better to let you buy them. I wouldn’t say this. We marriaged with Oakley in 2007. Bought Oakley. They tried to compete and they lost and then you bought them. I understand your theory but they understood that life was back to together. So now Luxottica owns the two top premiums on last brands in the world Ray Ban and Oakley. But Luxottica points out there are other players. Whose your biggest competitor in the United States. You could say Wal-Mart. Also Costco. And emerging online companies like Warby Parker. But other competitors told us Luxottica has them in a chokehold. If you make glasses you wanna be and their stores. And if they have stores you wanna sell Ray Bans. So Luxottica can set the prices as high as it wants. Luxottica is . what’s called a price maker. Which means essentially you can set prices and other people will follow in its wake. Which he says is why glasses in general costs so much even at your local opticians. The whole point of a luxury brand is to persuade people to pay. 200 dollars for a product that cost 30 dollars to make. But let me show you something. Why why is it any different than my shoe. Well to some extent There’s actually a lot of comparisons. The difference is that the entire shoe industry isn’t made by one company and the same company doesn’t own all the shoe stores. You’d think well surely insurance companies covering vision would complain. But guess what it Luxottica also owns the nation’s second largest vision care plan IMed. Covering eye exams and glasses. What don’t you own? A lot of things. Not really Why not combine everything under one name? A lot of things — not really — you seem to really why not combine everything under one name? I think people love diversity. People love to have different brands. People love to have different experiences. It’s an illusion of choice. If you’re all along by the same company. I think this is totally wrong. The question is what kind of choice consumer has. It’s not the question of how many you own. How does the consumer benefit from all of this? Your prices are still high. If you go to a shoe company would just say that their prices are high? You’re trying to tell me it’s worth all that money. Everything it’s worth what people are ready to pay. And you know what? He’s right. It seems people are ready to pay a lot. I bet they cost a fortune. They’re not too expensive. They cost almost 400 dollars. With prescription lenses the price could jump to 600. Or more.