We possible prices with minimum profits. Right? However,

We all know how expensive eyewear
can be. There are so many brands selling sunglasses, which means that there is a
lot of competition in the sunglasses market. There is Chanel, Prada, Giorgio Armani,
Burberry, Versace, Dolce and Gabbana, Persol, Oakley, Ralph Lauren and the
bestseller Ray-Ban.

With all of these brands, competing
for the customers you would expect them to set the best possible prices with
minimum profits. Right? However, unfortunately for us the customers a single
company called Luxottica. Luxottica owns Ray-Ban, Persol,
and Oakley. Luxottica also makes
sunglasses for all of the brands mentioned above and many more and thus
controlling over 80% of the world’s major eyewear brands. Luxottica Group has dominated this industry (for
both prescription as well as sunglasses) for many years now. This also explains
the recent rise in competition such as Warby
Parker who keep their capital costs relatively low by working with
Chinese based manufacturing partners.

A man called Leonardo Del Vecchio,
the pioneer of the fashion eyewear industry and founder of Luxottica. In the
past eyewear apart for sunglasses used to be considered lame and the people who
wore glasses were more often than not, looked down upon. However, in recent
years fashion powerhouses has set them as a trend and made glasses popular and mainstream
like never before, which also contributed to a massive new flood of customers. Leonardo,
who at the time already has an established company and has a large equity of
the eyewear industry, he saw an opportunity, worked with luxurious brands,
capitalized and today runs a monopoly.

Sunglasses from Luxottica are
usually sold for 10 to 20 times the price it costs to make them, it is also
quite easy to produce, and the material are inexpensive. In fact, the
monopoly of Luxottica over the sunglasses market is so strong people some
people are willing to go as far as to buy hideous looking sunglasses and the
price can vary from 500$ to absurd amounts such as 15000$.

Since Luxottica also owns about 7000
retail outlets, they have the flexibility to set the prices as high as possible,
but at a price where the customers are still willing to buy their products. Luxottica
also owns and operates LensCrafters, Sears Optical, Target Optical, Pearle
Vision, Sunglass Hut, Ilori, OPSM, Bright Eyes and other chains in the United
States, along with yet more chains throughout Asia, Europe, Africa, India, the
Antipodes and the Middle East.

Oakley, before Luxottica acquired it tried selling their sunglasses cheaper.
This angered Luxottica; they kicked Oakley out of their retail outlets and
within a day Oakley shares crashed. Luxottica then acquired Oakley and
maintained the artificial prices.

Ray-Ban being so expensive has to do with high
demand, good branding, and Luxottica’s monopoly on the eyewear market. Their price does not signalize superior
quality in any way. Ray Bans became popular because JFK and Tom Cruise
wore them in several movies. However, the brand was not always exclusive since
the glasses were originally available almost everywhere. Before Luxottica
bought Ray Ban in 1999, you were able to buy a pair at a gas station for 29$.
After Luxottica bought Ray Ban, they
withdrew Ray Bans from the market completely. This created a higher
demand. Now that Luxottica made the brand more exclusive, they are able to
charge a higher price.

Next time to be a little cautious the next time you buy those expensive sunglasses.
Moral of the story: “The correct price of a product is what a customer
is willing to shell pay.”