Ask people to name an infamous monopoly in recent history, and most will recall De Beers diamonds. In the 1980s, De Beers controlled almost 90 percent of rough diamonds.
Today, there’s a monopoly in a completely different industry that you’ve likely never heard of, yet it has become equally as powerful: Luxottica. While De Beers’ diamond market share has dwindled, Luxottica has slowly consolidated its businesses, dominating its industry with a market share as high as 80 percent.
What business is Luxottica in? Max Chafkin in Fast Company sums it up pretty well: “Founded in 1961, the Milan-based company takes in about $9 billion a year, running the eyewear business for most major fashion houses, including Armani, Chanel, Prada, and Ralph Lauren. Luxottica markets its own frames too: Oakley, Oliver Peoples, Persol, and Ray-Ban are all Luxottica brands. Consumers find these frames for sale at LensCrafters, Pearle Vision, and Sunglass Hut, all of which are (you guessed it) Luxottica subsidiaries. Luxottica also happens to own one of the top vision-insurance companies, Eye-Med, which, if you have coverage from Aetna or Anthem Blue Cross Blue Shield, is your carrier.”
Suddenly, everything becomes clearer. Your glasses aren’t expensive because they’re all that costly to make. They’re expensive because your eye doctor’s office, glasses store, glasses manufacturers and vision-insurance company are all owned by one conglomerate.
Sound like an industry ripe for disruption? Warby Parker thinks so.
In many respects, Warby Parker was another glasses startup destined to fail. Many had tried unsuccessfully to break into the market — but how do you go up against a company with a massive market share and dominant brand portfolio?
For the four co-founders, classmates in the MBA program at Wharton Business School, writes Chafkin, it was a “fanatical focus on execution and brand.” Warby Parker began with the idea of creating an online eyewear company, where customers would have the ability to order five frames for free to try on at home.
The glasses were stylish and most cost less than $100, with no need for additional coatings and other add-ons because they were already included (a major difference from Luxottica lenses). The idea became an immense success and soon led to Warby Parker brick-and-mortar stores as well.
That didn’t mean there weren’t mistakes at the beginning. Graham Winfrey at Inc. describes the first launch of Warby Parker’s website. GQ had offered to do a profile on the company, and the co-founders assumed the issue of the magazine would run in March. But when they realized it would launch two weeks earlier, they scrambled to get the website up and running.
As soon as the article ran, people flooded the site to try on and order these new $95 glasses. “The bad news: The waitlist was 20,000-people long,” writes Winfrey. “The good news: The company hit its first-year sales target in three weeks.”
I had a firsthand experience with Warby Parker this weekend. I needed new prescription sunglasses and eyeglasses. First, I went to Lenscrafters (a Luxottica subsidiary) to buy Ray-Ban sunglasses (a Luxottica brand) so that I could use my Eye-Med vision insurance reimbursement (owned by Luxottica). Though I found the glasses I wanted right away, the purchasing experience was less than optimal. It took about an hour and a half, one broken fax machine, two old computer systems, and a complex pricing model that confused even the salesman.
Warby Parker, by contrast, took 10 minutes. I grabbed the glasses I wanted off the shelf, and approached a roving saleswoman: “I want one of these.” Within two minutes she had my information and prescription on her iPad, measured my face with a portable machine, and processed my credit card on the iPad. Even though my Ray-Bans from Lenscrafters had been marked down over $300 from the insurance benefit, my Warby Parker glasses (without any insurance coverage) were still cheaper. As I walked out, I realized that this is how shopping should be.
Warby Parker still has a long way to go — after all, Luxottica sells around 80 million pairs of glasses each year, while Warby Parker has sold slightly over a million in the last several years combined. But as my experience and the experience of hundreds of thousands of others has shown, the company has caught on to something. And Luxottica better be watching.