How badly are we being ripped off on eyewear? Former industry execs tell all
From the LA Times. March 5, 2019
https://www.latimes.com/business/laz...305-story.html
Charles Dahan knows from first-hand experience how badly people get ripped off when buying eyeglasses.
He was once one of the leading suppliers of frames to LensCrafters, before the company was purchased by optical behemoth Luxottica. He also built machines that improved the lens-manufacturing process.
In other words, Dahan, 70, knows the eyewear business from start to finish. And he doesn’t like what’s happened.
“There is no competition in the industry, not any more,” he told me. “Luxottica bought everyone. They set whatever prices they please.”
Dahan, who lives in Potomac, Md., was responding to a column I recently wrote about why consumer prices for frames and lenses are so astronomically high, with markups often approaching 1,000%.
I noted that if you wear designer glasses, there’s a very good chance you’re wearing Luxottica frames.
The company’s owned and licensed brands include Armani, Brooks Brothers, Burberry, Chanel, Coach, DKNY, Dolce & Gabbana, Michael Kors, Oakley, Oliver Peoples, Persol, Polo Ralph Lauren, Ray-Ban, Tiffany, Valentino, Vogue and Versace.
Along with LensCrafters, Luxottica also runs Pearle Vision, Sears Optical, Sunglass Hut and Target Optical, as well as the insurer EyeMed Vision Care.
And Italy’s Luxottica now casts an even longer shadow over the eyewear industry after merging last fall with France’s Essilor, the world’s leading maker of prescription eyeglass lenses and contact lenses. The combined entity is called EssilorLuxottica.
Just so you know up front, I reached out to both Luxottica and its parent company with what Dahan told me. I asked if they’d like to respond to his specific points or to speak generally about optical pricing.
Neither company responded, which was the same response I received the last time I contacted them.
Apparently EssilorLuxottica feels no need to defend its business practices. Or it understands that no reasonable defense is possible.
Dahan, a chemical engineer by training, established a company called Custom Optical in 1977 after designing a machine capable of making prescription lenses appear thinner.
In short order he also was designing plastic and metal frames, and proposed to LensCrafters in 1985 that he supply the then-independent company.
“They bought my lens machines, and soon I was selling them a few models of frames,” Dahan said. “Those were successful, so they kept buying more.”
Buying glasses online can save you a lot of money. Here’s how to do it »
Eventually, he said, his company was supplying LensCrafters with about 20% of its frames. “They called me their crown jewel,” Dahan said.
E. Dean Butler, the founder of LensCrafters, remembers Dahan as “a real go-getter.”
“He was a key supplier — good product at reasonable prices,” Butler, 74, said in a phone interview from Berlin, where he was meeting with optical-industry contacts.
He’s no longer affiliated with LensCrafters. These days he’s based in England, but serves as a consultant to optical businesses worldwide.
Both Butler and Dahan acknowledged what most consumers have long suspected: that the prices we pay for eyewear in no way reflect the actual cost of making frames and lenses.
When he was in the business, in the 1980s and ’90s, Dahan said it cost him between $10 and $16 to manufacture a pair of quality plastic or metal frames.
Lenses, he said, might cost about $5 a pair to produce. With fancy coatings, that could boost the price all the way to $15.
He said LensCrafters would turn around and charge $99 for completed glasses that cost $20 or $30 to make — and this was well below what many independent opticians charged. Nowadays, he said, those same glasses at LensCrafters might cost hundreds of dollars.
Butler said he recently visited factories in China where many glasses for the U.S. market are manufactured. Improved technology has made prices even lower than what Dahan recalled.
“You can get amazingly good frames, with a Warby Parker level of quality, for $4 to $8,” Butler said. “For $15, you can get designer-quality frames, like what you’d get from Prada.”
And lenses? “You can buy absolutely first-quality lenses for $1.25 apiece,” Butler said.
Yet those same frames and lenses might sell in the United States for $800.
Butler laughed. “I know,” he said. “It’s ridiculous. It’s a complete rip-off.”
In 1995, Luxottica purchased LensCrafters’ parent company, U.S. Shoe Corp., for $1.4 billion. The goal wasn’t to get into the shoe business. It was to take control of LensCrafters’ hundreds of stores nationwide.
Dahan said things went downhill for him after that. Luxottica increasingly emphasized its own frames over those of outside suppliers, he said, and Custom Optical’s sales plunged. Dahan was forced to close his business in 2001.
“It wasn’t just me,” he said. “It happened to a lot of companies. Look at Oakley.”
Indeed, the California maker of premium sunglasses was embraced by skiers and other outdoorsy types after it released its first sunglasses in 1984.
It raised $230 million with an initial public offering of stock in 1995. Its biggest customer by far was Sunglass Hut, which, like LensCrafters, had stores in malls across the country.
Luxottica purchased Sunglass Hut in early 2001. It promptly told Oakley it wanted to pay significantly lower wholesale prices or it would reduce its orders and push its own brands instead.
Within months, Oakley acknowledged to shareholders that the talks hadn’t gone well and that Luxottica was slashing its orders.
“We have made every reasonable effort to establish a mutually beneficial business partnership with Luxottica, but it is clear from this week's surprising actions that our efforts have been ignored,” Oakley’s management said in a statement at the time.
The company’s stock immediately lost more than a third of its value.
Luxottica acquired Oakley a few years later, adding it to Ray-Ban, which Luxottica obtained in 1999.
“That’s how they gained control of so many brands,” Dahan said. “If you don’t do what they want, they cut you off.”
Again, no one at Luxottica responded to my request for comment.
As I’ve previously observed, online glasses sales hold potential for pushing retail eyewear prices lower, but the e-glasses industry still has a ways to go before posing a threat to the likes of EssilorLuxottica.
It can be a challenge buying something so central to one’s appearance without first trying it on or receiving hands-on help with fitting.
In the meantime, Dahan and Butler told me, federal authorities should step up and prevent price gouging for eyewear — just as they’ve done with other healthcare products, such as EpiPens.
“Federal officials fell asleep at the wheel,” Dahan said. “They should never have allowed all these companies to roll into one. It destroyed competition.”
Butler said it should be clear from EssilorLuxottica’s practices that the company has too much market power. “If that’s not a monopoly,” he said, “I don’t know what is.”
I couldn’t agree more. Regulators are currently wringing their hands over further consolidation in the wireless industry, with a proposed merger between Sprint and T-Mobile raising the prospect of just three major carriers.
The eyewear market is in considerably worse shape.
That should be clear to anyone.
Their now largest participation in and of any single group ..........................
Quote:
Originally Posted by
optimensch
Not to be too defensive of Essilor, but I can buy equipment from Topcon, Nidek and various Chinese and American suppliers which are not, to my knowledge, owned by Essilor. I can buy frames and lenses from non-Essilux companies (and I do). So while there are fewer large suppliers than in the past (as in other industries), I am not so sure that there is anything special about optical. Consumers have never had so many options either. Nonsense news articles such as this LA Times crapola are pure laziness, sensationalist and big deal they found a disgruntled "insider" who may have lost his gravy train who is now "telling all". As if.
optimensch,...................If you would have followed the posts on Essilor's "optical world domination " posts right here on optiBOARD, over the last few years. you would see that they are moving forward step by step without stopping, and counter no visible defensive action at this time.
Their now largest participation in and of any single group, in quality online optical services should give you the shivers, instead of making belittling comments.
The 2 disgruntled "insiders" you mention were the 2 owners of the original "Lenscrafters" chain, who walked away with many millions of Dollars when they sold it to Luxottica.
I'm also going to opine .........................................
Quote:
Originally Posted by
optio
I'm also going to opine that I don't think you would do very well in a basic test of reading comprehension.
The title of the article is: How badly are we being ripped off on eyewear? I think the "we" is intended to describe people NOT in the industry. So people who aren't (for instance) opticians and optometrists. In either words, neither you nor me. Yet look at your post.
Why does an article written by and for non-optical people elicit a response from you detailing all your potential (optometric) purchase avenues? You aren't part of the "we" that the journalist is reporting about. You (and me) are on the "other" side of his basic argument. I'm not sure how you missed that.
..............................a very good point overall.
As having lived and worked in the world of optical retail for whatever timespan it has been, we have been used to the way it was and now is.
We forget that when the optical retail profession became a specialised field in the early 1900's , the times of primitive instruments, machinery and glass lenses, using a lot of manual work to make and finish a pair of glasses. If you would break a lens while finishing a job you had to restart all of it again. For that reason alone, opticians would charge a much higher markup, to cover for broken lenses and other redos, than is standard in other commercial fields. Furthermore the now standard historically higher markup in optical retail sales has survived just about a full century by one reason or another.
No wonder that non optical people are trying to get into this field by catering to the masses, at much lower pricing and still making money.
I have to agree it is newsworthy to the general public...............................
Quote:
Originally Posted by
optio
There is no need to read between the lines. Just read what the lines say. The journalist reports:
“You can buy absolutely first-quality lenses for $1.25 apiece,” Butler said.
Yet those same frames and lenses might sell in the United States for $800.
If the article can be distilled into two sentences, these would be the two. I don't dispute his claim because the prices claimed are consistent with what I know about the optical industry. Now, the journalist overlooks the price of frames in there (let's say $15). So two lenses plus frames comes to $17.50. And that item is then sold for $800. Is that newsworthy? I'm not a news editor but I'm going to assume the editor of the LA Times is competent, and he deems that newsworthy so I'm going to assume it's newsworthy to non-industry folk.
You wrote:
>Where is the monopoly - at wholesale? retail? both?
Butler ..........................sold LensCrafters to Luxottica for millions of $s.
........and the lenses are Polycarbonate, the easiest and cheapest ones to manufacture.
I have to agree it is newsworthy to the general public.
To follow the MONOPOLY...................just read up on Essilor ....Essilux and their worldwide progress right here on optiBoard.
I am just wondering that with such a wide ranging business activity..................
Quote:
Originally Posted by
optimensch
I will opine a little further on your attitude. I run an independent full service practice, have more years of experience than I care to mention, have a number of utility patents in eyewear,
have manufactured, distributed frames on a world wide basis, run multiple retail locations and basically done a fair bit in optical over the past few decades.
I have sold eyewear to some of the biggest chains in the world.
I see patients almost every day, and might be one of the hardest working optometrists anywhere, if by hard working, hours logged count.I have attended countless optical tradeshows around the world and have read financial statements and other information on various players in the field, if only for sport and interest.
.................... I am just wondering that with such a wide ranging business activity and experience , you still work as an Optometrist seeing one by one customer.
................and with all this experience you do not seem to see the writing on the wall. Your present customers age group is dying off, and are being replaced by another younger generation that embraces totally different ways of spending their money, and buying their goods.