Millions of people wear glasses. Some studies indicate that as many as 225 million people in the U.S. wear some form of vision correction, with 75 percent of those choosing to wear spectacles over contact lenses. Worldwide, the number is more difficult to pin down, but according to a recent story on 60 Minutes of CBS, eyeglass behemoth Luxottica estimates that over half a billion people in the world wear glasses manufactured exclusively by them. That’s a staggering figure, and with demand so high one might expect that glasses would be relatively affordable. That, of course, is not the case.
Luxottica and its near domination of the market manages to thwart competition and keep prices artificially high. Couple that with recent stories like the one coming out of Augusta, Georgia, of an optometrist convicted of Medicare fraud and defrauding the U.S. government of over $441,000, and one might be excused for believing that costs associated with being able to see clearly are unjustly exorbitant.
Of course not all optometrists are committing insurance or Medicare fraud. There isn’t even evidence that the majority are. But if one takes the case of Luxottica, which owns Lens Crafters and Pearle Vision (the two biggest players in retail eyewear—and providers of diagnostic testing) as well as the second largest vision insurance company EyeMed; it quickly becomes apparent that competition is sorely lacking in the eyesight industry. That lack of competition has led to artificially high prices that many have become accustomed to paying without asking any questions.
Indeed it may seem odd that no one bothers to ask why a pair of glasses—just a few pieces of plastic and a couple of lenses — should cost over $500 and why determining that those high-priced items are necessary should cost as much as it does. The truth, it seems, is that no one really knows. But those who have bothered to ask the question are positioning themselves to make a fortune in the new world of affordable glasses.
Enter the likes of Neil Blumenthal. He cofounded a company called Warby Parker in 2010 with fellow students at the University of Philadelphia’s Wharton School. Warby Parker set out to become the “Netflix of glasses,” providing glasses to people at a much lower cost over the internet, instead of through more traditional methods. By all accounts it has succeeded, but the company may be more aptly compared to Tom’s Shoes than Netflix.
Blumenthal had been inspired by his time at the non-profit organization VisionSpring, a charity that focuses on providing glasses to people in need and living developing countries. In order to do that, VisionSpring needed to escape the choke hold on the industry in place by Luxottica. The organization came up with a simple solution—it began manufacturing its own glasses. Back at the Wharton School, Blumenthal reasoned that if a non-profit could do it, then students at one of the United States’ most prestigious business schools could also do it and manage to turn a profit. The company now sells prescription eyeglasses for $95 a pair.
Blumenthal described the founding principles of the company in a New York Magazine article last year.
He said he wants people to understand, “How we started this business to radically transform the optical industry, bring down prices, and transfer billions of dollars from these multi-national companies to normal people. And, thinking more broadly, how we wanted to demonstrate that business can be profitable and can do good in the world, and it doesn’t have to charge a premium for it.”
Since 2010 Warby Parker has grown by leaps and bounds. It maintains a formidable presence on the internet and is opening retail stores to boot. It has yet to release financial data to prove it is profitable, but it is reported to have raised $60 million from investors at the end of last year.
The company is also keeping true to its do-gooder roots. Much like Tom’s Shoes, which provides a pair of shoes to the developing world for every pair it sells in America, Warby Parker maintains a similar program. Detailed under the “Do-Good” heading on the company website the “Buy a Pair, Give a Pair” program claims to have provided 500,000 pairs of free glasses worldwide.
Warby Parker, however, is not the only player in the game. Since the early 2000s, many companies have cropped up to make money in an industry that once enjoyed 700 percent markups for lenses. A Minnesota software engineer named Ira Mitchell launched a blog in 2006 called GlassyEyes with the motto “Saving the World from Overpriced Glasses.” The blog has become a clearing house of sites like Goggles4U and EyeBuyDirect, all of whom are taking a chunk of Luxottica’s market share.
It is a virtual do-it-yourself landscape out there as glasses go these days. While no one has yet broken into the market to bring diagnostic costs down, customers can now afford to buy two or three frames to match outfits or meet other fashion needs. Once armed with a prescription from an optometrist, the possibilities in the market are numerous for procuring specs, and that has spelled nothing but good news for the consumer.
In a way, this shift was inevitable. It is a simple business story of a manufacturing behemoth — Luxottica — being unable to respond quickly to market demands, or just simply being too busy raking in piles of cash to realize that the world was changing around it.
Luxottica had focused for years on manufacturing frames that cost little to make but were designed by in-house designers to match the styling trends of big fashion houses. The company was then able to demand high prices for designer label frames licensed by fashion greats like Chanel, Ralph Lauren or Coach. Younger generations, it seems, don’t care about those types of labels and are much more interested in affordability and simplicity—the new hip aesthetic.
All of the online glasses providers are now providing affordable options, and some are providing the trendy simplicity consumers crave. Warby Parker is the pinnacle of that. What’s more, the company has also expanded into the sunglass market. The benefit, of course, is that sunglasses are worn by virtually everyone, and require no expertise to manufacture. No prescription needed (necessarily). And yet again, this is a shot across the bow of Luxottica, which also owns Sunglass Hut, the largest sunglass retailer in the world and marketer of sunglasses-greats Oakley and Ray-Ban.
That is another signal that the multi-billion dollar industry is changing, and changing in ways that bode well for consumers and those for whom good eye sight was previously out of reach. Eyeglasses and sunglasses are two products where functionality, health, and fashion intersect. The market has been calling for change for quite some time as prices continued to climb, and while Luxottica will likely survive, now, more than ever, consumers have options. The most interesting part is that those options are fashionable, affordable and even carry a little bit of social awareness.
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