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COLUMN CONSUMER CONFIDENTIAL BUSINESS
How badly are we being ripped off on eyewear? Formerindustry execs tell all
By DAVID LAZARUS MAR 05, 2019 | 5:00 AM ! " #
Charles Dahan was one of the leading suppliers of frames to LensCrafters, before the company was
purchased by optical behemoth Luxottica. Glasses that cost him $20 to make would be sold for five
times that amount. (Luxottica)
Charles Dahan knows from first-hand experience how badly people getripped 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. Healso built machines that improved the lens-manufacturing process.
In other words, Dahan, 70, knows the eyewear business from start tofinish. 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 Irecently wrote about why consumer prices for frames and lenses are soastronomically high, with markups often approaching 1,000%.
I noted that if you wear designer glasses, there’s a very good chanceyou’re wearing Luxottica frames.
The company’s owned and licensed brands include Armani, BrooksBrothers, Burberry, Chanel, Coach, DKNY, Dolce & Gabbana, MichaelKors, Oakley, Oliver Peoples, Persol, Polo Ralph Lauren, Ray-Ban,Tiffany, Valentino, Vogue and Versace.
Along with LensCrafters, Luxottica also runs Pearle Vision, SearsOptical, Sunglass Hut and Target Optical, as well as the insurerEyeMed Vision Care.
And Italy’s Luxottica now casts an even longer shadow over theeyewear industry after merging last fall with France’s Essilor, theworld’s leading maker of prescription eyeglass lenses and contactlenses. The combined entity is called EssilorLuxottica.
Just so you know up front, I reached out to both Luxottica and itsparent company with what Dahan told me. I asked if they’d like torespond to his specific points or to speak generally about opticalpricing.
Neither company responded, which was the same response I receivedthe last time I contacted them.
Apparently EssilorLuxottica feels no need to defend its businesspractices. Or it understands that no reasonable defense is possible.
Dahan, a chemical engineer by training, established a company calledCustom Optical in 1977 after designing a machine capable of makingprescription lenses appear thinner.
In short order he also was designing plastic and metal frames, andproposed to LensCrafters in 1985 that he supply the then-independentcompany.
“They bought my lens machines, and soon I was selling them a fewmodels of frames,” Dahan said. “Those were successful, so they keptbuying more.”
Buying glasses online can save you a lot of money. Here’s how to doit »
Eventually, he said, his company was supplying LensCrafters withabout 20% of its frames. “They called me their crown jewel,” Dahansaid.
E. Dean Butler, the founder of LensCrafters, remembers Dahan as “areal 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 withoptical-industry contacts.
He’s no longer affiliated with LensCrafters. These days he’s based inEngland, but serves as a consultant to optical businesses worldwide.
Both Butler and Dahan acknowledged what most consumers have longsuspected: that the prices we pay for eyewear in no way reflect theactual cost of making frames and lenses.
When he was in the business, in the 1980s and ’90s, Dahan said it costhim between $10 and $16 to manufacture a pair of quality plastic ormetal frames.
Lenses, he said, might cost about $5 a pair to produce. With fancycoatings, that could boost the price all the way to $15.
He said LensCrafters would turn around and charge $99 for completedglasses that cost $20 or $30 to make — and this was well below whatmany independent opticians charged. Nowadays, he said, those sameglasses at LensCrafters might cost hundreds of dollars.
Butler said he recently visited factories in China where many glasses forthe U.S. market are manufactured. Improved technology has madeprices even lower than what Dahan recalled.
“You can get amazingly good frames, with a Warby Parker level ofquality, 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 $1.25apiece,” 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. ShoeCorp., for $1.4 billion. The goal wasn’t to get into the shoe business. Itwas to take control of LensCrafters’ hundreds of stores nationwide.
Dahan said things went downhill for him after that. Luxotticaincreasingly emphasized its own frames over those of outside suppliers,he said, and Custom Optical’s sales plunged. Dahan was forced to closehis business in 2001.
“It wasn’t just me,” he said. “It happened to a lot of companies. Look atOakley.”
Indeed, the California maker of premium sunglasses was embraced byskiers and other outdoorsy types after it released its first sunglasses in1984.
It raised $230 million with an initial public offering of stock in 1995. Itsbiggest 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 toldOakley it wanted to pay significantly lower wholesale prices or it wouldreduce its orders and push its own brands instead.
Within months, Oakley acknowledged to shareholders that the talkshadn’t gone well and that Luxottica was slashing its orders.
“We have made every reasonable effort to establish a mutuallybeneficial business partnership with Luxottica, but it is clear from thisweek's surprising actions that our efforts have been ignored,” Oakley’smanagement 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. “Ifyou 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 forpushing retail eyewear prices lower, but the e-glasses industry still hasa ways to go before posing a threat to the likes of EssilorLuxottica.
It can be a challenge buying something so central to one’s appearancewithout first trying it on or receiving hands-on help with fitting.
In the meantime, Dahan and Butler told me, federal authorities shouldstep up and prevent price gouging for eyewear — just as they’ve donewith other healthcare products, such as EpiPens.
“Federal officials fell asleep at the wheel,” Dahan said. “They shouldnever have allowed all these companies to roll into one. It destroyedcompetition.”
Butler said it should be clear from EssilorLuxottica’s practices that thecompany has too much market power. “If that’s not a monopoly,” hesaid, “I don’t know what is.”
I couldn’t agree more. Regulators are currently wringing their handsover further consolidation in the wireless industry, with a proposedmerger between Sprint and T-Mobile raising the prospect of just threemajor carriers.
The eyewear market is in considerably worse shape.
That should be clear to anyone.
David LazarusCONTACT ! " $
David Lazarus is an award-winning business columnist for the Los Angeles Times,focusing on consumer affairs. He also appears daily on KTLA-TV Channel 5 and is a part-time radio host. His work appears in newspapers across the country and has resulted in avariety of laws protecting consumers.
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