What is Luxottica Group?
Founded in 1961 by Leonardo Del Vecchio; Luxottica Group is the largest eyewear company in the world.
With a Market Cap of $30.9 Billion, Revenues worth €8.837 billion and with 79,000 Employees, it is also known to be the 65th most Innovative Company in the world, that is a global leader in the Design, Manufacture, Distribution and Retail of fashion, luxury and sports eyewear with high technical and stylistic quality.
Luxottica has two main product offerings: Sunglasses and Prescription Frames, and own an army of Proprietary Brands including – LensCrafters, Sunglass Hut, Pearle Vision, Sears Optical, Target Optical, Glasses.com, Alain Mikli, Arnette, Oakley, Persol, Ray-Ban, Sferoflex, EyeMed Vision Care, Vogue Eyewear, etc..
In addition to the proprietary brands, they also manufacture eyewear under license for some of the most well-known names in the global fashion and luxury industries, including: Giorgio, Armani, Emporio Armani, A|X – Armani Exchange, Bulgari, Burberry, Chanel, Dolce & Gabbana, DKNY, Michael Kors, Ralph Lauren, Prada, Tiffany & Co., Tory Burch, Versace, etc…
Talking about their Retail business, Luxottica conducts their business activities at more than 7200 retail locations in the United States, South America, Canada, China, Australia, New Zealand, South Africa, the United Kingdom, and the United Arab Emirates.
Some of their retail banners include Sunglass Hut International, LensCrafters, Pearle Vision, Sears Optical, Target Optical, ILORI, Laubman & Pank, Alain Mikli, Oakley and David Clulow, etc…
The company is also doing their bit of Charity under their global foundation program called One Sight.
What is their Operating Model?
One of Luxottica’s competitive advantages which they have built over the years includes their vertically integrated business model. It covers the entire value chain: Design & Product Development, Manufacturing, Logistics, and Distribution.
Their operations also follow the same sequence as well. It begins with the…
- DESIGN & PRODUCT DEVELOPMENT: Every year the Group adds approximately 2000 new styles to its collection. The process begins with the first style sketches of the product, and then the idea quickly forms the shape of the design, which once finalized, is then sent for the development of the Prototype. This new model is then moulded at the workshop using 3D technology.
- MANUFACTURING: The manufacturing operations of the company are located in Italy (6), China (3), the United States (1), Brazil (1) and India (1). The manufacturing processes is very consolidated and every plant has specific production roles and technologies, thus, improving the productivity and quality of their operations.
- LOGISTICS: Luxottica’s distribution system compromises a total of 18 distribution centers in the Americas, Asia-Pacific and Europe. It is a well organized and linked network that fed by a centralized manufacturing platform and serves both the retail and wholesale businesses. There are four main distribution centers (hubs) in strategic locations that operate as centralized facilities using highly automated order management system, serving to the rest of the distribution centers in the world.
- DISTRIBUTION: – Their distribution network is divided into three parts – Wholesale, Retail and eCommerce! Their Wholesale Distribution Structure covers more than 150 countries, wherein most of the customers are retailers of mid to premium-priced eyewear, such as independent opticians, optical retail chains, department stores, online players, etc. Their Retail Distribution covers their retail business that is spread across 6,589 stores and 676 franchised locations. Their retail stores sell both their proprietary and licensed brands of products. And lastly, their eCommerce section consists of websites of Oakley, Ray-Ban and Sunglass Hut, which provide a premium assortment, exclusive services and a consumer experience that is unique to the individual brand. Other than that, they also have Glasses.com (acquired in 2014) under their wing, which continues to serve as an innovation lab focused on improving the eyewear e-commerce experience for consumers.
What are the strategies adopted by the company to become the market leader?
To begin with –– overall, the company has used numerous strategies to reach where they are today, but the most important ones by many, are believed to be their Licensing and Competitive Pricing Strategies!
Licensing Strategy is one of the biggest reasons that Luxottica has managed to maintain superiority over the eyewear industry. One right decision taken by Leonardo in 1988 to sign licensing agreements with sunglass designers, has helped the company to achieve a dominant position in the world of eyewear. They are also the first eyewear company to sign licensing agreements with designers as well.
This is closely followed by the Competitive Pricing Strategies used by Luxottica! Vertical Integration and Computerization are the two main reasons due to which they are able to effectively offer competitive pricings. They implemented Computerization along with the Integration / Consolidation of the complete value chain of their functioning from design to manufacturing, inventory control to the distribution, greatly helped them in significantly reducing the prices and undercutting their competition. Additionally, their acquisition of distribution companies has also played an important role too!
Lastly, they have very intelligently used numerous direct and indirect Marketing Strategies such as communications with customers (e.g., mailings and catalogues), broadcast and print media (e.g., television, radio and magazines), etc. to build a powerful image in the minds of their customers.
Who is the founder of Luxottica?
Born on the 22nd of May 1935 in Milan (Italy), Leonardo Del Vecchio is the Founder and Chairman of Luxottica.
Recently on his 80th birthday Leonardo granted $10 million in Shares to his employees at Luxottica.
With a Net Worth of $18.7 Billion (Forbes Magazine); Leonardo is known to be the 2nd richest man in Italy, 8th richest man in Europe and 37th richest man in the world.
As of date, Leonardo owns 61.90% of Luxottica, 28% of Foncière des Régions (French Real Estate Company), and 3.17% of Assicurazioni Generali (Italy’s largest Insurance Company).
To give you a gist about his life – Leonardo was born in an impoverished family and his father who was a street hawker of vegetables had died five months before his birth. Hence, since his mother was financially not in a position to raise him, he was given away to an orphanage by her.
He began his career at the early age of 14, apprenticed as a Designer in a tool and die making Factory in Milan that specialized in small components.
After working there for around a decade and studying drawing and engraving at the Brera Academy of Art, the young designer struck out on his own in 1958, manufacturing moulded plastic eyeglass components in Milan. The new company was Luxottica!
“Work always came before everything!” – Leonardo Del Vecchio
How has their growth been so far?
It all began when he was just 25!
Leonardo moved to Agordo in the province of Belluno, which is home to most of the Italian eyewear industry, and started a new company called Luxottica.
By 1967, they started selling complete eyeglass frames under the Luxottica brand, which proved successful enough that led to the end of contract manufacturing business in 1971.
In the same year, the company also saw the entrance of a new partner – Scarrone (a distribution company), when the two outside investors requested the repayment of their loans. Later, in 1974 Luxottica acquired Scarrone in attempts of vertical integration.
Leonardo also systematically brought about various technological advances throughout the 1970s which also included automated moulding, milling equipment, adoption of techniques from allied industries, borrowing specialized electroplating procedures from local jewellers, R&D in plastics compounding, metallurgy, and basic chemistry, etc…
But, beyond all these, one of the most important step taken by the company was the implementation of overall Computerization of all their functioning.
This not only helped them with a significant cost advantage over their competitors, but also helped them to make small production runs more efficient as well.
During this period, they launched their first collection of prescription eyewear, and also entered the wholesale distribution space as well.
In 1981, the company set up their first international subsidiary, in Germany, which further led to the expansion in England, France, and Canada.
In 1988, they signed their first licensing agreement with Armani-branded eyewear and started producing for them. This led signing of many more deals with some of the most reputed and world renowned eyewear brands in the next few years.
In 1990, Luxottica launched their IPO on the New York Stock Exchange and later, in Milan in December 2000 as well.
Using the money they were able to raise from the IPO, they went on an acquisition spree and acquired other brands like: Vogue Eyewear in 1990, Persol and US Shoe Corporation (LensCrafters) in 1995, Ray-Ban (Bausch & Lomb) in 1999, Sunglass Hut, Inc. in 2001, OPSM in 2003, Pearle Vision and Cole National in 2004.
They also acquired Oakley for a whooping $2.1 Billion deal in November 2007 and Erroca for €20 Million, as well.
In 2014, they partnered with Google for the development of Google Glass and also announced a new organizational structure that composed of two Co-CEOs, one focusing on market development and the other overseeing corporate functions.
More recently, the group has signed an Exclusive Agreement with Macy’s Stores to open LensCrafters licensed departments in as many as 500 Stores over the next 3 years.