EssilorLuxottica has its eyes on the prize
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Illustration: Natalie Peeples/Axios
Italian eyewear giant EssilorLuxottica knows that the not-so-secret secret to making money in the fashion industry is to have direct relationships with customers. That's why it's beefing up with tech — and is buying a high-profile streetwear brand.
Driving the news: EssilorLuxottica said last week it would spend $1.5 billion to buy Supreme; it seems likely to accept a $5 billion investment from Meta; and is buying a controlling interest in Heidelberg Engineering, a company specializing in eye-test technology.
The big picture: Attracting and retaining the loyalty of new consumers, especially in highly fashion-conscious markets like Japan and Korea, has never been more difficult.
- Supreme presents one attractive model. Its wares are available only on its website or in its stores, and most of its customers are signed up to receive notifications of its Thursday drops.
- The value of its iconic logo is huge, especially if it can be used in a range of collaborations across EssilorLuxottica's many brands. (The company owns the likes of Ray-Ban and Oakley outright — and partners on eyewear with the likes of Chanel and Ferrari.)
- The value of Supreme's customer list is almost as large. It isn't just a fashion brand; it's also a repository of data on exactly who is willing and able to pay a large premium for a certain logo.
Between the lines: There's another model, which EssilorLuxottica also seems to be pursing — one that has been perfected by Apple. Under this model, once consumers are locked into your software, they'll pay almost anything for your hardware.
- EssilorLuxottica has already embedded Meta's technology into its Ray-Ban Meta line of smart glasses, which have been well received.
- The promise of Heidelberg Engineering is that it might develop technology that allows people to get an eye prescription at home.
- That technology could be built into a LensCrafters app (EssilorLuxottica owns them, too) to instantly generate a pair of smart prescription glasses with massive profit margins.
Zoom out: Fashion brands are doing a very good job disintermediating third-party retailers like department stores.
- EssilorLuxottica's vision is to create "a laboratory for med-tech, innovation and growth" covering "the entire spectrum of the value chain."
- The natural destination of such a strategy is one where getting a prescription, finding frames, and buying lenses can not only be done seamlessly in a single transaction in a single app but can also carry all the cachet associated with a high-fashion brand.
The bottom line: "Only perfume and cosmetics beat the margins on eyewear," fashion attorney Douglas Hand told Vogue Business.
- Instead of using technology and data to disrupt an existing business and bring down prices, EssilorLuxottica is seeking to use it to build a moat that makes it immune to disruption.
