Luxottica...an eye for vertical integration

Luxottica HQ in Italy

While the debate on disbursed supply chain and contract manufacturers rages on...a small lux company from Italy has emerged as the champion of vertical integration and retaining key SCMluxe elements in-house. Luxottica is a $8billion eyewear company almost monopolising the eyewear market with a 80% market share. What is interesting about Luxottica apart from its impressive market share and growth rates of about 20% yoy is that it retains full control over the supply chain of its iconic in-house brands like Ray-Ban, Oakleys and Vogue and licensed ones like Burberry, Chanel, Dolce & Gabbana and others.  It has retained production in-house with six manufacturing facilities in Italy, as well as one plant in the United States and Brazil, and two in China. The China facilities again cater to the exploding Asian markets. Distribution is also kept in-house with 2 distinct segments - wholesale and Retail. In the Wholesale distribution segment the Company's products are mostly retailers of mid- to premium-priced eyewear, such as independent opticians, optical retail chains, speciality sun retailers and duty-free shops and are sold under the brand Oakley. The retail distribution operations are carried out through such brands as LensCrafters, Pearle Vision, OPSM and Sunglasses Hut and is again a prominent landmark in most duty free sections of airports. Obviously this strategy has helped Luxottica rake up business and keep the growth engine well-oiled (20% growth expected this year). But will it lead to improved perceptions amongst customers and brand equity or will the entire eyewear market be seen as a luxottica world with no differentiation?