LUXOTTICA'S COMPETITORS

In relation to vertical integration, in order to have a more complete view of the eyewear sector, now we want to analyze the strategy pursued by the major competitors of Luxottica: De Rigo, Safilo, Marcolin e Marchon.

De Rigo

Born as a subcontractor, today it is one of the most important companies for the production and distribution of eyewear. It also implements a strategy of vertical integration, even if with smaller dimensions than Luxottica. Upstream in the production chain, De Rigo oversees the phases of design, industrialization and production. Raw materials are purchased from outside by specialized companies and then processed internally to create the individual components and assemble them. Downstream De Rigo is one of the most integrated realities after Luxottica: it directly oversees wholesale distribution with sixteen foreign branches, but at the same time also relies on over one hundred independent distributors. Furthermore, after several acquisitions today it owns over nine hundred own stores and thirty franchises in Spain, Portugal, Turkey and the United Kingdom with the Grand Optica, Mais Optica, Opmar Optik and Boots Opticians brands.

Safilo

This company is the second operator in the frames market after Luxottica. It presents a more complex situation in terms of vertical

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integration. The company is integrated in research and technological innovation, design and product development, production, marketing and communication up to sales and distribution. Its production process covers almost all production phases and is characterized by high innovation and the use of modern technologies.

Production takes place in seven production plants, four of which are in Italy, one in Slovenia, one in the United States and one in China.

However, the vertical integration model used in production is not completely integrated: in fact, the company internally produces the expected production while relying to external contractors in the event of surpluses.

As regards distribution, the group has announced a strategy based almost exclusively on the wholesale channel with an owned distribution network in thirty-nine countries and three main distribution centers in Padova, Denver and Hong Kong. In the past, however, Safilo attempted integration also in the retail segment, acquiring around three hundred points of sale, but renouncing the project due to family disagreements at the top of the company. Today it has only about 125 retail outlets with the Solstice brand. However, it is necessary to report an interesting possibility of greater integration in the retail sector: the majority stake of the company was purchased in 2010 by HAL Holding NV, a Dutch international investment company, which owns one of the largest retail chains in the optical segment: GrandVision. Even if the current company policy is directed towards wholesale channel, in the future possible synergies between Safilo and GrandVision could be exploited.

Marcolin

Founded as a "Handicraft Factory" specializing in the production of gold laminated eyeglass rods, over the years the company has grown internationally through acquisitions and strategic agreements.

Marcolin is present in the production and wholesale distribution phases with a weaker vertical integration strategy than the other companies mentioned above. In production, the company does not carry out all the steps required to obtain the finished product

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internally but buys some components and semi-finished products from external Italian and Chinese suppliers. The production phases carried out internally take place in the two plants owned in Italy and partly in China. For the commercial area, the company has twenty-five branches with which it carries out direct distribution activities and four showrooms but, at the same time, it also relies on one hundred and sixty-one independent distributors. Finally, like Safilo, the company does not operate directly in the retail segment.

Marchon

The company is headquartered in New York where it also has its own stylistic center. Regarding its market offering, in addition to the production and distribution of frames, are provided services of optical/ophthalmic assistance and ophthalmic lenses, management and process software for the optical industry. In fact, Marchon is part of the VSP Global group, a leader in the field of health insurance specializing in ophthalmology.

Marchon produces in two factories in Italy as well as some in other countries, including China, appearing in the world as an international producer of Italian Style.

The conclusions that can be drawn after this brief focus on the use of vertical integration by the major frame manufacturing companies is that not all market leaders have implemented the same verticalization strategy. For example, Luxottica and De Rigo are integrated, as well as in the production and wholesale distribution also in retail, unlike Safilo and Marcolin, which instead are present only in wholesale distribution.

Marcolin and Safilo, as we have said, are also less integrated, considering that they purchase some components from external producers. Marchon, on the other hand, is a special case due to the fact that it belongs to a well-rounded group in the optics industry that offers insurance products, software, lenses and frames, somehow escaping from the perimeter of eyewear alone.

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