May 19, 2015
Kering made up of two divisions, luxury and sports and lifestyle, owns brands like Alexander McQueen, Gucci, Brioni, Saint Laurent, Bottega Veneta, Stella McCartney and Puma. Last fall they ended their contract with Safilo Group, Italian manufacturer and distributer of eyewear, and decided to go in-house. This has caused a change in the future growth of the eyewear market that has many wondering, how will the industry develop in the coming years?
Today, the eyewear market is composed of frames, contact lenses and sunglasses and is worth $90 billion. It is said that the market will reach $140 billion by 2020. Frames and sunglasses make up 40% of the market of which 35% are premium frames created by fashion labels. In 2014, premium frames and sunglasses had a revenue of just below $13 billion.
The market is run by 5 players in the premium fashion segments who market, develop, manufacture and distribute their own brands and enter into licensing deals. The first and most dominant is Luxottica. Luxottica owns a portfolio of brands such as Persol and leading eyewear in the industry Ray-Ban. It also licenses brands such as Chanel, Armani, Prada and Michael Kors and manages the distribution of their product through 200,000 wholesale doors. The terms vary according to each licensing agreement, but they typically design the eyewear with input from brand. In 2014, Luxottica generated over $8.5 bill in revenue.
The second largest player in the market is Safilo group who holds licenses for Dior, Fendi, Céline, sells through 90,000 wholesale doors and reported $1.33 bill in revenue in 2014. The last three smaller players license with global brands. Marchon licenses Calvin Klein, Valentino, Ferragamo and Chloé. De Rigo licenses Lanvin and Carolina Herrera. Marcolin licenses Tom Ford, Balenciaga, Tod’s and Ermenegildo Zegna.
Kering now plans on joining the 5 players in the market as well. Kering’s reasoning is that according to research, “the premium segment of the eyewear business is currently growing in the high double-digits.” In fact, it just recently finalized a partnership agreement with Safilo, to cover the product development, manufacturing and supply of Gucci eyewear products.With only 408 points of sale for Gucci and Saint Laurent, Kering will have to operationalize its relationships with brands and global consumers in a market with additional distribution channels if it plans on competing with the big guys.
Kering announced that its initial brand focus “will include three pillar brands: Saint Laurent, Bottega Veneta and Puma, and four brands with great potential: Stella McCartney, Alexander McQueen, McQ and Boucheron. There will also be two new brand entries from us into the eyewear market which we will reveal very soon.”
Currently, the eyewear industry is looking for growth through deeper market penetration, specifically in North America, and through digital platforms that allow customers to customize according to their own personal style and preferences. Whether Kering will be successful in making a dent in the eyewear market is yet to be known. We will just have to see what happens as they announce and present their new brand product lines later on this year…