Similar to the beauty and jewelry categories, glasses also have the function of "stepping stones" for primary consumers to enter the luxury world, and compared with the beauty that is not easy to be recognized and the less conspicuous jewelry, the glasses that occupy about half of the area on the human face have a high degree of recognition and styling functions, and have a lower average price than bags and shoes, so for the primary luxury consumers who use luxury goods as "social currency", glasses are their more cost-effective choice.
According to Statista, a global business data platform, the global eyewear market, which comprises spectacles, contact lenses, sunglasses and other eyewear products, is estimated to be worth about $154.22 billion in 2022 and is expected to reach $197.2 billion by 2027. As far as the Chinese market is concerned, the data of the China Commercial Industry Research Institute points out that the market size of China's glasses industry is expected to reach 85 billion yuan in 2020. "Future Think Tank" believes that the market size of China's eyewear products can reach more than 100 billion yuan by 2025. In addition to contact lenses, several other categories are promising dividend treasures for fashion brands.
The reality of the situation determines that glasses must become the "cash cow" of fashion brands, and this market is bound to be full of fierce competition.
After experiencing the departure of cooperative head brands, the epidemic crisis and the strong attack of the same industry represented by Kering Eyewear, the World's second largest eyewear manufacturer from Italy, Safilo Group, ushered in a comprehensive recovery in 2021.
Last week the company released its 2021 financial report. In the 12 months ended December 31, Group sales amounted to €969.6 million, representing an increase of 26.3% over €780.3 million in 2020 and an increase of 7.5% over 2019 at constant exchange rates. Its adjusted net profit, excluding non-recurring costs, was EUR 27.4 million for 2021, compared to its adjusted net loss of EUR 50.1 million for 2020 and EUR 6.5 million for 2019. While net profit for 2021 has still not been able to make up for the losses of the previous two years, the significant improvement in performance shows that the Safilo Group has found a way to recover after a difficult time.
Safilo Group
Among them, the steady business transformation and the increase in new licensing cooperation are important reasons for the Safilo Group to emerge from the predicament and usher in a revival.
Throughout the twentieth century, large luxury conglomerates, such as the LVMH Group and the Kerping Group, were accustomed to handing over the eyewear business to large specialist manufacturers such as Luxottica and Safilo. As the world's second-largest eyewear company, Safilo has represented more than half of the luxury brand eyewear business. But since 2014, the Safilo Group's footprint has been rapidly eroded by its peers.
In 2014, roberto Vedovotto, former CEO of Safilo Group, created Kering Eyewear, the eyewear division for the new owner, Kering Eyewear. Two years later, Kering took back the Gucci brand glasses licensing business, which had been working with Safilo Group for 20 years, and handed it over to Kering Eyewear. Due to the termination of the agency contract two years in advance, Kering group did not hesitate to pay 90 million euros in compensation to Safilo Group in three installments, and the partnership between the two parties was officially terminated on December 31, 2016.
The Safilo Group has ceased to cooperate with the Gucci brand eyewear business
This operation opened the way for luxury giants to take back their eyewear business from professional manufacturers. Subsequently, safilo group successively lost the right to manufacture glasses for luxury brands such as Celine and Amarni.
In 2017, the LVMH Group invested and held 51% of the shares in Italian eyewear manufacturer Marcolin. At the end of 2019, LVMH Group successively announced that the licensing agreements between its brands Dior, Givenchy, Fendi and the Safilo Group would expire and not be renewed. At the time, Safilo had already said that losing the licensing rights to the LVMH Group's brands would result in a reduction in the group's annual sales by a whopping 200 million euros.
Aware of the crisis, the Safilo Group immediately announced a new business plan for 2020-2024: balancing the proportion of licensed brands and private labels to 50% each; adjusting the sales target of the sunglasses business to 55%, leaving the remaining 45% to the optical eyewear business, and the group will carry out efficient digital transformation as soon as possible. Angelo Trocchia, CEO of the Group, said: "We have put too much energy on sunglasses in the past and will gradually turn to optical glasses in the future, while focusing on developing business in emerging markets, with the Asian market expected to account for 20% of sales by 2024, the online business is expected to account for 15%, and the company will also be committed to digital transformation." ”
The COVID-19 pandemic that began in 2020 has indeed greatly affected Safilo's plans, but the strong market potential of the eyewear business has also welcomed new partners, including Missoni, Levi's, Isabel Marant, Ports and Under Armour, while the overall category is still receiving greater investment.
The Safilo Group currently has five private label brands (Safilo Caffino, Polaroid Polaroid, Carrera, Smith Smith and Oxyd) and more than 30 brand licensing partners. Designs, manufactures and sells prescription frames, sunglasses, sports eyewear, ski goggles and helmets, as well as cycling helmets, and has factories in Italy, Slovenia, the United States and China.
Driven by a surge in enthusiasm for outdoor sports over the past two years, Safilo Group's Smith-branded goggles and helmet business has skyrocketed, described by Group CEO Angelo Trocchia as "the largest brand in our portfolio.") Licensing from Kate Spade, Hugo Boss, Jimmy Choo and Tommy Hilfiger has grown by double digits, and the optical eyewear business already accounts for 40% of the group as a whole.
Tommy Hilfiger glasses
In the process of realizing the new business plan, Safilo Group acquired a 70% stake in privé Revaux, an American designer eyewear brand, and Blenders Eyewear, a California-based Internet eyewear brand (and valued the start-up brand at $90 million), and further increased its incubation of the David Beckham brand. The new partnership with Dsquared2, Carolina Herrera and Chiara Ferragni Collection has also brought more young customers to Safilo. A number of transformational strategies have had a significant positive impact on the Safilo Group, whose online presence now accounts for 13.4% of sales, up from 12.7% in 2020 and 3.9% in 2019, and almost doubles its presence in China.
In Deloitte's Global Powers of Luxury Goods 2021 report, Safilo remains at the 50th place on the 2021 list of the world's top 100 luxury goods companies.
Although it has begun to bottom out, the competitive landscape facing the Safilo Group is not entirely optimistic. One of the strongest competitors comes from Kering Eyewear.
Back in 2019, Kering Eyewear, which was founded only 5 years ago, has grown from a "Kering Group's intrapreneurship project" to a leading company that occupies 20% of the global luxury eyewear market, with 15 fashion brand eyewear product development and operation licenses, including not only Kering Group's internal brands, but also brands from Richemont Group, such as Cartier. The company's revenue in the first half of 2019 has reached 321 million euros, and its number of employees has increased by about 1,300 from 33 in December 2014.
Even during the pandemic, Kering Eyewear hasn't stopped expanding.
In June 2020, Kering Eyewear announced the signing of a partnership agreement with Chloé to design, develop, manufacture and distribute the eyewear collection for Chloé. Previously, Chloé's eyewear category worked with Marchon Eyewear for 9 years, producing and selling classic models such as Carlina, Poppy, Rosie and more. A month later, Kering Eyewear signed an agreement with Dunhill to produce and distribute sunglasses and optical eyeglasses worldwide. Coupled with previous partnerships with the Alaia brand, Kering Eyewear has reached eyewear business cooperation with almost all of richemont's fashion brands.
Chloé CEO Riccardo Bellini's assessment illustrates Kering Eyewear's ambitions: "Kering Eyewear shares the same ambitions as our brand. ”
Kering Eyewear, the optical eyewear category that occupies an important position in Safilo's new business plan, has also made a big move. In October 2021, Kering Eyewear completed the acquisition of Lindberg, a Danish luxury eyewear brand. Although Lindberg will remain independent and will not produce products for the Kering Eyewear brand, it has actually enhanced Kering Eyewear's penetration and voice in the high-end optical eyewear market.
In 2021, Kering Eyewear acquired Lindberg, a danish luxury eyewear brand
Not long ago, Kering Eyewear announced the acquisition of Maui Jim, an American eyewear brand, which is expected to close in the second half of 2022. Founded in Hawaii in 1987, Maui Jim is known for its Polarized Plus 2 lens technology, which protects against glare and UV rays while enhancing the eye's natural ability to perceive color, and its sunglasses and optical frames are sold in approximately 100 countries. The move is seen as an important step towards Kering Eyewear's expansion into the field of lens expertise and functional eyewear products. Speaking about the acquisition, Safilo Group CEO Angelo Trocchi said "(Maui Jim) is a great brand", but vaguely mentioned the lack of official figures and many "opportunities from a financial point of view".
According to Kering's 2021 financial report, after excluding intra-group sales, royalties paid to partner brands, and including Lindberg's revenue from October 1, 2021, Kering Eyewear's performance rose to €599 million, a significant increase of 45% on a comparable basis.
Maui Jim
At the beginning of 2021, Kering just sold two of its unsatisfactory professional high-end Swiss watch brands to strengthen the group's operational capabilities for core assets with higher sales conversion capabilities. It is not difficult to see from the degree of investment in Kering Eyewear that the status of the eyewear business within the Kering Group is continuing to improve, and it is bound to receive greater support in the future.
While the second largest professional manufacturer and the second largest luxury group each have long sleeves dancing, the first professional manufacturer and the first luxury group seem to be still accumulating strength.
As early as 2017, the world's largest eyewear manufacturer Italy Luxottica Group and the largest spectacle lens manufacturer Essilor announced a merger, merging lens manufacturing and full-line production of spectacle frames to form the Essilor Luxottica Group, with a total market capitalization of 59 billion euros and a revenue of 16.160 billion euros the following year. As the parent company of sunglasses brands such as Ray-Ban and Oakley, EssilorLuxottica also owns eyewear agency rights for luxury brands such as Chanel, Giorgio Armani, Prada, burberry and so on.
In the past two years, Essilor Luxottica has not made a big move in investment and financing, but has instead chosen to strengthen its deep cooperation with technology companies such as Facebook, the predecessor of Meta. In September 2021, Essilor Luxottica partnered with Facebook through Ray-Ban to release the smart glasses Ray-Ban Stories. Although the glasses that are called smart glasses and equipped with cameras, these glasses do not achieve any type of digital display, and their function is more to capture images, videos and sounds, so this product is considered to be the test of the real AR glasses that Facebook will launch in the future.
AR glasses from Ray-Ban
In response, Alex Himel, vice president of AR business at Facebook Reality Labs, said: "What better start than the world's most iconic glasses, sold by the world's largest and best companies? Rocco Basilico, Essilor Luxottica's lead wearable device, hinted that through the partnership with Facebook, smart wearable technology may one day be extended to the group's other 20 cooperative brands.
Considering Facebook's pursuit and investment in the metaverse concept after changing its name to Meta, as a "two-love" partner, the continuous advancement into the smart glasses field may be another way for Essilor Luxottica to choose for itself in the face of fierce market competition.
As for LVMH, the largest luxury group, in addition to injecting 51% of the shares into Italian eyewear manufacturer Marcolin and its fund company L Catterton Asia, which has become the second largest shareholder of Korean brand Gentle Monster, LVMH has not yet seen an important move in the eyewear business. But in the usual style of Bernard Arnault, before he retires at the age of 80 and after completing his siege of the high-end watch field, it is also a question of whether the LVMH Group will start a strong attack on the eyewear market.
Gentle Monster
To be sure, the eyewear market will continue to grow. On the one hand, the marketing investment of luxury brands in eyewear products is also growing at a speed that is visible to the naked eye, such as Gucci appointing Ni Ni as its eyewear spokesperson, and Salvatore Ferragamo announced Ouyang Nana as its global brand spokesperson for glasses last year. It can be seen that today's consumers have long gone beyond the stage of being driven by functionality in the treatment of glasses, and glasses are regarded as a fashion accessory, and glasses are no longer something with a specific function.
Salvatore Ferragamo announced Nana Ouyang as the global brand spokesperson for its eyewear last year
On the other hand, for the Z generation consumers, the price is not the primary criterion for them to buy fashion glasses, the style and design are. These low-priced eyewear accessories, like the perfume beauty product line, are the stepping stones for ordinary consumers to enter the luxury world and are also high-profit cash cows. Therefore, this market of more than 100 billion US dollars will continue to grow rapidly driven by young consumers, which will also prompt brands to further improve their product layout, increase their own business growth points, improve their competitiveness, so as to use glasses for higher-priced handbags, ready-to-wear products for consumption drainage. WWD
Written by Ma Xiao Thorn
Edit Neon
Image source network