Eyewear’s Shifting Landscape Challenges Safilo

With changing consumer lifestyles and ageing populations driving demand for spectacles and sunglasses across global markets in recent years, the growing eyewear industry has seen a shifting competitive landscape challenge some of its legacy players.

Ranked eighth among global eyewear companies in terms of retail value sales in 2018, Safilo Group SpA has suffered as it has ceded market share to emerging, digital-savvy players in key markets, and has also lost entire brands from its portfolio as luxury groups rein in their licenses and increasingly produce eyewear in house.

Value-driven digital native brands eat into Safilo’s market share

Low entry barriers for digital marketing and direct-to-consumer e-commerce have enabled several niche independent brands to scale quickly within Safilo’s key markets of North America and Western Europe in recent years. Brands such as Australia’s Quay in sunglasses, as well as the US’s Warby Parker and Zenni in spectacles, have captivated consumers in the markets with their unique value propositions, eroding Safilo’s market share.

Luxury groups terminate eyewear’s licensing model

Meanwhile, growing market demand and a desire to assert complete control over their brand portfolios has caused luxury groups Kering SA and LVMH Moët Hennessy Louis Vuitton SE to increasingly terminate license deals for their brands and elect to produce eyewear in-house instead. After establishing Kering Eyewear in 2014, Kering terminated its license agreement with Safilo for its fast-growing Gucci brand in 2016, at the time Safilo’s largest brand in terms of value sales. Similarly, soon after establishing Thelios in a joint venture with Marcolin in 2017, LVMH terminated Safilo’s license for Celine, and will terminate its licenses for Dior, its current top selling brand, and Fendi in 2021.

Despite challenges, opportunities still abound amid a growing market

While both emerging players and lost licenses have weighed heavily on Safilo’s sales, the positive market environment for eyewear should continue to present opportunities for Safilo to recover, and even grow, sales.

Although the company has suffered in developed markets since 2016, it has continued to grow in developing markets, which it now plans to prioritise moving forward. Many consumer-driven trends in developed markets, like the desire to “experience more”, are working to the benefit of Safilo’s proprietary brand portfolio, driving sales of performance sunglasses from brands including Smith and its recently acquired Blenders Eyewear. Finally, Safilo has still been able to leverage its production prowess to court brands entering the growing eyewear market for the first time, signing a myriad of new licensing deals, such as with Missoni and Under Armour, in 2019.

Notably, despite losing its license for Gucci in 2016, Safilo continues to manufacture Gucci products under a supply agreement with Kering Eyewear, leading some to speculate that Kering could seek to acquire Safilo in the near future. If not acquired, however, growing demand for both sunglasses and spectacles will present new opportunities for Safilo, even as it continues to face the challenges of a shifting competitive landscape.

For more insights, please visit Safilo’s Company Profile.