Following my previous in-depth analysis of Luxottica Group (NYSE:LUX), great fresh news has arrived to comment about. This week, Google (NASDAQ:GOOGL) signed an agreement with Luxottica which will put the company in charge of the design, development, and distribution of new versions of Google's web-connected eye-wear, Google Glass.
The idea behind the agreement is that Luxottica's Oakley and Ray-Ban designers, among others, will work with Google designers to develop eye-wear that will incorporate Glass technology. In other words, Google wants to push Glass and the broader industry forward into the emerging smart eye-wear market.
A fashion problem?
Functionality-wise, Google Glass offers many smartphone features such as Web surfing, emails, and video. However, with this deal, it seems that Google intends to make Google Glass look cool.
This is not a minor thing, since this product is very related to style and image. In fact, customers feel very exposed when they wear the product and use it among others, and observers can experience similar feelings when they see individuals using these devices. For example, one San Francisco bar has banned Google Glass due to customers' concerns about being recorded.
Hence, as consumers remain unsure of the merits of the device, there's hope that a stylish approach will help overcome these consumer doubts. After all, it has not been easy so far to convince people to wear computers on their faces. People involved in the project recall that this is a fashion problem as much as it is a technology problem, and Luxottica should be able to resolve the fashion part of the issue.
If there is a company that knows how to design, develop, and distribute eye-wear, that company is definitely Luxottica. The company has reached a scale in lens manufacturing, frame technology know-how, and distribution which is impossible to find anywhere else in this industry.
This agreement shows us that Google has acknowledged Glass as a serious consumer product, and since it's not easy to combine high fashion, lifestyle, and innovative technology in a single product, Luxottica's help will be critical. When it comes to style and luxury eye-wear, Luxottica is hard to beat. Just look at its impressive portfolio of house brands such as Ray-Ban, Oakley, REVO, and Oliver Peoples. Plus, it holds designer-licensed lines such as Chanel, Polo Ralph Lauren, Prada, Burberry, Tiffany, Coach, and Armani.
Google's first step toward increasing access to Glass has been its January agreement with vision-care giant VSP Global to offer prescription lenses, subsidized frames, and training for optometrists on how to properly fit the device. This company has a network of 30,000 eye doctors nationwide and 60 million people enrolled in its vision plans, so the agreement is a good first step.
However, Luxottica can contribute even more. In regard to retail in North America, the company owns vision-care plan providers EyeMed, LensCrafters, and Sunglass Hut. Also, through Pearle Vision, Sears, Target Optical, and Ilori, Luxottica could take distribution to the next level. On a global basis, the company holds 7,000+ retail stores and 143 wholesale distributors in more than 130 countries. This is impressive penetration and it helps Luxottica get to clients directly, wherever they are.
Final foolish thoughts
This new agreement just makes Luxottica's outlook look even brighter. The company now has a huge technology ally which could trigger more business. This new potential opportunity in glasses use will generate a completely new market for the company.
Is there a smart eye-wear market? Well, not yet. However, technology experts have considered whether wearable computers such as Glass could become the next big market for consumer devices, just like when smartphones evolved from PCs. Hence, it could be just a matter of time until we see Glass go massive.
The Glass eye-wear has only been available in the U.S. so far as an expensive prototype. According to Google's website, Glass costs $1,500 plus tax. So, it's not for everyone. In order to reach a wider consumer market, the product should be available for a much lower retail price. In fact, analysts estimate that this price should drop to around $300 with massive production.
Nonetheless, we don't know when Luxottica's Google Glass products would become available, nor do we have details about what they might look like. The companies did not disclose the financial terms of their arrangement either. However, the companies hope for a launch date for the consumer version later this year.
Louie Grint has no position in any stocks mentioned. The Motley Fool recommends Coach and Google. The Motley Fool owns shares of Coach and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.