As far as I can tell, Luxottica is like a book publisher who also has a significant retail presence. They buy licensing deals with all the major eyewear brands, likely at prices competitors can't afford because only they can sell through their retail channels (7,000+ stores in the US alone, and keep in mind the U.S. is by far the largest market for luxury consumer goods). Eyewear designers want to get their glasses in front of as many consumers as possible, so the alternative of not signing a licensing agreement would mean forgoing all those retail channels (and a big chunk of the U.S. market).

So it's basically vertical integration (exclusive manufacturing rights and retail presense) + economies of scale. They made themselves a very powerful intermediary and signed some very lucrative exclusive contracts to compound that advantage.

There are people taking advantage of this. Namely, Warby Parker.[1] They opened retail stores to combat Luxottica's market share in that arena, manufactured their own eyeglasses, and raised $41mm in funding to do so. They're growing rapidly, but still a relatively small part of the overall market. They originally were going to price their glasses at $50, but found that consumers branded their products as cheap so they artificially raised the price to $100! Still enough to undercut the competition, but shows you how the current market has skewed consumer perceptions of price/quality.

http://www.masoneyewear.com/buy-eyeglasses-online-purchase-g...