Warby Parker: Affordable Fashion That’s Easy to See

Founded in 2010, Warby Parker has disrupted the premium eyewear industry, a $13B segment of the $36B global frames and sunglasses market.⁽¹⁾  One conglomerate – Luxottica – dominates the segment, with ~$8.5B of annual revenue at a 20% operating margin, and control of many of the world’s major eyewear brands, including Lenscrafters, Sunglass Hut, Ray-Ban, and Oakley.⁽²⁾  Yet Warby Parker has been able to carve out its niche as a low cost, high fashion competitor with a $1.2B valuation – and its innovative operating model has been one of the keys to its success.⁽³⁾

 

Business model: Designer eyewear at a revolutionary price

Lower price: Warby Parker recognized that Luxottica was employing a skimming strategy, keeping prices (and margins) artificially high.  The concept beyond Warby Parker’s philosophy was simple: Fashionable glasses don’t need to cost hundreds of dollars.  At an entry price point of $95, Warby enabled fashion-conscious consumers to purchase designer glasses at a fraction of the price of designer alternatives.

Easy and fun: At a lower price point, Warby Parker’s brand couldn’t “out-luxury” Luxottica’s, but it could “out-fun” it.  Easy and fun are the critical ingredients to the company’s style of premium.  Buying glasses, says the company’s website, “should leave you happy and good-looking.” ⁽⁴⁾

Social mission: The social mission is the third tenant of the company’s strategy.  For every pair of glasses sold, Warby Parker ensures a pair is distributed to one of the one billion people worldwide who lack access to glasses.⁽⁵⁾

 

Operating model: True to the brand 

Low cost production and distribution: First and foremost, Warby Parker needed a lower cost operating model to enable lower prices. There are (at least) two critical building blocks: First, the company designs its own eyewear, cutting out licensing fees.  This vertical integration is important, but the bigger innovation is in its direct to consumer distribution model.  Warby Parker originally sold glasses exclusively online, cutting out the expense of building a brick & mortar retail presence (or paying a retailer to do so).  This was a major innovate risk in a market that at the time sold less than 1% of prescription eyeglasses online.⁽⁶⁾  Today, Warby Parker has a limited brick & mortar store presence, but still controls its distribution.

The customer experience – easy and fun: The company’s customer-facing policies make the shopping experience easier and more fun.  The company offers a home try on program in which a shopper can request 5 frames, then keep them for 5 days before returning them – all for free, shipping included.  If the customer is having trouble deciding, she / he can actually call a Warby Parker “personal stylist” and ask for help.  The company offers free returns (within 30 days) and will even reimburse customers if they need to get their frames adjusted.⁽⁷⁾

Human capital and culture – on brand: Warby Parker aligned its corporate culture with its commercial brand.  The company’s second operating principle (referred to playfully as “ground rules” on its website) is “to create an environment where employees can think big, have fun, and do good.”⁽⁸⁾  Headquartered in the (hip) SoHo neighborhood of New York, dress is casual and (free) food is available to employees.  It took a page out of Google and Facebook’s playbook by using its brand and culture to attract young graduates into roles that they wouldn’t necessarily take at other companies.  As a result, executive assistants and customer experience representatives at Warby Parker are graduates of top universities.

Limits on scope – partner for the mission: A good operating model must also know its limits.  Warby Parker does not distribute glasses in developing countries itself; instead it partners with VisionSpring, a company that trains low-income men and women in the developing world to sell glasses at “ultra-affordable” prices. ⁽⁹⁾  The program is aligned with Warby Parker’s image as a fashion brand and cultural ethos – instead of giving away glasses, selling the glasses forces VisionSpring to offer glasses that “fit with local styles, look good, work well, and make the wearer feel incredible.”⁽¹⁰⁾

 

Conclusion: Operating model alignment is important…but a good idea helps too

Warby Parker’s operating model and business strategy are near flawlessly aligned, but it doesn’t hurt that the company is also targeting an industry ripe for disruption – a dominant player skimming the market and maintaining 20% operating margins, a growing category, and a product in which quality is largely subjective, in an environment in which affordable fashion is in style.

 

 

Sources:

(1) http://www.businessoffashion.com/articles/intelligence/a-closer-look-at-the-13-billion-premium-eyewear-market. Accessed December 8^th, 2015.

(2) http://www.luxottica.com/sites/luxottica.com/files/2015_03_02_-_luxottica_-_fy14_results_-_press_release.pdf. Accessed December 8^th, 2015.

(3) http://blogs.wsj.com/digits/2015/04/30/eyeglass-retailer-warby-parker-valued-at-1-2-billion/. Accessed December 8^th, 2015.

(4) warbyparker.com. Accessed December 8^th, 2015.

(5) Ibid.

(6) http://www.cbsnews.com/news/get-eyeglasses-online-for-quarter-of-the-price/. Accessed December 8^th, 2015.

(7) warbyparker.com. Accessed December 8^th, 2015.

(8) Ibid.

(9) Ibid.

(10) Ibid.