Warby Parker: Disrupting the Eyewear Industry
Warby Parker offers a winning value proposition – fashionable, quality glasses at an affordable price – and its commitment to doing good in the world makes it a star in the eyes of customers.
Wharton classmates Neil Blumenthal, Dave Gilboa, Andrew Hunt, and Jeffrey Raider founded Warby Parker in 2010 to create a solution to a simple problem: high quality, fashionable eyeglasses were too expensive.[i, ii]
The company was immediately successful, reaching its first year sales goal within three weeks of launching. [iii] Warby Parker has since distributed over a million pairs of glasses, with sales over $100 million.[iv] Its most recent funding round values the company at $1.2 billion.[v]
Business Model
Warby Parker’s mission is to “to offer designer eyewear at a revolutionary price, while leading the way for socially conscious businesses.”[ii] To this end, Warby Parker sells most frames for just $95, including prescription lenses.[iv] The company started selling exclusively online and has since opened twenty retail stores.[vi]
Established as a bcorporation, Warby Parker works with nonprofits such as Vision Spring to donate one pair of glasses for each pair sold to improve access to glasses worldwide and has already reached one million people in need.[ii, vii, viii] Warby Parker also supports sustainability by purchasing carbon offset credits and works with Verite to ensure that its factories use fair labor practices.[viii]
Operating Model:
Vertical Integration
The founders understood that the high prices were largely due to concentration of power in a single company, Luxottica, which controls 80% of the high-end eyewear market.[ix] Luxottica designs and manufactures frames for major brands, such as Chanel, Ralph Lauren, Prada, and Armani, via licensing agreements, and owns brands such as Oakley, Ran-Ban, and Persol. [iv, x] Luxottica also owns Lenscrafters, Pearl Vision, and Sunglass Hut, as well as Eyemed, a major provider of vision insurance.[iv]
Warby Parker has created a low cost structure by cutting out the middleman; it designs its own frames, hence avoiding licensing fees, sources its own raw materials, and works directly with manufacturers. For example, the company procures acetate from a family-run Italian company and titanium from Japan.[xi] Frames are manufactured in China and shipped to the United States through a third party logistics company. Lenses are polished, shaped, and inserted into frames at domestic optical labs. By negotiating directly with its partners, Warby Parker keep costs low, and it enforces strict service level agreements to maintain quality.[xii]
Interview with Neil Blumenthal and Dave Gilboa
Sales Channels: E-Commerce and Brick & Mortar
Warby Parker began by selling glasses through its website, which helped to minimize costs. Warby Parker created a Home Try-On experience to meet the needs of a customer base accustomed to trying on glasses in person. Customers select five frames, receive them in the mail, and have five days to try them out before sending them back. After choosing a frame, customers submit orders online and receive their glasses in the mail.[xii, xiii] If the customer is dissatisfied, the glasses can be returned or exchanged within 30 days; Warby Parker covers all shipping costs.[xii] The combination of the try-on service, free shipping, and generous return policy provides a comfortable and convenient consumer experience.
Warby Parker has expanded beyond e-commerce and now operates 20 retail stores across 15 cities throughout the country, which support its brand and offer additional services (e.g., many provide optometry exams). Its stores are booming, averaging $3,000 per square foot of retail space (Tiffany’s sells $3,043 per square foot).[iv] The stores feature library-inspired designs that align to Warby Parker’s quirky brand. Along with its own stores, Warby Parker sells through select boutiques.[vi]
Warby Parker’s flagship store on Greene St. in Soho, Manhattan[xiv]
Organization & Culture
Co-CEOs Dave Gilboa and Neil Blumenthal co-lead Warby Parker, with sales and marketing functions reporting to Dave and customer service and technology functions reporting to Neil. Warby Parker emphasizes high touch customer service, and the customer service group, known as “Customer Experience” is the company’s largest department. Warby Parker recruits college graduates as its customer service reps, who are expected to be promoted after a couple of years answering calls.[iv]
Warby Parker is highly data-driven, and the Customer Experience team is expected to report any issues that arise during customer interactions (e.g., prescription mistakes, product defects, shipping issues, etc.). This customer feedback is used to identify and resolve the root cause of issues. For example, after learning that a certain hinge was prone to breaking, Warby Parker redesigned the product to be more durable. The Customer Experience team also includes liaisons to different functions, such as supply chain, product, copy and content, and billing, which helps customer service representatives quickly address concerns requiring input from other departments.[xii]
The culture is collegial and emphasizes performance. All employees are required to complete weekly “15Five” reports describing their recent accomplishments, plan for the next week, and as well as an “innovation idea.”[iv, xii] Managers also have weekly check-ins with their direct reports. As a former employee described, “We’re a team, not a family,” meaning the culture is fun and collaborative, but everyone is expected to perform. Warby Parker also emphasizes professional development, offering its employees a variety of trainings, Lunch ‘n Learns, and speaker series with accomplished entrepreneurs.[xii]
Alignment
Warby Parker’s vertically integrated supply chain was critical to creating the low cost structure necessary to deliver high quality glasses at a $95 price-point, while still covering the cost of donating a pair of glasses. Its online channel enabled early success at a relatively low cost. As the company got more funding, it built retail stores, which have increased its brand presence and delighted customers through more services and a distinctive environment. Warby Parker’s customer-centric and data-driven approach has enabled it to identify and correct issues early on and support continuous product improvement. Finally, its supportive and performance-driven culture helps to attract talent that will drive the company’s continued growth.
Sources:
[i] http://www.forbes.com/sites/chasewithorn/2014/09/08/warby-parker-ceo-is-building-a-brand-that-gives-back/
[ii] https://www.warbyparker.com/history
[iii] http://www.entrepreneur.com/article/242437
[iv] http://www.fastcompany.com/3041334/most-innovative-companies-2015/warby-parker-sees-the-future-of-retail
[v] http://blogs.wsj.com/digits/2015/04/30/eyeglass-retailer-warby-parker-valued-at-1-2-billion/
[vi] https://www.warbyparker.com/retail
[vii] https://www.warbyparker.com/buy-a-pair-give-a-pair
[viii] http://www.entrepreneur.com/article/242437
[ix] http://www.forbes.com/sites/deancrutchfield/2012/11/27/luxottica-sees-itself-as-king-raising-questions-about-brand-authenticity/
[x] https://www.youtube.com/watch?v=gDdq2rIqAlM
[xi] https://www.warbyparker.com/design
[xii] Interview with former Warby Parker employee
[xiii] https://www.warbyparker.com/home-try-on
[xiv] https://blog.warbyparker.com/welcome-to-121-greene/
Great post, Lisa! I had no idea that 80% of the eye wear market was dominated by one company, that’s crazy.
What are your thoughts on the one-for-one model that companies like Warby Parker and TOMs use to create social value? On the one hand, the benefits seem clear, although I’ve read a few articles that suggest the unintended consequences might be larger than initially anticipated (such as creating dependency, interfering with local small businesses, etc.) and may do more harm than good. Do you think the value (or harm) of the model depends on the type of good (i.e., are local markets more likely to be disrupted for goods like clothing, than eye glasses – which otherwise may not be provided)? To what extent do you think this model is driven by altruism vs. it being a great marketing tactic? I go back and forth on how I feel about it… would love to hear your thoughts! 🙂
Hi Claire, that’s a great question. I generally share the same concerns about the traditional one-for-one models. Warby Parker’s giving model is actually quite different from the TOMS one for one models. Instead of giving away a pair of their own glasses, they partner with a nonprofit partner that independently procures glasses and trains local entrepreneurs in developing countries to sell glasses and give eye exams. Local entrepreneurs then provide eye exams and sell the glasses at an affordable price to people in their community. The model is “one-for-one” in the sense that each month, Warby Parker tallies up the number of glasses sold and provides a monthly donation covering the cost for the nonprofit to acquire the number of glasses. However I think it is a lot more sustainable than traditional one-for-one models because it is providing people with the tools to build their own businesses while still enabling the population to access eyecare that they previously could not.
I do think this model is driven by the vision of the founders to do good in the world, but I think it resonates with consumers too.
Below I have included the link to Warby Parker’s description of their giving model, as well as another article with additional insight
https://www.warbyparker.com/buy-a-pair-give-a-pair
http://www.momentumtelecom.com/corporate-social-responsibility-feature-warby-parker/
Great post! I was surprised to learn that Warby Parker’s sales/ft^2 is as high as Tiffany’s. I wonder whether the industry is open for another entrant to come in to steal share from Luxottica. WP’s advantage seems to lie in its brand name and customer word-of-mouth. People probably don’t re-buy eyewear that frequently, and WP is the “cool” brand right now. Wonder if aggressive expansion to more than 15 cities is currently in the works.
Agreed, I expect to see Warby Parker continue to enter new markets. I believe there are other players competing against Warby Parker, such as Frameri: https://www.indiegogo.com/projects/frameri-one-lens-many-frames#/ However, Warby Parker has a significant first mover advantage and strong brand recognition as you mentioned.
Interesting! I’m still not very comfortable buying a prescription lenses online. I remember every pair of my glasses required a little calibration after receiving them. Not sure how Warby Parker addresses this issue. In addition, does its retail store carry inventory? It seems WP can operate like Bonobos. Retail stores only offer try on. After try-on, customers can order directly online. Warby Parker can save tremendous cost in such way.
Hi Ni, thanks for your comment.
Warby Parker actually does offer adjustments at their brick & mortar stores (they have one in Boston if you want to check it out!)
Regarding inventory, they carry inventory of non-prescription sunglasses only in their brick & mortar stores. For prescription glasses, customers can try on frames in the stores and place an order in store or online; they then either get the glasses shipped to their home or pick them up at the store. In this respect, I think Warby Parker’s retail store model is quite similar to Bonobos’s model.
Great stuff, Lisa! To add on to Claire’s point, I’m also curious about the implications of benevolence and social mission in for-profit entities. As a consumer, I certainly like the fact that a pair of eyeglasses is being donated as a direct consequence of my own purchase, but I’m not entirely sure as to how much monetary value I place in that. If there were another retailer selling a similar pair of glasses for $20 less than Warby Parker’s frames, but with no equivalent social good, I might be tempted to go with the cheaper pair. I also wonder about the sustainability of the mission over time: the Company is riding huge tailwinds currently as a young, growing business, but what if performance starts to plateau or decline? Given that WP could essentially double gross margins without its philanthropic efforts, do you think management would ever consider using this as a lever to pull back on in tough times?
Curtis, I agree that the company is benefitting from the millennial mindset that values corporate social responsibility, which could become less salient in future years. That said, I think doing good in the world is core to the mission of Warby Parker, so I do not expect that they would ever pull away from making glasses available in underserved locations. If they really needed to pivot to reduce costs, I think they would pull back on retail stores before taking away the giving component of their model.
Hi Lisa, great read 🙂 I hadn’t heard of WP before arriving in the US so I’ve enjoyed catching up on the excitement around this new brand. It seems that a critical part of their initial strategy was the customer’s ability to receive five pairs of glasses in the mail. In thinking about these types of strategies for developing countries, the local postal systems present a significant challenge, as they are not sufficiently reliable or honest to deliver goods timeously or at all in some instances. The cost of sending these items through a more secure channel is often prohibitive, unfortunately. I hope that we will be able to innovate in Southern Africa to create delivery models that complement online beginnings for startups!
Andrea, that’s a great point. I think in markets where mail-order is not feasible, you might need to work with physical intermediaries, though this would increase costs and reduce the convenience of having products shipped to your home. Intermediaries could run shops that would carry “try-on” inventory; customers would have to visit the intermediaries’ shops to select a frame and then return to pick up the glasses.
While working in Zambia over the past summer, I noticed that interaction with intermediaries tends to replace a lot of the transactions that we conduct online with no human contact in the US (e.g., buying airtime or electricity credits from a dealer instead of online). Hopefully some savvy entrepreneurs in partnership with local governments can improve infrastructure and create opportunities for new delivery models, as you suggest!