Warby Parker: The Unicorn in Hipster Glasses

The Business

Warby Parker is an e-commerce company founded by four Wharton classmates in 2010. The company manufactures and sells men’s and women’s eyeglasses and sunglasses. The majority of their product line retails for $95. As the founders noted, “We started the company because we were sick and tired of radically overpaying for eyeglasses. It didn’t make sense to us that a pair of eyeglasses should cost as much or more as an iPhone” (Fast Company). Warby Parker began as a pure-play e-commerce brand (www.warbyparker.com) and later expanded to a “showroom” model combining online sales with offline retail locations. The brand targets the “hipster” and “yuppie” demographics of fashionable, urban young adults.

“You are so beautiful, even with your eight eyes”

Warby Parker is an example of a company that is highly effective at driving alignment between its business and operating models. It found a way to bring glasses, traditionally sold offline, into the e-commerce fold through a completely vertically integrated model. In the process, Warby Parker created a fashion-forward, socially responsible brand image while vastly reducing the price of eyeglasses for consumers, posing one of the first serious challenges to Luxottica Group’s monopoly over the eyewear industry.

 

Business Model

The business creates value for consumers in three principal ways: through the product itself, through the unique in-store and online shopping experiences, and through Warby Parker’s brand equity, associated with coolness and social responsibility.

Warby Parker glasses are all fashion-forward and designed to keep up with the latest trends appealing to the “hipster” and “yuppie” demographics. This has translated into a retro, mid-century aesthetic keeping with the prevailing trends of the last five years. Not only are the glasses trendy, but they are also very affordable at $95, compared to the typical ~$300 price point of many designer glasses brands. With their “hip” aesthetic, many can be made of a high-quality, durable, low-cost material called cellulose acetate.

Retro offerings at WarbyParker.com

In addition to an attractive, affordable product, Warby Parker offers its customers a unique, enjoyable, and convenient shopping experience. Customers can purchase glasses entirely online by browsing the online store and uploading their prescription. They can also visit a Warby Parker showroom to see the product in person and interact with highly trained salespeople.

The Warby Parker showroom in Soho…tres chic

The final piece of the value proposition is brand equity. The founders spent a year and a half just putting together the brand and positioning before launching. As founder Neil Blumenthal stated, “A good brand is authentic and ingrained in every aspect of the company…Slick designs is just one component. Fifty percent of people come from word of mouth. They’re telling their friends about the service because of their connection to it” (GigaOm). One of the main components of the brand is its social mission. Through its “Buy a Pair, Give a Pair” initiative, the company donates funds to provide glasses to people in need. This association with social responsibility has been important for Warby Parker in connecting with and creating value for its millennial customer base.

Warby Parker captures value by charging affordable prices for its glasses, typically $95 per pair for prescription eyeglasses or nonprescription sunglasses. There are small markups for some models depending on the materials (i.e. titanium frames, prescription sunglasses, special lenses), or if the frame is part of a capsule collection, but prices rarely exceed $200.

 

Operating Model

Warby Parker is able to provide stylish, affordable glasses due to its vertically integrated, online/offline hybrid operating model. Unlike the market leader Luxottica, which relies on outsourcing, designer licensing deals, and optical shops, Warby Parker has “bypassed the middleman” and relies on a vertically integrated model. As the founders noted, “We design our own frames under our own brand, and we work directly with suppliers. We avoid paying licensing fees, and we sell directly to consumers….” (Fast Company).

This last point is important; in addition to controlling design and using its own brand, Warby Parker “avoids optical store markups” (WSJ) by completely controlling its distribution channels. The company created several innovations to allow people to get comfortable with purchasing glasses online. These include “a Web application that lets people envision how glasses will look on them” (GigaOm) and the “Home Try-On” program, where customers receive five frames to try on at home with free shipping both ways. Once people have selected their frames, they can upload their prescription online and even use their webcam to measure pupillary distance, so the entire process is seamless and digital.

For customers who prefer the offline store experience, Warby Parker also controls all of their showrooms. They currently have 20 of their own showrooms plus 5 mini showrooms within other boutiques. Even though they have invested in this infrastructure, the stores carry no inventory or lens-making equipment (unlike a Lenscrafter or other optical shops), so inventory costs and overhead are much lower. Customers place orders in-store and then receive the frames at home about a week to two weeks later.

The final key piece of the operating model is Warby Parker’s partnership with VisionSpring. Co-founder Neil Blumenthal was formerly the director of this non-profit, which trains people in developing markets to start their own eyeglass selling businesses and then sells them in the local community at a price of about 10% of a monthly wage. This model “avoids a culture of dependency and creates an incentive for continued distribution” (TechCrunch). Warby Parker’s close relationship with VisionSpring allows it to concretely deliver on its social promise.

 

Alignment & Performance

Warby Parker’s business and operating models are highly aligned. Warby Parker creates value for its millennial consumers through design, affordability, a high-quality online/offline shopping experience, and through its socially-conscious, hip brand association. It is able to offer this value because its operating model emphasizes low costs, high quality design, and social impact. This is achieved through specific mechanisms including vertical integration, control of distribution channels, and solid partnerships. In sharp contrast to Luxottica, which controls about 80% of major eyeglass brands (Forbes), Warby Parker has cut the fat from this monopolistic industry to provide what consumers are looking for at a much more amenable price point.

How has this translated into performance gains? The company is not yet public, but there are many indicators to suggest overwhelming success thus far. As of June 2014, the brand had donated funds equivalent to providing 1 million glasses to people in the developing world (TechCrunch). In terms of funding, they most recently raised $100M in Series D in April 2015, at a $1.2 billion valuation (TechCrunch). Compare this to Luxottica’s $32 billion market cap, and Warby Parker is clearly making inroads. The alignment between its business and operating model is surely a contributor to Warby Parker’s “unicorn” status.

 

Sources:

• http://www.warbyparker.com/
• http://www.fastcompany.com/1818215/fast-talk-how-warby-parkers-cofounders-disrupted-eyewear-industry-and-stayed-friends
• http://www.vogue.com/871222/vd-in-focus-warby-parker-eyewear/#1
• http://www.wsj.com/articles/SB10000872396390444097904577535111565440718
• http://techcrunch.com/2014/06/25/warby-parker-hits-one-million-glasses-sold-distributed/
• http://www.bcorporation.net/community/warby-parker
• https://gigaom.com/2012/03/26/at-warby-parker-the-power-of-branding-is-easy-to-see/
• http://www.wired.com/2012/09/warby-parker/
• http://www.bcorporation.net/community/warby-parker
• http://www.forbes.com/sites/anaswanson/2014/09/10/meet-the-four-eyed-eight-tentacled-monopoly-that-is-making-your-glasses-so-expensive/
• https://www.crunchbase.com/organization/warby-parker#/entity
• http://techcrunch.com/2015/04/30/warby-parker-now-worth-1-2-billion-focusing-on-building-more-brick-and-mortar-stores/
• http://finance.yahoo.com/q?s=LUX
• My own anecdotal experience as a loyal Warby Parker customer, having interacted multiple times with their online and offline channels.