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Intro Like many businesses, Warby Parker began with a pain-point. Designer eyewear was way too expensive and there were no good alternatives for consumers on a budget. The company was started by four graduates of The University of Pennsylvania in 2010. The company originated out of the Venture Initiation Program at Wharton Business school. As an incubator program, the school helps young entrepreneurs turn their business ideas into a reality by providing seed capital and necessary resources. The idea began as a direct to consumer glasses and sunglasses online retailer. Their model is very different than the typical eyewear producers. Not only do they design and make every single pair in house, they also donate a pair of glasses to VisionSpring for each pair they sell. Vision Spring is a non profit organization that provides eyeglasses to those in need as their is a huge loss in productivity for people can not work or attend school without proper vision. Warby Parker is a socially responsible business and currently maintain a carbon neutral status. Without the big designer names and licensing fees, Warby Parker can create and sell designer eyewear at a fraction of the cost, ultimately passing those savings on to the consumer. Originally, the idea was to have no brick and mortar stores in order to keep costs down and minimize markup by third party retailers. After several rounds of investors they opened up their own showrooms in most major cities across the United States. Another unique selling point of Warby Parker is their trial policy. Customers are given the choice of five pairs of frames at no cost to insure they have the glasses they want. Warby Parker then sends the frames to customer to for five days before they have to make a decision on which, if any, they will purchase. Utilizing a revolutionary business model and social responsibility, Warby Parker has taken the road less traveled and is currently proving to industry giants that the landscape is changing for the better.
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Company Overview “After repeatedly losing my glasses and being forced to pay astronomical prices for uninspired frames, I decided to do something about it,” said Andy Hunt. When Hunt arrived at the Wharton School of Business campus in Philadelphia, he quickly met three similarly minded, equally entrepreneurial classmates. Neil Blumenthal, David Gilboa, and Jeff Raider all suffered from the same frustrations decided to remedy this issue by founding Warby Parker. Their line of boutique vintage-inspired frames and lenses for savvy urbanites sold at a revolutionary low price point. Their debut collection comprised of 27 styles, all available in ten different colors (like tortoise and amber), were handcrafted from cellulose acetate and given names like Huxley, Fillmore, and Wiloughby. One particularly handsome whiskey-tortoise monocle—cheekily named the Colonel— is also in the mix. The founders didn’t enter into the eyewear business blindly. Blumenthal had spent the previous five years with the non-profit foundation VisionSpring, which provided low-cost eyeglasses in developing countries and won him the distinction of developing the first line of reading glasses for populations living on less than $4 a day. Relying on Blumenthal’s insight, the founders discovered they could dramatically lower prices by cutting out cost-inflating middlemen like optical shops and licensing companies and selling the glasses exclusively online, where you can upload your photo and virtually try on different pairs before committing to a style. As a result, all Warby Parker eyeglasses, which include anti-reflective prescription lenses, are available for less than $100, and better yet, these frames all provide for other visually impaired men and women. For every pair bought, one pair is donated to impoverished people without the money to afford glasses through nonprofits such as restoringvision.org. The Warby Parker mission is crystal clear: Look sharp, pay less, do good.
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The company was founded in 2010 with a Jack Kerouac inspired name, and a unique purpose. Through Wharton’s Venture Initiation Program the company received $2,500 in seed investment and launched in February. Shortly after launching, the company was featured on vogue.com, and in GQ, which called it “the Netflix of eyewear”. Their glasses are designed in-house and are sold directly to customers to avoid frivolous retail markups. Their lower price is possible because glasses are designed in-house, eliminating licensing fees that can be as much as 15% of the wholesale cost on a pair of glasses. Warby Parker does not sell glasses through third party brickand-mortar retailers, whose markups can double or triple prices. Separate from their business operations, the company is known for selling stylish frames that have been praised by ELLE, Esquire, Vogue, GQ, and others. The company primarily sells eyewear online and through its New York City headquarters. It also maintains a limited number of showroom boutiques located throughout the United States. Warby Parker’s Home-Try-On program allows customers to choose five frames from the website, which they receive to try on at home for five days, free of charge. Customers can also upload a photo to their website and try on frames virtually. In addition to eyeglasses, Warby Parker sells sunglasses and one monocle as part of their default eyewear lines.
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Funding Beyond the seed funding round provided by the Wharton Venture Initiation Program, the company has had an extensive and detailed funding history. Over the past four years, Warby Parker has been backed by about 17 different investors. Included in this portfolio is J. Crew CEO and Apple Inc. Board Member, Mickey Drexler, as well as American Express. These funding rounds have raised a total of $115.5 million over about four years. The most recent investment made in Warby Parker was in December of 2013, when $60 million was raised by six separate investment entities during the Series C funding round. In this round, Tiger Global Management became Warby Parkers biggest investor. Their $55 million accounted for nearly all of the Series C funding and has gained a new majority stake in the company. The latest round is opportunistic. Warby Parker’s co-CEOs and founders, Blumenthal and Gilboa say they have plenty of cash to spare. However, this leading funding more than doubled their total investment. In conjunction with Tiger Global, General Catalyst Partners (which led its Series B round), Spark Capital, Thrive Capital, and First Round Capital all re-upped their investments. Potential new investors had expressed a great deal of interest in the months prior to the major investment, but the two firms concluded that the timing wasn’t right for a new series of financing. Tiger Global partner and member of the board at Warby Parker then offered to lead a round himself. This funding will be used to support its investments in technology, including doubling the size of its tech team, retail, and customer service. In an interview with Fortune, Neil Blumenthal stated that, “Some companies look at customer experience as a cost center that should be minimized and outsourced, whereas we’ve always hired super-talented, dynamic people.” He added that 96% of customer calls are answered in 15 seconds or less.
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Market The co-founders of Warby Parker saw an opportunity while attending grad school at Wharton School of Business at The University of Pennsylvania. This opportunity was to ultimately disrupt the eyeglass industry. They felt that the current technique used to buy and sell eyewear is both burdensome and outdated. Stores like Lens Crafters and Pearl Vision have not yet adapted to the new technological era, so the founders of Warby Parker saw the opening in the industry, and pursued it. Shopping for glasses online was the solution, they believed. Their business model began with a simulator. This allowed a customer to upload a picture of them self and drag and drop different Warby Parker frames onto their own face. The model was innovative, yet it was not quite the type of disruption the four founders had in mind. After using the glass-fitting simulator for quite some time, they realized that their business model was not quite demonstrating their company’s mantra “treat others, the way you would want to be treated.” After this realization, Warby Parker began putting together prescription-less five packs of frames and sending them for home try-on. Customers would be able to select and try on these different styles in their very own home, giving them the power to truly see and experience a week long trial with the frame that they may later be purchasing. The service is completely free and is in the process of completely changing the eyewear industry. In addition to disrupting the way that glasses are sold, Warby Parker has high hopes to overthrow a major player in the market with their frame designs. Luxottica eyewear has nearly monopolized the frame-building industry in recent years. While Luxottica is a third party company, brands such as Oakley, Ray Ban and Ralph Lauren outsource their frame building to Luxottica. The fact that the majority of sunglass brands have the same people building their shapes and styles opened an opportunity to disrupt their current foothold with both their styles and prices. Warby’s
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four founders began their frame designing by asking themselves and each other what shapes they would buy. They used a similar process to determine the pricing of the products. Their decision was a $95 price tag on every pair of single vision frames and a completely free home try-on kit. This price undercuts almost all of Luxottica’s brands, giving Warby Parker a new edge in the designer eyewear industry. They’ve found a way to reinvent both the model and the price point placing them in a solid position to eventually gain a large portion of the market share. Warby Parker’s new alternative to eyewear shopping and frame design has changed the industry. While it was not previously a competitive environment, the market has been infiltrated by a new generation and viewpoint that will change eyewear forever.
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Competition For years, the fashion industry has been led by many giants who dominate the market, dictating the high prices and trends to go along with them. Some of the more traditional competitors are: Ray Ban, Persol, Gucci, Fendi, Prada, etc. These traditional retailers often have third parties manufacturers to whom they sell their design, manufacturing, and sales rights. This means multiple rounds of mark-ups even before they get to your typical eye-wear store, who also charges for prescription lenses and other modifications. The consumer bears the brunt of these insane mark-ups for an item that should cost no more that $100. However, after the onset of Warby Parker in 2010, many “Warby Parker Clones” have entered this industry (PandoDaily). This competition has taken Warby Parker’s ideas and attempted to build on their model. With belief that being the second mover is an advantage, companies such as Rivet, Sway, Lookmatic, Made and Classic Specs have recently entered the market. Of these companies, Made Eyewear is the most notable, offering similar styles for a few less dollars. In addition to Made’s lower price point, made offers a home try-on that allows customers to try their glasses with their prescription. This feature is clearly an attempt to one-up Warby Parker and it is something that Warby should both be weary of and consider adapting to. As the Warby Parker model is rapidly spreading, it is clear that the industry has been reinvented. The founding four at Warby Parker truly disrupted the way glasses are bought and sold by creating a business model that is created by the people and for the people. Made Eyewear is recent entrant to the market, and decided to take Warby Parker’s model and tweak it. Made offers full customization of glasses complete with color selection and engraving at a slightly cheaper price. Made Eyewear also offers the free try at home service but with three pairs complete with prescription lenses. This enables the consumer to choose the ones they like
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and send the rest back to Made Eyewear. Even if the consumer decides none of the styles are to their liking they can send them back free of charge. Made is primarily based in China and due to cheaper labor and manufacturing processes, they are able to undercut Warby Parker as well as one up them in the trial at home program. Made is able to control every part of their business from design to creation to sales, while Warby still works with a middle man to manufacture their glasses. Admittedly, they do share many of the same styles and don’t have the same social initiative as Warby Parker. It is up to the consumer to choose whether they would rather save a few extra dollars or contribute to a worthwhile cause. Made Eyewear is not the only new entrant in the market looking to ride the coat-tails of Warby. Many low cost eyewear makers are attempting to capitalize on the space created in the market by Warby Parker. Some of these low cost competitors are: Classic Specs, Lookmatic, Mezzmer, Eye-Fly, Rivet, and Sway. Warby was able to prove that there is in fact a market but now it is up to them to defend their share. There are many ways in which they fend off their adversaries from encroaching on their stake. Warby is known for the best customer service so they win favor with many consumers who prefer to deal directly with a representative opposed to a machine or automated service. With over four years under their belt, Warby has been perfecting their customer experience, product design, and supply chain. As they face massive expansion over the United States and globally, many critics don’t believe they will be able to sustain their core values and mission. Giving consumers exactly what they want can only be sustainable for so long before it begins to eat away at your bottom line. Consumers are free to abuse the trial at home system in hopes they will eventually purchase a pair. If they don’t Warby Parker must absorb the shipping costs both ways. That will accumulate quickly if they don't invent a system in which they can insure some sort of recuperation of costs. Warby Parker has spent many years creating a brand and
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reputation that will help win customers over. Consumers have a large infatuation with brands and what they represent. For many it may be expensive taste, or a great fashion sense, but for Warby Parker it is a socially responsible and intelligent consumer.
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Conclusion Beginning in 2010, four University of Pennsylvania students set out to permanently change the eyewear industry. Through their innovative designs and customer friendly business model, they have made great strides toward achieving their ultimate goal. The product offers a customer experience like never before combining a hands-on shopping experience to online shopping. This model has set the standard for online eyewear sales, thus inspiring many competitors to try their luck with similar business plans. The increased competition will greatly impact the almost monopolized, stagnant industry we have known for so long. With a new twist, and a three-part business model, will compete for a large portion of the market share. Warby Parker’s social aspect has also set the standard for it competitors. Using the one-forone “TOMS model,” Warby Parker has not only satisfied the needs of their customers, but in turn helped their customers satisfy needs of underprivileged people elsewhere. The $95 price tag placed on every pair of Warby Parker models, is the same amount that is donated to people in need of eyewear. The method that they have chosen to do this has distributed over 1 million pairs, and generated over 200 million in revenue for needy people. They do not donate the money to buy glasses, but to teach and create jobs for those who can distribute these glasses. Warby Parker’s impact expands far beyond their frame designs and business model. They have stormed into a market with many interesting facets that will allow them to continue on and ultimately inspire companies to follow suit. Through their designs, model and social innovations, Warby Parker has changed the game in optical sales.
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References Berfield, Susan. "Hip Eyewear: Warby Parker's New Spectacles." Bloomberg Business Week. Bloomberg, 30 June 2011. Web. 17 Nov. 2014. Deamicis, Carmel. "Warby Parker Has One Big Weakness, and This Competitor Is Exploiting It." PandoDaily Warby Parker Has One Big Weakness and This Competitor Is Exploiting It Comments. 29 Jan. 2014. Web. 12 Nov. 2014. <http://pando.com/2014/01/29/warby-parkerhas-one-big-weakness-and-this-competitor-is-exploiting-it/>. Krasny, Jill. "Attack of the Warby Parker Clones." Inc.com. 15 July 2013. Web. 12 Nov. 2014. <http:// www.inc.com/jill-krasny/attack-of-the-warby-parker-clones.html>. Kowitt, Beth. "Warby Parker Raises $60 million." Fortune. Fortune, n.d. Web. 17 Nov. 2014. McMahan, Ty. "Stylish Eyewear Maker Warby Parker Tries On $12M In Funding." Venture Capital Dispatch RSS. Wall Street Journal, n.d. Web. 17 Nov. 2014. O'Connell, Vanessa. "Warby Parker Co-Founder Says Initial Vision Was All About Price." The Wall Street Journal. Dow Jones & Company, n.d. Web. 17 Nov. 2014. Wohlson, Marcus. "Is Warby Parker Too Good to Last? | WIRED." Wired.com. Conde Nast Digital, 23 June 14. Web. 12 Nov. 2014. <http://www.wired.com/2014/06/warby-parkers-quest-toprove-not-sucking-is-the-ultimate-innovation/>. Zelman, Josh. "(Founder Stories) Warby Parker: “Less Than 1% Of Eyeglasses Were Sold Online”." TechCrunch. TechCrunch, 23 Feb. 2012. Web. 17 Nov. 2014.
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