This originally appeared in Sparksheet.
Jeff Swystun looks at how Warby Parker is disrupting the eyewear industry by blending online and in-store commerce, even while the company struggles to profit.
Brands can become verb-worthy. In my father’s day it was the Cadillac, a car synonymous with luxury and status. If you had a Caddy you’d arrived.
Today, brand-verbs have taken on extended meaning. Start-ups and businesses seek to emulate certain brands: companies aim start the UBERization of their industry. We also hear that whole industries are being “Warby Parkered.” This is funny given Warby Parker was once called “the Netflix of Eyewear” in GQ.
The affordable, hipster-chic eyewear company has risen fast but is yet to make much money. In an April 30th article in The Wall Street Journal, Warby Parker admitted it was not profitable. Dave Gilboa, co-founder and co-chief executive, did not share revenue performance but claimed annual sales were picking up.
Warby Parker founders set their sights on an industry with bloated costs and one dominated by just a few sleepy players. The business model cut out the middleman to work directly with manufacturing. The designer eyewear was then sold online to cut retail costs.
All of this was wrapped in a strong brand predicated on being hip and fresh that delivered superior quality and customer service. Warby Parker felt that by greatly improving the buying experience they would make traditional competitors irrelevant. This approach has rocked the complacent category.
Warby Parker built the popular brand by first marketing designer frames for under $100. The startup saved costs by cutting out licensing fees, working directly with suppliers and shipping products to consumers. Now the frames start at $130 indicating either the company can price for improved margin or that operating costs are higher than expected.
The eyewear is still competitively priced and is made attractive with free shipping and returns. For the socially conscious, Warby Parker distributes a pair of glasses to those in need for every pair sold. This is an incredible commitment in an age when corporate social responsibility programs are largely vacuous press releases.
Having begun strictly online, the business is now experimenting with retail. Their website claims, “Our retail spaces combine the snappy ease of online ordering with the fun and serendipity of real-life shopping (with a photo booth or two).” These now number fourteen across America.
Warby Parker is up against a great range of competitors. Chief among them is Luxottica Group, which owns brands such as Oakley and Ray-Ban, and retail chains LensCrafters, Pearle Vision and Sunglass Hut. Luxottica would have seemed formidable given their dominance in both production and distribution but Warby Parker saw that this as an opportunity.
The competition extends from opticians right down to drugstores and convenience stores. There are also several other online innovative eyewear providers. I recently purchased two pairs of prescription sunglasses from Eyebuydirect.com. They arrived within eight days, cost $78, and could be returned for free. I admit one frame was rather cheap and was intended for outdoor sports while the other was in a faux wood grain that prompts compliments wherever I go. I am not shilling for the company, I am making the point that options for eyewear abound.
Warby Parker has raised $115.5 million USD in six rounds of financing from twenty-two investors. The most recent round values five-year-old Warby Parker at $1.2 billion. This makes it one of only a handful of online retail startups to grow beyond a $1 billion valuation before going public or getting acquired. Still, the company is not yet profitable. They do not share revenue numbers but Dave Gilboa, co-founder and co-chief executive, has said sales are accelerating.
The capital is largely going to the retail shops. A growing portion of sales are coming from these storefronts which now employ nearly half of the company’s five hundred employees. The physical locations help drive awareness for the Warby Parker brand overall. Henry Ellenbogen, who manages T. Rowe Price’s $16 billion New Horizons fund and an investor in the company told The Wall Street Journal, “We think about Warby as a blend of offline and online commerce. The more successful Warby is offline in a market, the more successful they are online.”
This comes from the company’s website: “Warby Parker was founded with a rebellious spirit and a lofty objective: to offer designer eyewear at a revolutionary price, while leading the way for socially conscious businesses.” But I would say the brand is less about rebellion and more about whimsy.
The company name comes from Jack Kerouac’s book Dharma Bums. Every employee gets a copy, “as part of our standard secret initiation rites.” The brand’s language is fun and approachable, “Sometimes people say to us: ‘If you love your job so much, why don’t you marry it?’ (Answer: we would if we could.)” Frame names are definitely upscale and preppy ranging from Halford to Winston to Madison.
The brand continues to flirt with different distribution models and has recently partnered with Nordstrom on a pop-up shop. The installation is curated by Olivia Kim, Nordstrom’s director of creative products, and will live in select Nordstrom locations as well as online. The shop will sell existing Warby Parker frames, four exclusive new sunglasses, and a curated selection of non-eyewear items, including McSweeney’s books, Pike St. Press notecards and Clare V foldover clutches. This suggests that Warby Parker is looking to be a more holistic lifestyle brand.
A 20/20 Conclusion
Warby Parker itself is a disruptive retailer and cool brand with aspirations to a larger role in the lifestyle market. As they embark on this journey they are creating a universe of affiliations that will help make it happen, whether by intention or happenstance.
Warby Parker co-founder Andy Hunt is raising $125 million USD for a new venture capital firm called Elephant Partners, which would aim at monetizing startups willing to leapfrog Series A investments. Warby Parker alumni, Stephanie Korey and Jen Rubio, have started Away with Warby Parker co-founders Neil Blumenthal and Dave Gilboa on the board.
Disruption is the thread that runs through all of these ventures. All that remains to be seen is if disruption actually pays. To be “Warby Parkered” needs to be synonymous with making money, not just raising it.