Warby Parker: “Why Should Should a Pair of Glasses Cost as Much as an iPhone?”

Warby Parker provides stylish, socially-conscious eyewear at an affordable price point ($95) through their own e-commerce channel and brick-and-mortar stores.

At face value, Warby Parker is your typical disintermediation story. The disrupter comes in, cuts out the middleman, goes direct to the consumer, and changes the game forever. But there is more underlying this success story. Warby Parker has developed an inherently customer-centered business model and has created an operating model that reinforces its authentic brand. As new start-ups try to go direct-to-consumer with cheap eyeglasses (there were 10 copycats alone in 2012), this focus on an authentic brand and innovative customer experience will keep Warby Parker on top.

The Problem

The founders were responding to a particularly pronPicture1ounced customer pain point: Glasses are expensive – on average $263 – but there is a feeling among consumers (especially millenials) that this shouldn’t be the case. In the eyeglass industry, there is really only one player who matters: Luxottica, who controls 80% of the market. Not only does Luxottica own major brands like Ray Bans and Oakley, they also manufacture glasses for Armani, Versace, and many others. More than that, Luxottica also owns many of the most popular eyeglass retailers, including more than 10 in the U.S. like Lenscrafters, Pearle Vision, and Sunglass Hut. It’s no wonder that prices are artificially high in an industry with this prevailing model. After working for VisionSpring, a non-profit focused on producing and distributing eyeglasses in the developing world, Neil Blumenthal, one of the founders, knew that it did not have to be this way.

A New Business Model for Eyewear that Puts Customers First

Warby Parker creates a huge amount of value with its convenient, direct-to-consumer model. They sell their own branded eyeglasses, which are made of the same materials and in the same factories as Luxottica’s. This means Warby Parker can offer a product that is just as high-quality and stylish, but at a much lower price point. However, they are doing more than just creating economic value for their customers. They have made the eyeglass buying process more convenient and fun. Customers can buy glasses on their website with the innovative “try on at home” feature or at one of their 12 freestanding stores. Maybe most importantly, they are making glasses that customers are proud to wear. Warby Parker glasses signal not only style, but also a social consciousness as they donate a pair of glasses to VisionSpring for every pair sold.

An Operating Model Which Upholds the Customer Promise

From the beginning, I mentioned disintermediation as a main piece of this story. It is definitely important for the cost-reasons, but also because it enables Warby Parker to control every piece of the customer experience and the brand.

Supply Chain

From his experience at VisionSpring, Blumenthal knew the factories and the manufacturing process so he is laser-focused on sourcing everything directly – from the acetate for the frames to the hinges and the screws. This focus on the supply chain enables Warby Parker to deliver a high-quality product at low cost.

In-House Design

Whereas Luxiotta licenses brands from other companies, Warby Parker designs their glasses themselves under their own brand name. They invested in designers and brought in in-house talent. By controlling the design and being keyed into what customers like, Warby Parker can quickly respond to any changes in customer demand and preferences. As the founders said, “We will not design anything that we will be embarrassed wearing in 20 years.”

Online Distribution

To get customers more comfortable with purchasing glasses online, Warby Parker came up with the innovative try-on-at-home idea. Customers could choose five frames to try on at home and then pick the one they want to order (and there wasn’t even an obligation to buy). Shipping was free both ways. They also reimburse customers up to $50 for getting the glasses fitted at another optical shop. This distribution model supported the convenience and customer-first aspect of the business model. This process also supported the brand building in important ways. Customers would post photos on social media to get opinions on which frames to buy. This provided Warby Parker with free advertising, but also immediate feedback on their designs which they could take back to their in-house designers.

In-Store Experience

2013_05_warbyparker_boston.0At their brick-and-mortar locations, customers are greeted by friendly opticians wearing Warby frames and holding iPad minis, which run their custom built point-of-sale system. If you are in a rush, opticians can check inventory, pull up your prescription, or get your frames ordered in a matter of minutes. Many more people, though, are here to browse, trying on one of their many frames, reading about the company’s history and mission (a timeline sits prominently in the middle of the Boston store), or sitting on the couches flipping through a book (the Boston store has a literary theme). These stores enable Warby Parker to really showcase their brand and what they stand for to their customers.

 

Looking forward

Warby Parker has created an innovative operating model that successfully upholds and reinforces its business model. It is clear that they are creating a lot of value for their customers. The big question going forward is whether they are capturing enough value for themselves to be sustainable.

Sources

http://www.forbes.com/sites/mikeotoole/2013/07/22/warby-parker-one-million-eyeglasses-and-the-next-generation-of-brands/

http://techcrunch.com/2012/02/22/founder-stories-warby-parker-why-should-a-pair-of-glasses-cost-more-than-an-iphone/

http://www.businessinsider.com/warby-parkers-year-of-insane-growth-we-hit-our-first-year-sales-targets-within-the-first-3-weeks-2012-2

http://business.time.com/2013/05/23/the-consumer-psychology-behind-warby-parkers-95-pricing-for-eyeglasses/

http://finance.yahoo.com/news/building-a-better-eyeglass-shop–warby-parker-says-it-is-142116692.html

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Student comments on Warby Parker: “Why Should Should a Pair of Glasses Cost as Much as an iPhone?”

  1. Hey Kate — love this post. I wrote a reply on Libby’s Warby Parker post that you might also like to read re: WP’s operating model and incorporating optometrists into stores: https://digital.hbs.edu/platform-rctom/submission/warby-parkers-prescription-for-disrupting-four-eyed-fashion/#comment-414

  2. I wonder why Luxottica would manufacture for the Warby Parker brand in its own factories. Given Luxottica’s monopoly in the eyeglass market, Warby Parker would certainly cause some cannibalization. Is it just because Luxottica’s factories had spare capacity, or is there a bigger rationale behind this? I will not be surprised if Luxottica buys out WP in the future to maintain its monopoly in the market and also target a different market segment.

  3. Great post! I recently found out that Luxottica was the provider of my frames, lenses, eyeglass retail outlet, AND eye insurance. Hopefully Warby Parker and others will succeed in breaking up the total monopoly Luxottica has in the space. Having bought my last pair of frames at WP, I found the brick and mortar outlet to be a critical part of my purchase decision. I’d be curious to know what their penetration looks like in markets with no retail outlet- seems like they have a nice solution that allows customers to try frames via mail so I would love to know what customer adoption looks like via that channel.

  4. Great Post Kate! I have a pair of WB and have always wondered how they are able to maintain margins to grow particularly when reimbursing up to $50 to fit my glasses at a competing optometrist. What I really like though is their differentiation and their online presence. When it launched it was one of the first websites that allowed this online trial of all the frames you picked out (online). made shopping considerably easier.

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