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Today, we’ll discuss the Warby Parker story and more in just 4 minutes to read.

— Matthew

QUOTE OF THE DAY

“Never underrate either the majesty of simplicity or its proven effectiveness as a long-term strategy for productive investing…investing shouldn’t give you a rush.”

— Jack Bogle

WHAT ELSE WE’RE INTO

📺 WATCH: The future of the federal budget

🎧 LISTEN: Building wealth through high-quality stocks

📖 READ: Patagonia’s masterclass on how to treat employees

CLEAR VISION: THE WARBY PARKER STORY

Photo by wu yi on Unsplash

It’s 2008, and Dave Gilboa can’t find his $700 glasses.

The University of Pennsylvania MBA student had lost them on a plane after a backpacking trip. The cost of replacing them was so high that Gilboa spent a whole semester at an Ivy League school without them, “squinting and complaining.”

“Why are glasses so expensive?” he asked his friends one day in the hallway. “And why isn’t anyone selling online?”

Many great businesses emerge from “pain points.” Those questions prompted discussion and ideation for what became known as Warby Parker, the direct-to-consumer eyewear brand. Later that night, the soon-to-be founders couldn’t sleep, so they exchanged a few emails, then met to discuss the idea at a Philadelphia bar: Could we really disrupt the eyewear business? Short answer: yes. The company launched in 2010, selling eyewear online for $95.

Today, Warby Parker does over $600 million in sales, mostly in its 200 locations, while providing a free pair of glasses to people in need with every purchase. The company closed some stores during the pandemic, but it has rebounded to compete in the massive glasses business ($140 billion industry), which includes prescription glasses, sunglasses, reading glasses, and Warby Parker’s fast-growing contact lens business (70%-plus annual growth rate).

“We’re often asked why Warby has been successful,” says CEO Neil Blumenthal. “If we sum it up in one word, it’s deliberate. It was really about bypassing retailers, bypassing the middleman that would markup lenses 3-5x what they cost, so we could just transfer all of that directly to consumers and save them money.”

Natural doubt

Every quality business had doubters or investors who passed on an early investment. For Warby Parker, there were questions about the business pitch.

• E-commerce for glasses seemed like a losing bet; who would buy them online without trying them on?
• None of the founders pursued the business full-time at the start
• Large incumbents like EssilorLuxottica dominated market share

But Blumenthal, who credits his mother, a nurse, for teaching him how to serve others, created something worthwhile by thinking of the brand in terms of the need they met: more affordable, stylish eyewear. Plus, about two-thirds of American adults need some kind of glasses or contacts, meaning there was room for newcomers.

The founders also knew eyewear wasn’t merely about the product; people paid hundreds of bucks for a single pair for the brand name. But they considered the competitive landscape and saw room to charge $95 per pair, not $300 or $500, by honing in on the young: adults between ages 22 and 35.

They interviewed and surveyed their Penn classmates to understand pricing and what people wanted (easy, clean, stylish glasses). By initially selling all pairs for exactly $95, word spread more easily because the price was simple and easy to understand. There weren’t 11 different prices.

Splashly profiles in Vogue and GQ coincided with their spring 2010 launch, helping them hit their first-year sales target in three weeks. Quickly, that fleeting idea from a lost pair became a real, tangible business. They were skipping classes to respond to customer emails and fill orders.

“Innovation always requires a deep examination of a problem,” Blumenthal says. “Stand back and break every challenge into smaller steps.”

Trial and error

Here’s an idea you don’t see every day: home try-on. Warby Parker made a controversial, bold bet to allow customers to try five pairs at home, for free, before committing to one. This innovative home-trial program has helped them build trust and scale.

“Ideas are one thing, but it’s really all about execution,” Blumenthal says. “Eyewear is a massive market, high margin business…Details matter. They create depth, and depth creates authenticity.”

Warby Parker got its first venture capital funding in 2011, raising $1.5 million. In total, it raised $573 million over nine rounds from 38 investors before going public in 2021, although its stock has suffered (ticker: WRBY), largely because of pandemic-era supply chain holdups and a lack of profitability. It has a $1.62 billion market cap.

Change in business model

Once online-only, Warby Parker does most of its sales via fashioned brick-and-mortar retail stores in the U.S. and Canada.

Merging online to in-person made a big shift in the company’s story. It opened its first location in 2013 in New York and hasn’t looked back. Leaders consider stores as an extension of their relationship with customers, not necessarily as a vehicle for profitability. The stores are about generating foot traffic and discoverability, akin to a street-level billboard.

“The original business model was that they were gonna become the Amazon of optical retailing,” one analyst remarked. “What they very quickly found out was that it just doesn’t work.”

Though it grew the number of stores aggressively, Warby Parker is deliberate about launching new products. It has slowly introduced sunglasses, progressive lenses, contacts, eye exams, telehealth, and virtual vision tests.

“We believe in doing it right rather than fast,” Blumenthal says.

From The Wall Street Journal

Doing good

Executives believe Warby Parker’s “Buy a Pair, Give a Pair” program has helped drive sales. With every pair bought by the brand, another pair is donated to someone in need. Over 15 million glasses have been distributed to date, part of its corporate social responsibility (CSR) business model.

“You can be good in the world and not charge a premium for it,” Blumenthal says. “It’s not about the wealth you can accumulate, it’s about the impact and change you can create…It’s a false choice of profits over people. They’re not mutually exclusive.”

Dive deeper

For more, check out the How I Built This podcast episode on Warby Parker.