I decided to write this week’s blog post as a follow up to my presentation on Warby Parker last week. I will try to answer a few of your questions and go a bit deeper into WP’s future endeavors.
The motive behind Warby Parker was to prove that it is possible to make affordable eyewear and be a successful company. Neil, Dave, Jeff, and Andy were determined to create a business model that produced fashionable glasses at a reasonable price. By building a completely vertically integrated production system, Warby Parker is able to create prescription glasses for as little as $95.00.
DAVID DISCOVERS HIS GOLIATH
The main challenge Warby Parker faced was competing against the incumbent leader in the eyewear industry, Luxottica. This Italy-based company may be the closest thing to a monopoly in today’s retail landscape. Luxottica owns brands, stores, and product to have a huge control over the industry. It owns over 7,000 stores worldwide, 4,268 of which are in North America, including LensCrafters, Pearle Vision, Sunglass Hut, Target Optical, and Sears Optical. (For reference, Wal-Mart has only 5,000 stores). Its brands include Oakley and Ray-Ban, and it has exclusive licensing deals with many luxury brands including Chanel, Ralph Lauren, and Versace. In addition to this top-to-bottom control of the eyewear industry, Luxottica also owns EyeMed, the second-largest vision insurance provider in the United States, and is the producer of Google Glass.
LUXOTTICA BY THE NUMBERS
- 2017 revenue of 9.157 billion euros ($11.269 billion)
- 82,282 employees worldwide
- 2017 Merger with Essilor (France-based company) valued at 46 billion euros ($56.6 billion) was approved by the European Commission this month
- Controls over 80% of major brands
Clearly Luxottica is still growing in its control of the eyewear industry and shows no sign of reducing prices. So how does Warby Parker compete? They simply do not attempt to bring down the giant, but do work at creating a new space in which they can be successful within the market. Warby Parker’s $1.2 billion valuation still trails significantly behind Luxottica’s nearly $57 billion value, but they have definitely built a very successful company and proved that glasses should not be so expensive. Here is a quick look at the pricing strategies of both.
As you can see, Warby Parker still makes a significant amount of revenue off of their product margin, but drastically less than Luxottica does. In addition to providing a much more inexpensive product, WP also donates a pair of glasses for every pair sold. So, in reality Warby Parker is only making $34.50 per pair of glasses produced, compared to Luxottica’s $166+ margin.
Although Warby Parker has become the ultimate success story of a start-up breaking into a monopoly-controlled industry, the giant does not seem to care. While Luxottica is aware of this new company, it has not even made comments addressing WP as a competitor. And it definitely has not made any business changes to indicate a response to the start-up’s success. Quite frankly, Luxottica is so much bigger and has so much power over the industry, it does not yet consider Warby Parker to be a legitimate threat.
THE FUTURE OF WARBY PARKER
Warby Parker continues to push the envelope in expanding their own business, regardless of Luxottica’s lack of attention. In the past year, WP has grown their product line to include sunglasses, both prescription and non-prescription, progressive lenses, and a limited kids line. They have broken into the telemedicine realm of the eyewear industry with their Prescription Check app. And the physical footprint of WP continues to expand as they plan to open 100 brick and mortar stores by the end of 2018 including optometry services in select locations.
Since I went into detail on the telemedicine and the online to offline migration in my presentation, I will concentrate on Warby Parker’s expanding product line here, particularly their kids line.
Warby Parker is currently testing a kids’ line of prescription glasses in New York City. This product line is limited, starting with just six styles of frames that each come in two sizes: “Junior” (for ages 8 and up) and “Junior Junior” (for ages 4-7). Like the majority of WP’s glasses, these will also start at $95.00. However, one big difference in the business model for this line is that they will not offer an at home try on program for kids. They believe that the first time a child tries on prescription glasses is extremely important and that it should be done in the best environment possible with eyewear professionals who are experienced working with children. That is why Warby Parker is only running this pilot program in a handful of brick and mortar locations in New York City. Another change from the business model in this test-pilot falls under their “buy a pair, give a pair” program. Every pair of kids’ glasses purchased will support Pupils Project in New York, a program that provides free vision screenings, eye exams, and glasses to schoolchildren in need.
In addition to the kids’ pilot program, Warby Parker has also expanded into frames using new materials, sunglasses (both regular and prescription), and limited collections. The latest collection released was in collaboration with Justin Timberlake for a small line of sunglasses. While Warby Parker continues to push boundaries within the eyewear industry, they have no plans to stretch their business model into new markets or unrelated products. To learn even more about this amazing company, I highly recommend browsing warbyparker.com.
After personally facing the reality of needing prescription glasses just a year ago, I can honestly say that Warby Parker made the disheartening process easy and fun! I actually feel good about wearing my glasses today and am proud to be a Warby Parker customer. What more can you ask for?