Problem: How Warby parker broke through Formable barriers to entry and Disrupted the eyeglasses industry
Introduction: It started in business school. In the fall of 2008, neil Blumenthal and David Gilboa, both 28, were in the first year of their MBA program at the University of Pennsylvania's Wharton School. They were in a computer lab kicking around business ideas with classmates Andrew Hunt and Jeffrey Raider. The topic of eyeglasses came up. Gilboa had recently lost his glasses, and was shocked to learn that a replacement pair would cost $700. He recalled thinking that his iPhone cost $200. He thought how could an iPhone, that can do unimaginable things, cost $200 and a simple pair of glasses cost $700? Blumenthal thought he had the answer. He had spent time working for visionSpring, a nonprofit that distributes eyewear to low-income people in developing countries. While at visionSpring, he learned that the global eyewear industry was dominated by a single company, Luxottica. Luxottica is the world's largest eyewear company, and controls over 80 percent of the world's major eyewear brands. It owns oakley, Persol, Ray-Ban, Sunglass Hut, LensCrafters, and Pearle vision. It also owns the eyewear stores located inside several major retail chains, including Sears optical and Target optical. Luxottica's near-monopoly status was the reason for the $700 glasses. That was the "aha" moment. The four thought that if visionSpring could outfox Luxottica by manufacturing its own glasses for people in developing countries, why couldn't four business students do the same thing for people just like themselves? industry analysis Before jumping ahead, Blumenthal and his three friends spent some time studying the eyewear industry. The term "eyewear" includes glasses, contacts, and sunglasses.
They discovered four interesting characteristics about the industry. First, the industry had experienced very little innovation. Buying eyewear today isn't much different than it was 20 years ago. Second, there were virtually no brands on the market that evoked passion or that people were excited to be associated with. Third, only 1 percent of eyeglasses were bought online. They figured this was because people like to try on glasses before they buy them. Finally, they learned that eyeglasses can do termendous good. The University of Michigan conducted a study to evaluate the impact of visionSpring's efforts to provide eyeglasses to people who couldn't afford them in "Base of the Pyramid" countries. The study found that a pair of visionSpring eyelgasses increased the monthly income of the user by 20 percent and overall productivity by 35 percent on average. These are staggeringly positive numbers for a social initiative. Blumenthal and his classmates concluded that the eyewear industry, which is projected to reach a total of $95.5 billion in revenue by 2015, was ripe for disruption. What was needed was a company that
(1) had the courage to do an end-run around Luxottica by manufacturing its own glasses,
(2) could lower the price by selling online,
(3) knew how to create a brand that people could get passionate about, and
(4) was willing to give away a pair of glasses to low-income people in the developing world for every pair the firm sold.
As emerging entrepreneurs, they concluded that a company could earn money, inspire customers, and do good at the same time. Warby parker Warby Parker launched in 2010 as an online eyewear company, based on the criteria shown above. All four founders were involved at lauch, but soon afterward Hunt and Raider moved on. Hunt joined a venture capital firm and Raider founded a company called Harry's, which is trying to disrupt the online razor business. The name Warby Parker comes from characters in Jack Kerouac books, Warby Pepper and Zagg Parker. Here's how the company was set up. Blumenthal and Gilboa secured Chinese manufacturers to produce frames and an Italian company to make lenses, allowing them to make the glasses and frames themselves. At the start, the glasses were sold strictly online, for $95 a pair. The $95 price point was possible because the glasses were designed in-house, manufactured overseas, and sold via the Web, eliminating many of the costs associated with traditional glasses manufacturing and retailing. Also, when traditional glasses bear a brand name, such as Coach or Polo Ralph Lauren, they include a licensing fee that can run as high as 15 percent.
Warby Parker's approach to selling glasses works like this. A customer submits his/her prescrption and begins browsing Warby Parker's site. To ensure a proper fit, the customer can upload a photo of him or herself and "try on" frames through a virtual system. The company's Home-Try-on program allows the customer to pick five frames, which s/he then receives to try on at home for five days, free of charge. The $95 includes the frame and the prescription lenses. From the beginning the company set out to create a hip urban brand, targeting 18 to 34 year olds. They wanted to pick a market and evoke excitement and passion. The website had (and still has) a distinct, funky tone, with women who looked like grad students or magazine editors and men who appeared to be architects, artists, or jazz musicians. The company didn't spend much on promotions, with one exception. Early on they hired a top fashion PR firm, Brandbury Lewis, to help them get press coverage. Soon they were featured in Vogue and GQ, which boosted Warby Parker's visibility among its hip target market. The glasses themselves were part of the branding strategy. They had simple frames with slightly chunky temples that feature subdued colors: gray, blue, and burgundy. The glasses have preppy, country names like Sibley, Winston, Ellsworth, and Ames. As shown in the table below, the descriptions of Warby Parker's glasses are purposefully playful.
Sample of Warby Parker Men's Glasses
Name of Frame Description
Wilkie There's no reason to mess with a good thing. Wilde is our version of a never-fail frame, with a sloped
rectangular eyeframe that flatters any face.
Ames With a bold brow line and generous width, Ames transitions easily from mornings in the quad to nights on
the town.
Greeley A sleek architectural frame with contrast temple arms, Greeley is an everyday frame with dress-up
potential.
Roosevelt A modern classic. Roosevelt is a large, masculine frame with a keyhole bridge that immediately inspires
confidence.
Ellsworth With its slender temples and narrow silhouette, Ellsworth is a bright, to-anywhere frame that flatters all
face shapes.
Warby Parker's tone, product, and price resonated with its target market, young urban hipsters, almost immediately and the company experienced success. Although the company doesn't release sales figures, it is estimated that it had sold more than 300,000 pairs of glasses by the end of 2012. Social mission An important component of what Warby Parker stands for is encompassed by its social mission. It gives away a pair of glasses for each pair it sells. While the company's efforts appear to be heartfelt, it has also been good for business. According to a recent study, about 80 percent of Americans are likely to switch brands, if price and quality are the same, if a company supports a compelling social cause. Companies that support social causes are also more naturally viral. People generally feel good about recommending a company that not only has an attractive product but also supports a meaningful social cause. A portion of Warby Parker's website is dedicated to a section labeled "Do Good." It has three parts labeled "Buy a Pair, Give a Pair," "Good Company," and "WP Stories."
The "WP Stories" section provides hearthwearming stories of how Warby Parker and the organizations the company partners with have changed the lives of people in devleoping countries. the road ahead Warby Parker envisions an exciting future. At the time this feature was written, in February 2014, the company's website indicated that it had given away 500,000 pairs of glasses. Since the company gives away a pair of glasses for every one it sells, that means it has sold 500,000 pairs of glasses since 2010, which represents over $47.5 million in sales. The company has evolved since its 2010 beginnings. In the last two years, it has partnered with boutiques to open "stores within stores" in cities such as Los Angeles, nashville, and San Francisco. In 2013, Warby Parker opened its first store in new york City. The company acknowledgs that some people are skittish about buying glasses online. The store is an experiment to see if a physical store will bring in new buyers. The store has the same quirky appeal as Warby Parker's website. It's 2,500-squre-foot space is lined with books and old-school rolling library ladders. An in-store optometrist is on hand to perform eye exams for $50. Shoppers can track their appointments on an appointment board. A second store is planned for Boston. A question for Warby Parker is whether the company will expand to products beyond glasses, using its distinct approach to business to do so. The company is studying possibilities, but no decision has been made.
Discussion Questions
1. What environmental trends and business trends are working both for and against Warby Parker?
2. How has Warby Parker's social mission contributed to the firm's success?
3. What are some reasons that would support a decision by Warby Parker to expand into products beyond glasses?
4. What are some reasons that would support a decision by Warby Parker to not expand to products beyond glasses?
5. What actions has Warby Parker taken that have allowed the firm to at least in part successfully disrupt a large industry that had been dominated by a single company, Luxottica?
6. What can an entrepreneur learn, regardless of the industry he or she is entering, by how Warby Parker redefined the customer experience in its industry?