As Warby Parker heads toward a public company, the co-founders of the $3 billion eyewear brand are proposing a story-centric growth strategy.
It’s a turning point for a company that over the past decade has sparked a boom in digital brands that has investors betting billions largely on their ability to grow rapidly online.
But in this category, where eyeglass and contact sales still depend on customer relationships with eye doctors in physical locations, Warby Parker plans to significantly expand its store base by about 140. To start, three dozen more locations will open by the end of the year, the company said.
“We still have room to open hundreds of stores,” Warby Parker co-founder and co-CEO Neil Blumenthal said in an interview. “When we look at our competitors – the large public optical retailers – they all have over a thousand locations across the United States.
Warby Parker is now 11 years old and growing up isn’t as easy. There is more competition, both from online brands, such as Zenni, and well-established players, such as Pearle Vision, who have improved their e-commerce. The company hasn’t had to release financial results as a private company, but Bloomberg Second Measure data shows the retailer’s sales growth nearly doubled in 2013 and then slowed.
From 2016 to 2019, annual gains have averaged around 25%. And in 2020, growth was around 7% before rebounding this year, according to Second Measure, which analyzes anonymous credit card transactions.
“They’ve been around for a while, and people who would have tended to try them now have already done so,” said Sucharita Kodali, retail analyst at Forrester. “Their biggest challenge is growth. How do you find the next slice of customers? »
Investors invested around $530 million in Warby Parker, including a $120 million Series G funding round in August, according to researcher CB Insights. The company confidentially filed for an initial public offering last month and plans to proceed with a “public listing” after reviewing by regulators. He declined to provide further details.
Venture capitalists who have taken stakes in Warby Parker have a lot to gain from an IPO, as does the rest of the direct-to-consumer industry. The big criticism of these companies is that they have failed to live up to the hype of their investments and press attention.
Yes, they caused disruption, but most struggled to maintain their initial success. Few companies have gone public, and those that have, like Casper Sleep, have largely disappointed. But more are likely to hit the stock market in the coming months, especially with the rise in special purpose acquisition companies, or SPACs, that facilitate IPOs.
That’s why Warby Parker’s ability to grow through brick-and-mortar stores isn’t just important to potential investors in its public offering. It could be seen as a proxy for all these young consumer brands. Can they really mature beyond the fashion stage and push sales into the billions by dotting America in physical locations? With the cost of online advertising continuing to rise, using stores to acquire customers, while costly, is a choice more people are likely to make.
Warby Parker’s new store slate will have qualified eye doctors, as will around 80 of its current locations. That, along with becoming a covered provider on more vision insurance plans, may help boost his budding contact business. The company, which entered this market at the end of 2019, declined to give details on its performance.
When it was founded in 2010, Warby Parker stood out by selling glasses online for around $100. The company sent executives to customers. They would try them on, choose one and provide their prescription to have their glasses made. The model quickly took off and sparked a frenzy of direct-to-consumer sales ranging from swimwear to vitamins.
To unlock more growth, the company has tried to remove the need for customers to transfer a prescription, but it’s difficult. Consumers often develop trusting relationships with their ophthalmologists, who then sell them glasses and contact lenses. That’s why Warby Parker is offering more eye exams in stores and eventually wants to offer them online. This could increase repeat purchases.
Using online reviews will “make it easier, faster, and cheaper for people to get new prescriptions,” said Dave Gilboa, a co-founder who is also co-CEO. “We continue to invest in telemedicine, which we believe will lead the first leg. ”
The same cannot be said for the company as a whole. In the direct-to-consumer world, Warby Parker is the old-timer. And the next few months could go a long way in defining it and the era of digital branding. The co-CEOs don’t seem worried, though. The company has not seen competitors be able to match its prices, products, or customer service, they said.