Amazon has conquered the e-commerce space, leaving little scope for smaller players to grow. It has been observed that only niche e-commerce players have somewhat managed to survive its onslaught. Online eyewear retailer Warby Parker is one such player. In fact, its storefront strategy to build brand awareness seems to have inspired even Amazon.
Warby Parker’s Offerings
New York-based Warby Parker was founded in 2010 by Dave Gilboa, Neil Blumenthal, Jeff Raider, and Andy Hunt to sell affordable prescription eyeglasses and sunglasses. It sells designer eyeglasses online for under $100 with a ‘one for one’ offer. It also has a popular service called Home Try-On in which customers can test up to five frames at home free of charge.
It is able to offer such huge discounts because it designs the glasses in-house, thus avoiding licensing fees that can be up to 15% of the wholesale cost. It also saves costs by working directly with suppliers and shipping products directly to consumers with valid prescriptions.
Its low prices give it an advantage in an industry dominated by Luxottica Group that owns the Oakley and Ray-Ban brands as well as the LensCrafters, Pearle Vision, and Sunglass Hut retail chains. It is a vertically integrated monopoly of sorts. To build awareness of its brand, in 2013, Warby Parker started opening brick-and-mortar showrooms of up to 2,000 square feet in upscale locations like Manhattan’s SoHo district to build awareness of its brand.
The company claims that the stores soon became profitable, making an average of $3,000 per square foot annually, a figure that is higher than larger retailers like Tiffany and Best Buy.
It now has 27 stores in 22 US cities. This strategy is something that several other online retailers like Amazon, RentTheRunway, Bonobos, and BlueNile are also experimenting with. The idea is to have a minimal offline presence that could also be used to reduce the costs of shipping.
Warby Parker’s Financials
Warby Parker has sold over one million pairs and given away one million pairs since 2010. The company is not yet profitable and doesn’t disclose its revenue details. However, according to PrivCo’s internal estimates, the company brought in $35 million in revenue in 2013 and is most likely to have doubled it in 2014.
Warby Parker was started with a seed investment of $2,500 through the Venture Initiation Program of the Wharton School, University of Pennsylvania, where its founders studied. It has since then raised a total of $218 million from investors including American Express, Spark Capital, BoxGroup, Brand Foundry Ventures, First Round Capital, General Catalyst Partners, Lerer Hippeau Ventures, Menlo Ventures, Microsoft, Red Swan Ventures, SV Angel, Thrive Capital, Tiger Global Management, T. Rowe Price (New Horizon Fund), and Wellington Management.
Its latest round of funding was held in April 2015 when it raised $100 million at a valuation of $1.2 billion. The funds were to be used to expand its physical presence and in enabling customers to conduct eye exams using just their mobile phones. It also plans to build new technology to make shopping for frames in stores and online easier.
Warby Parker is one of the few e-commerce players to be featured in CB Insights 2016 Tech IPO Pipeline. However, e-commerce is a turbulent space right now and Warby Parker should focus on its fundamentals before taking the plunge. We don’t want another Etsy-like fiasco.
This segment is a part in the series : 2016 IPO Prospects