Has Warby Parker reinvented its business model?
Warby Parker, one of retail’s most-lauded digital startups, now sees room to open over 900 stores in the U.S. Management sees the stores as critical to supporting its newer growth opportunities.
The eyeglass retailer opened a record 35 stores in 2021 to end the year with 161. Forty are planned for 2022.
Growth opportunities include progressive lenses, which account for 20 percent of Warby’s mix versus 45 percent of all prescription glasses sold in the U.S. Progressive glasses start at $295, Warby’s highest price point and highest margin.
“Progressives purchases tend to skew more toward bricks and mortar given the complex nature of the prescription and the older customer demographic,” said Dave Gilboa, co-CEO, last week on Warby’s fourth quarter call. Buyers of progressive lenses tend to be 45 years or older.
Stores also enable eye exams, which accounted for less than two percent of Warby’s sales in 2021 compared to 10-to-15 percent at a typical optical retailer. Neil Blumenthal, co-CEO, said exams also “give us greater control over the customer experience.”
Finally, in-store exams support sales of contact lenses, which doubled in 2021 to four percent of Warby’s sales versus 15-to-20 percent at a typical optical retailer. Industrywide, 70 percent of consumers buy glasses and contacts in the same location where they have an eye exam.
The 37 percent revenue growth in 2021 reflects Warby’s original business model’s core tenets. Warby avoids wholesale markups by producing its own lenses, keeping single-vision prescription glasses at $95 — the same price Warby charged when founded in 2010. (Progressives sell well below the $800 to $1,000 typically paid.)
Stores, accounting for 54 percent of sales in 2021, target four-wall margins of 35 percent and paybacks in under 20 months. New stores entering markets expand the entire market by over 250 percent on average in the first year. Other differentials include omnichannel capabilities, including online vision testing, and its “Buy a Pair, Give a Pair” program.
The 900-store potential determined by a third-party commissioned study last year “is still a fraction of the 41,000 optical shops that exist today,” said Mr. Blumenthal. “As we continue to expand our product and service offering, we believe this will also expand our store footprint opportunity.”
- Warby Parker Announces Fourth Quarter and Full Year 2021 Results – Warby Parker
- Warby Parker Inc. (WRBY) Q4 2021 Earnings Call Transcript – The Motley Fool
- Warby Parker Culture – Warby Parker
- Warby Parker, Launched as an Online Disrupter, Now Bets Big on Bricks and Mortar – The Wall Street Journal
- Warby Parker to embark on ambitious physical expansion – Fashion Network
- The Mistake That Turned Warby Parker Into an Overnight Legend – Inc.
- Warby Parker’s Retail Stores Are Pacing 75 percent Ahead Of Schedule – Fast Company
DISCUSSION QUESTIONS: Was Warby Parker always destined to open an extensive chain of stores or has the expansion into progressive lenses, contacts and eye exams created more urgency around store openings? Do you see more opportunities than risks in its ramped-up expansion across offerings and with physical stores?