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Warby Parker: Too Good to Sustain?
EXCERPTS
THE BUSINESS MODEL
WP started as an online store of prescription glasses with a unique business model. Its aim was to differentiate itself and offer prescription glasses at a lower price point than its competitors and yet be a fashionable brand. Its range of glasses began at US$ 95. WP was able to reduce costs by cutting out the intermediaries (Refer to Exhibit III for the cost structure of Wary Parker). The objective was to reduce the value chain by not selling the products wholesale to a retailer who would sell it at high markup but to sell it directly online or offline... |
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ONE FOR ONE
WP was inspired by TOMS, an online shoe retailer which called itself the ‘one for one company’. Blake Mycoskie (Mycoskie) had founded TOMS in 2009 and his pitch to consumers was “buy a pair and a second one will be donated to the needy”. This helped launch a phenomenon that retail consultants called “compassionate consumerism” . The model was quickly adopted by other start-ups whose business model framework had a humanitarian cause attached to it. ..
THE CHALLENGES
WP was poised to disrupt the eyewear industry but it did not perceive Luxottica, the market leader, as an immediate threat. “Luxottica has such an entrenched cost structure to support their current business that if they responded to us directly they’d be cannibalizing their own sales much more than ours," asserted Gilboa. The prime WP competition was from WP clones, who were quick to copy the company’s business model. ..
LOOKING AHEAD
Analysts said, WP as a do-gooder start-up, was creating for itself an image of an ideal company which knew what its customers wanted at a modest price. The “Try Five” program definitely wasn’t easy on the Profit and Loss account but as analysts understood it, they compared the model to Amazon and its never ending quest to scale with wafer thin margins; the obvious query which arose was how long WP could sustain what people liked most about it. WP was being good on every front of the business – from employees to providing value to customers to the buy-one-give-one program..
EXHIBITS
Exhibit I: Eyewear Industry
Exhibit II: Warby Parker - Series of Funding
Exhibit III: Cost Structure - Boutique Vs Warby Parker
Exhibit IV: Warby Parker – Hush Mob
Exhibit V: About VisionSpring
Exhibit VI: Warby Parker – Major Competitors
