Inside Warby Parker’s New York City headquarters, there is a corner of the office that serves as a retail showroom. Shoppers can peek through an opening to see the inner workings of the company while scheduling a $50 eye exam or picking out a pair of frames. This retail petri dish gives Warby employees regular exposure to customer feedback, and it also "funds the rent many times over," says Warby Parker cofounder and co-CEO David Gilboa.
It’s quite a change from the dining room table in Philadelphia where Gilboa and his cofounders first invited customers to try on their low-cost, socially progressive frames. Today, Warby Parker's four brick-and-mortar locations are growing 75% faster than expected. There are ten showrooms, and a retrofitted yellow school bus full of stylists and eyewear that travels around the country. Lines stretch out the door on some weekends at the flagship 2,000 square foot SoHo retail shop in New York City.
"Two years ago, in our first meeting, [J. Crew CEO] Mickey Drexler said we should move into retail stores," Gilboa told the attendees of an Innovation By Design offsite design experience. The move to bricks and mortar may have been obvious to J. Crew’s CEO, who is now a Warby Parker board member, but the cofounders didn’t think it was a sure bet.
And that’s a good thing: Instantaneous decision-making, the stuff that corporate hero stories are made of, isn’t something that comes naturally. "Professional intuition is something that can take years to develop: think, the veteran fire fighter who 'knows' when things are about to go bad or the farmer who can 'feel' the rain coming," says Derek Dunfield, a Neuroscientist and Behavioral Economist at MIT Sloan School of Management.
"People should be very careful about believing their gut has the right answer," says Dunfield. "Even when you're absolutely sure your intuition is right and your gut tells you why something is true, you need to run the data." If you’re a veteran with a track record of success, like Drexler, by all means follow your instincts. But the rest of us—even CEOs—benefit from validation.
Gilboa and his cofounders have been trying to balance measurement with informed instinct ever since the company’s inception in 2010. "We were guys from business school…four outsiders trying to build a fashion brand," Gilboa says. One of the first things they spent money on, even before collecting a paycheck themselves, was a fashion PR firm.
Warby Parker’s pricing strategy is also based on a combination of experimentation and some advice from one of their professors at The Wharton School. The glasses were originally going to sell for just $40 a pair. The professor told them to double the price because psychologically consumers wouldn’t believe that the same quality glasses they’d been paying $200 for could be had for such a huge markdown. Subsequent studies have borne out the theory: Warby customers perceive the glasses as higher quality with each incremental price jump up to $100—and after that, says Gilboa, purchasing "drops off a cliff."
How, then, can an eyeglass maker known for its affordable frames increase sales? It turns out that the retail stores encourage customers to buy that extra set of glasses. And after opening the first store, Warby Parker surveyed 1,000 customers and asked if they would have been just as likely to purchase online. It turned out that 30 percent would only have purchased in a physical store. By expanding into bricks and mortar the company expanded its customer base.
That customer base is still relatively small—Gilboa admits that the company is a "rounding error" to the eyeglass world behemoth Luxotica, which saw $5.1 billion in sales last year. But the company is undoubtedly growing: Warby Parker is remodeling the 8th and 9th floors of the Butterick building, and will relocate all of its employees there in mid-2014.