There’s a Warby Parker of luxury footwear. A Warby Parker of cowboy boots. A Warby Parker of hearing aids. It’s a rare brand that can become a standard by which others not only measure themselves, but becomes shorthand for an entire business category.
Over the last decade, Warby Parker has built itself into the exemplar of modern direct-to-consumer brand success. (Ironically, in its early days, GQ dubbed the nascent brand to be the “Netflix for glasses” because its at-home try-on model mimicked the way Netflix’s DVD rental program worked.) It built off the buy-one-give-one model popularized and pioneered by Tom’s (with shoes) to disrupt a product category in eyewear that was both monopolized by behemoths like Luxottica and Esilor and opaque on pricing and markups. In a 2015 Fast Company cover story, co-CEO Neil Blumenthal said, “We’re often asked why Warby has been successful. If we sum it up in one word, it’s deliberate.”
Now, Warby Parker is going public through a direct listing. It’s not the first of the direct-to-consumer brands to do so: Casper, the mattress company, had its IPO in February 2020; and Figs, the healthcare apparel brand that made scrubs sexy, went public last May. Investors have put more faith in Figs’s prospects than the one-time “Nike for sleep.” Figs is trading at $38.73, up from its stock debut in May at $22, while Casper’s stock is at $4.79 after its $12 per share IPO price last year.
Warby Parker is not profitable, reporting 2020 losses at $55.9 million. But as the long-time bellwether for the state of direct-to-consumer brands, its future performance will impact how investors—and consumers—consider the category, as companies like Allbirds also head to the stock market. For a decade, Warby Parker has been synonymous with young, hip, creative, and tech-class workers by offering stylish glasses at affordable prices through a convenient e-commerce platform. Can that brand halo survive investors’ obsession with high-growth, high-margin businesses?
The state of the Warby Parker brand is strong
“I don’t think there is a brand that is more fundamentally sound than Warby Parker,” says Web Smith, founder of the 2PM Inc. consultancy, which has a particular focus on how digital is changing commerce. “I think the ‘Warby Parker of’ descriptor still applies, because what you’re going to see from a lot of direct-to-consumer brands in the next five to seven years is a pivot to physical retail.”
According to Warby Parker’s S-1 filing, it generated 60% of net 2020 revenue from e-commerce and the remaining 40% from its retail stores. In the first six months of 2021, that split became 50-50. Warby Parker’s plan is to add between 30 and 35 new retail stores this year to its current 145 outlets—and keep that pace of rollout into the foreseeable future.
Smith sees this as a winning play. “Warby’s going back to basics by saying, ‘We built this great digitally native brand, and that is our primary vehicle, but we have these touch points in [retail] that are wonderful, and if nothing else, will serve as a billboard and make us $2 million to $3 million per storefront per year,'” he says. “That plays really well for them, because it lowers their [customer] acquisition costs, it decreases logistics costs like shipping, and those seem to be the two biggest challenges for DTC brands right now.”
The perils of being public
For Warby Parker, its own challenges will change significantly as a public company. Forrester vice president and principal analyst Sucharita Kodali says its biggest issue may well be maintaining momentum and interest when its sales figures are public. “When companies are private, it’s much easier for people to imagine you are successful, but now there are profit targets, revenue goals, and public investors don’t forget what you said and didn’t do,” says Kodali.
Under those pressures, it’s usually a brand’s values that are most challenged in the face of meeting quarterly results. Consultant Chuck Welch, founder of Rupture Studio, which has worked with major brands like Nike, Spotify, and PepsiCo, says that when Wall Street demands its pound of flesh, it will be telling how the company decides to feed it. “You can feed it by holding steady and using those additional resources to scale and reach more people,” says Welch. “Or you can feed it by compromising those values, squeezing margin, and short-circuiting a model that’s been very successful. We’ve seen companies that have had their values tested as they’ve gone public, and taken on that pressure to scale, grow, and return value to investors at all costs.”
The future of Warby Parker is finding another Warby Parker
Warby Parker will have to balance that challenge, and its continued retail expansion, with its biggest growth hurdle: People just don’t buy a lot of eyeglasses. The brand’s original conceit was that with cheaper price points and stylish designs, customers would treat glasses like sneakers, another interchangeable fashion accessory. That didn’t turn out to be the case. So the brand will eventually need to find another product category in which it can effectively and authentically expand.
“For Warby Parker the brand to continue growing, they’re going to have to sell more than eyewear because the lifetime value of a Warby Parker customer isn’t very high,” says Smith. “And that’s scary. Apparel is easy but doesn’t make much sense. So which product line will it be for them? That’s my biggest question.”
But there’s hope for Warby Parker if it’s resolute in maintaining its core brand attribute. “Warby Parker built a whole model around a vision of transparency, and positioned themselves as what’s best for the shopper,” says Welch. “The mission was to get you the best product, not at just the cheapest price, but at a price that makes you feel smart. That’s the brilliance of their model. I’m going to make you feel smart because you didn’t pay what you thought you needed to pay. When someone does that, you tend to trust them.”
So far, the one type of glasses Warby Parker doesn’t sell are the kind that can see the future. But that deliberate focus is never out of fashion.