Case Study: How I Built A $598 Million/Year Business Selling Glasses

Neil Blumenthal: Warby Parker

Neil, thanks for joining! Could you introduce yourself to the audience?

Sure thing! I am the co-founder and co-CEO of Warby Parker, a transformative lifestyle brand that offers designer eyewear at a revolutionary price while leading the way for socially conscious businesses. We finished 2022 increasing revenue to $598 million, up 10.6% year over year—a pace well above the industry’s growth at 0.5%.

To understand where you are today, I want to start off with your childhood when a food dehydrator started your spirit for entrepreneurship. Could you tell us a little bit more about that?

So, growing up in New York, you're just surrounded by energy and entrepreneurship in all places. I was watching an infomercial, and they were trying to sell a food dehydrator. The whole idea is that if you purchased this food dehydrator in the next five minutes, you got a free matic slicer. My idea was to create a dry fruit stand in the middle of Manhattan. Needless to say, I don't know if it was the best idea, but I ran around my apartment begging my parents if I could borrow the $49.99 to get this food dehydrator.

Later, I got it in the mail, and it's this really crappy device that's just plastic trays with a heating coil and a fan. It would take four days to turn grapes into raisins. So, needless to say, my short career in dried fruit wasn't highly lucrative.

Moving beyond your earliest entrepreneurial ventures, while getting your bachelor’s degree, you had the goal to change the world. Why was changing the world so important to you?

My mom was a nurse, and I would just see how she would care for patients; whether I went and visited her in the hospital or whether a family member or a friend was sick, she'd always be the first to respond. The most extreme example was there was a shootout at my little league game; a man was shot three times, and she was the first one to run and help this person.

While the gunman was running in the opposite direction she was running toward the victim and stopped the bleeding while the ambulance got there. I think that was very formative for me.

Going to college at Tufts, which is known for international relations, was one of the ways I thought I would be able to create positive change by understanding the way that countries and governments interact.

My idea was, “Hey, if I could work to help resolve deadly conflicts, resolve wars, then maybe we could focus on the big things like health and education.” So, after college, I went and worked at a think tank that came up with policies to resolve deadly conflict. But I realized it just wasn't the type of work I wanted to be doing. I wanted to be the one making the decisions as opposed to recommending certain decisions to be made.

That brings us up to what you did over at Vision Spring, a nonprofit providing glasses to people in developing countries, where you were able to have that direct impact on communities. What was it about that experience that was so impactful?

So a family friend introduced me to her eye doctor, who had this idea to train low-income women in parts of the world where people were living on less than $4 a day to start their own businesses, giving vision screenings and selling glasses.

I thought it was a really interesting idea. Why? Well, first, there are about a billion people on the planet who don't have access to glasses, and that's just crazy, right? Glasses were invented 800 years ago, so we're failing as a species when a billion people don't have access to a product that was invented 800 years ago.

I thought that it was a smart solution to train people to start their own businesses to solve this problem because you needed to solve it at scale. And to do that, you want to create economic incentives for people to solve the problem.

In traditional philanthropy, for every dollar you give, you need to go out and raise another one. If we were able to create a market-based solution where folks were getting paid to serve someone, then this could be self-sustaining and create a permanent positive solution.

So I moved down to El Salvador to work on the pilot program. I was actually living in an eye clinic and going to these rural areas in El Salvador, training folks to give vision screenings and sell glasses for a couple of dollars in their communities.

I observed the power of a pair of glasses to transform someone's life. If somebody needs a pair of glasses, and they put on that pair of glasses, the impact is immediate. You see a smile emerge ear to ear. Similarly, the individual who's selling that pair of glasses has a sense of self-worth. They're giving back to their community, and they're now earning an income that can support their family.

So it was just incredibly rewarding and challenging. It was a very entrepreneurial experience where I was touching every aspect of a traditional business. I had to figure out how to source glasses for people living on less than $4 a day. You had product development, supply chain, marketing, and HR challenges, and I just learned a ton over a five-year period doing that.

You mentioned it was incredibly rewarding. What made you decide to leave and focus on the next stages of your career, which was moving out to Philadelphia and getting your MBA from Wharton?

I think I found after five years, my learning curve started to plateau a bit. And I'm somebody who wants to be constantly learning and getting better at everything that I do. As I started to think about what my next step would be, I found a lot of folks undervalued and underappreciated a nonprofit background. I thought that by going to business school, number one, I could formalize some of the things that I learned working at Vision Spring, but also it would give me a credential. And having that credential that said, “Hey, this guy knows business,” would help position me for my next job.

At Wharton, one of the professors you met was Adam Grant. When you and Dave went up to Grant with the idea of selling glasses online, he said it was ridiculous and was not going to work. To a lot of people, being told no can be demoralizing. How did you use rejection as a motivation to build a billion-dollar company? And how do you think other entrepreneurs facing rejection can use it as motivation?

Yeah, I think what makes successful entrepreneurs successful is they identify problems and then find solutions for those problems. So if somebody told us that Warby Parker was a bad idea, then we would try to get at the root of why they thought it was a bad idea and then come up with ways to solve that.

For example, in 2008, when we initially had the concept of selling glasses online, nobody really was doing that. Now, a bunch of other categories were moving online and doing so very successfully. Whether it was Zappos selling shoes or Blue Nile selling engagement rings, footwear, and jewelry. Glasses were a category folks thought could never be sold online.

Meanwhile, now it seems so obvious. Yeah, of course, you can buy that over the internet. But what we heard from friends and family and, and folks that we trusted was, I don't know if I'd buy glasses online because I need to try them on first. So when you hear, “This is a dumb idea,” that's not really helpful.

When you hear, “I don't think it will work because I want to try on glasses before buying them,” that is helpful because it’s a specific problem that we can work to solve. That led us to brainstorm, “How do we solve this issue of trying on?” and we thought, “Okay, well, is there a technology in which somebody could do a virtual try-on?”

At the time, there wasn't great technology, and there also wasn’t great hardware that enabled somebody to have a virtual try-on. So we used the technology available, where you had to hold up a credit card with the magnetic strip so that way you had a reference point, and you knew what distance someone's face was. So you could fit properly, a pair of glasses in one's face.

When we experimented with that, we found customers didn't like it. [The virtual try-on] didn't look real. It gave them less confidence in buying. So we went back to the drawing board and came up with this idea to ship people five pairs of glasses where they'd have five days to try it on at home for free.

If there was a pair that they liked, we would put in prescription lenses and ship it to them. This program has been wildly successful, and I think it's one of the reasons that Warby Parker was successful from the get-go. We wouldn't have come up with that idea if we didn't get that feedback at the very beginning.

Why did you decide that [sending pairs of glasses for free] was the best model to build an online glasses business from?

You know, at Warby, we always say that the customer comes first, and we want to do everything to make shopping for glasses and contacts as easy as possible. Trying on is certainly something that's important. We wanted to eliminate all barriers to shopping with us and purchasing with us.

Enabling somebody to try on five pairs of glasses for free, versus charging them, eliminates barriers to purchasing. One thing that's been our guiding metric is net promoter score, which is a measure of customer satisfaction.

Bain and Company did a ton of work over the last few decades on what is the best way to measure customer satisfaction. What they found was the best question to ask is, “How likely are you to refer this product or service to a friend on a scale of 0 to 10?”

If you're an 8, 9, or 10, you’re a promoter. If you're a 6 or a 7, you are neutral. If you're 5 or below, you're actually a detractor.

Our net promoter score has been around 80 since inception. And when we look at the broader optical category. What we find is that most optical retailers are in their 20s. The fact that our net promoter score is so much higher, we deliver much greater value and a greater customer experience.

Before Warby Parker, Luxottica was one of the major dominating players in the eyewear industry. They currently own brands such as RayBan and Oakley, and they also own stores like Sunglass Hut and LensCrafters.

They keep prices up to 20 times the cost of what it takes to produce the glasses. How difficult was it to enter a market where there was such a big monopoly in the industry, and how did you overcome the challenges there?

Yeah, I think when you have really large incumbents, you have to understand what's their business model, what are their strengths, and how to navigate around them.

So, for us, it was important that we have our own brand, right? We're not licensing some other fashion brand. Luxottica makes a lot of its money by licensing big fashion names like Prada, and they sell those glasses out of their stores like LensCrafters. So we were going to design glasses under our own brand. Then, we were going to partner with factories that weren't primarily selling to Luxottica. Then, at any point, Luxottica just could tell the factory, “Hey, stop manufacturing Warby Parker’s designs.”

Similarly, you have optical labs where you cut lenses, insert them into the frames, and ship them to customers. We've built our own optical labs so that way we can control that process. It helps us maintain high-quality standards and get the product to customers fast.

We found when we do things ourselves, we're able to do it at cheaper costs than others.

When you first started Warby Parker, one of the first criticisms you faced was you were also going into a summer internship at the time. A lot of people think of business as very binary: either you do it, or you don't, and there is no in-between. How confident were you that Warby Parker was going to work, and if you were confident, why did you decide to pursue a summer internship?

So I think there's this misperception that entrepreneurs are crazy risk-takers. We focus on these very few stories of somebody who dropped out of school, like Mark Zuckerberg, to build their company.

I think great entrepreneurs are actually really good at managing risk, not necessarily taking crazy risks. So often, I think about if I am standing on a cliff and I need to get to the bottom. I can either jump off the cliff or I can take a step back and look for an easier way to get down the hill.

And I'd prefer not to jump off the cliff, especially if I don't know what’s at the bottom. So with Warby Parker, we wanted to de-risk the business before we invested all of our life savings and before we gave up any other job opportunities.

I only had one shot to graduate business school and get a new job, so I wanted to make sure that I was best positioned to graduate business school with a job. I took that summer internship at McKinsey and would basically be working these long hours with McKinsey, and then at night would be working on Warby Parker, along with my co-founders, Dave, Jeff, and Andy. We'd be having calls at midnight. It wasn't until halfway through the second year of our MBA program that we were ready to launch.

We launched Warby Parker in February of 2010, and the company took off like a rocket ship. We had our first-year sales targets in two weeks, sold out our bestselling styles in four weeks, and had a waitlist of tens of thousands of people.

It was at that point that I went to McKinsey and said, “Hey, I've got this opportunity here. It doesn't look like I'm gonna be able to join the firm.”

They said, “Listen, you have this amazing opportunity. Even if you don't wanna pursue it, we'll give you a year. And if you want to still come and work for us in a year you'll have the job.” Of course, Warby Parker ended up doing super well, so I didn't have to take their offer. But it was really nice of them.

Sometimes, there's this inflection point out of nowhere where the business might just spike. I've had entrepreneurs message me and ask me, “Hey, I know that this happens, but why does it happen?”

There were 3 things that I think we got right.

One was our price point, charging $95 for a product that would typically cost $400-500.

Second, it was novel that we were selling glasses online, and that's something that people wanted to talk about.

Third, we had this great brand that stood for fun, creativity and doing good in the world. We were distributing a pair of glasses to someone in need for every pair that we sold.

The name Warby Parker encapsulated that.

You now have over 140 stores in the United States and Canada, and 60% of your sales are currently from in-store locations. Why did you see physical stores as important for the growth of the brand?

So, we were never so dogmatic that it was e-commerce or nothing. What was important to our business model was having direct relationships with our customers. If we were designing and manufacturing the glasses ourselves and selling them directly to customers, then there was no middleman.

A website enabled us to have a direct relationship with customers, as well as stores, as long as they're owned and operated by us.

What we found when we launched the website was we ran out of inventory for our home try-on program, and people started to call our 1-800 number and email us saying, “Hey, I want to try on glasses, but you're out of inventory. Can we come into your office?”

At the time, we were working out of my apartment, so we invited some folks into the apartment. We put the glasses on my dining room table, and we moved the mirror close by. We took my co-founder, Dave's laptop and set it up so people could check out through our website. At first, we only invited five customers just as a test, thinking, “Hey, if this is too weird of an experience, we're only gonna destroy the brand in the eyes of five people.”

But I remember one of those five people was wearing scrubs. It turns out they were a doctor at the nearby hospital, and he checked out with an email address from that hospital. Well, sure enough, a week later, we had 10 orders from people from that hospital. And what it was a unique experience that person then told all of their colleagues about.

When we finally moved into an office, we made sure we got an office that was centrally located, near mass transit, that was easy for customers to come, and we actually dedicated about a third of the office to be a store to be a showroom.

Suddenly, we were on track to do over a million dollars of sales out of our office. That gave us the confidence to open up a pop-up shop and then a permanent store.

This was another example of how we de-risked opening up stores because stores are major commitments. You often are signing a multi-year lease, and you're spending a lot of money to build it out. So we really wanted to know that stores were gonna be successful before we made those financial commitments.

One of the best ways you did that was actually by traveling around in a school bus to determine the best cities or locations to set up these stores and sell the glasses. You mentioned it was a unique experience for that doctor, and that's why you shared it with maybe his other colleagues. How do you translate that experience into the stores that you currently have?

We spent a of time observing how people buy glasses and also thinking about our own experience going into an optical shop.

Typically, before Warby Parker, we hated going into optical shops. You walk in, the glasses are in a glass display or behind the counter, out of reach. It's a very guided experience, and if you're like me, you just want to grab some glasses and try them on. We also found that a lot of these optical shops had really small mirrors.

So when we were designing our first store, we were like, okay, well, we want the glasses out on the shelf. that can be easily grabbed so people can try them on their own. We want them at eye level so they're easier to see. We want the store to be well-lit, and we want full-length mirrors.

What is next for Warby Parker?

Well, unfortunately for the world, but fortunately for our business, by 2050, 50% of the world's population will need glasses or contacts in order to see properly. Wow. And that's because we're all spending a lot more time inside.

We're focused on objects right in our near vision versus in the distance. That's leading to an increase in the incidence of refractive error that's solved with glasses and contacts. So, the future for the category is quite bright, and that demand will constantly be increasing.

My hope is we influence our competitors to deliver even better customer experiences and also hopefully influence them to give back more to the community.

One thing that I take a lot of pride in is we've partnered with the city of New York to go into New York City public schools and give vision screenings to every kindergartner and first grader. If they need a comprehensive eye exam, they receive one. If they need glasses, they get glasses from us, that were designed by our designers that are made in our optical labs to ensure that they're getting glasses that are great quality.

We actually did a three-year longitudinal study with Johns Hopkins to see what the impact of glasses was on reading and math scores. What we found was that a pair of glasses was the equivalent of three months of additional schooling.

That's one of the most effective educational interventions in the world. More effective than computers in classrooms, extending the school day, and private tutoring. So we think we can have a real impact by providing glasses to students in schools that don't currently have access to them.

And now that we wrap it up here, what are your takeaways for first-time entrepreneurs in the audience?

I think the key takeaways for entrepreneurs are to identify a problem, come up with a solution, and then test every aspect of that solution and really be focused on the customer. What's going to make the customer happy? What customer problems are you actually solving?

I totally agree. Well, thank you, Neil, for taking the time to join the show; it was a pleasure.

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