Building A Successful Made-On-The-Internet Brand with Warby Parker’s Dave Gilboa | Disrupt SF (Day 2)
11:52PM Sep 6, 2018
You guys are really familiar with our next speaker, or at the very least, his brand. Please welcome to the stage Co-Founder and Co-CEO of Warby Parker Dave Gilboa and your moderator Anthony Ha.
Thanks for joining us today.
Thanks for having me.
Well, let's, let's put that statement to the, the test. How many people here, raise your hand, if you're wearing Warby Parker glasses right now?
We got it. We got a few, not not an enormous. How many people have glasses at home?
All right, getting there. But I think you got a couple more sales you can make today.
Alright, can do.
So, Warby Parker obviously, has become one of the most recognizable names in online retailer in online retail. And you guys have also led the way to this whole other wave of startups that are building direct-to-consumer brands online. You've also moved offline with 70 more than 70 brick and mortar retail stores. So let's talk about how you got here and what's coming next.
Many times, you've told this story about losing these expensive Prada glasses is sort of like the origin story of Warby Parker and realizing that was just kind of crazy expensive and that you felt like you could do something better. And at the time you are in business school so like what was the sort of insight of oh not only is this dumb but what was how did you actually fix the process?
Yes, really started the company to solve our own problems. I'd lost a $700 pair of glasses. Couldn't figure out why they're so expensive. Realized that a lot of other people were frustrated consumers and and so we started looking into the industry and try to understand what what led to a product that's been around for 800 years that still cost 10 to 20 times what it costs to manufacture. Something didn't didn't make sense to us and and as we dug into the industry realize that there's a massive concentration of power in the space.
So there was one company, Luxottica, that owns everything from Ray-Ban, Oakley, Oliver Peoples, Persol, Arnette, LensCrafters, Pearl Vision, Sunglass Hut, Target optical, Sears Optical. Have over 10,000 stores. They have the exclusive license to manufacture and distribute glasses for most major fashion labels Chanel, Prada, Dolce & Gabbana, Ralph Lauren, dozens of others. They also own EyeMed which is the second largest vision insurance plan in the US.
And so they've just done a great job of creating an illusion of choice where you walk into a LensCrafters or Sunglass Hut see different 50 different brands of glasses, don't realize that all those brands are owned by the same company, that owns a store that you're standing in, that owns the vision insurance plan used to pay for those glasses.
And so it's something didn't didn't add up to us and the world looked very different. This was about 10 years ago when I lost my glasses. There wasn't kind of a playbook for direct to consumer brands. E-commerce was starting to take off in a bunch of categories but was still kind of unproven. Amazon had not kind of taken over the world yet.
And we thought that there was a unique opportunity to create a vertically integrated brand where historically if you wanted to create a brand of eyewear you had to sell through Luxottica's channels to have any sort of distribution to get in front of customers, you had to be in LensCrafters or Sunglass Hut.
Or if you wanted to be an eyewear retailer, you had to carry their brands to have products that consumers want to buy. We thought there was a unique opportunity to leverage the power of internet and e-commerce to produce high quality eyewear and sell them direct to consumers, cutting out all the licensing fees all the unnecessary markups and pass the savings onto consumers offering a product that normally costs several hundred dollars and offer it for less than hundred dollars.
So you as you mentioned that part of the goal was to create this vertically integrated brand. But again at the time you guys were just four guys in business school. How did you actually go about then, you know, just creating this infrastructure for building eyeglasses?
Yeah. So we were four full-time students. None of us had ever started a company before. None of us, you know, on paper, we were not the team that you would pick to to build an eyewear company, or to launch any sort of tech company. None of us were technical. We had been working in consulting and banking, so I was really good at PowerPoint and Excel.
Our first UX user testing, we designed our website in PowerPoint slides and printed out paper slides and would walk into a Starbucks and offer to buy strangers cups of coffee if they would take five minutes to help us with some, some testing.
We put a stack of paper in front of them and say, imagine this is the homepage. Point your finger imagine your fingers and mouse, where would you click and then they point somewhere and we'll shuffle through the pages and put another piece of paper in front of them. And that was kind of our first wireframe UX testing.
And so you know, we were really scrappy in the early days. But we also realize that there's only one opportunity to launch a fashion brand. And that people with with eyewear, we, we joke that kind of the first wearable technology but right it it it serves a function and in terms of helping to people see so we need trust and credibility on that front.
But it's also one of the only products that people wear on their face and and has to look good and and and so getting both of those elements right you can't really do in a MVP type type manner and so we felt like we had to have a really polished product from a design standpoint and a in a polished operational infrastructure to get prescriptions right. And so we spent a year and a half really working on every element of the business before we launched out of our apartments when we were in school.
And so from what I understand, kind of launched the website. Not necessarily did a doing a ton of promotion but fairly quickly it started selling more rapidly than you had expected, maybe more rapidly than you could handle. Well, how are people finding the site initially?
Yeah. So we we bootstrapped the business. We only spent money on three things. So the first was hiring an engineer on oDesk to build our site. None of us could code. Our initial set of inventory, because we had horrible terms with our suppliers and had to pay them up front before we could get any inventory. And then we hired a fashion PR firm. We realized that four Wharton MBAs is not necessarily the sexy background for the fashion and design world and we really wanted credibility from a design standpoint.
There were a bunch of other sites that were selling glasses online before we were. But they some of the biggest sites at time were 39dollarglasses.com, ibuydirect.com, framesdirect.com they're really focused on on price as a differentiator without any focus on design, quality, customer service. We really wanted consumers to to get great value but not have to sacrifice anything to get that value.
And so we really want a stamp of approval from the fashion community and we're able to get great features in GQ and Vogue the the week we launched and I think we were just blown away by the power of press and and and traditional press. Being in print in particular, I think still carries a lot of weight in credibility and being in those in those publications really put us on the map.
We had our first year sales targets in three weeks, we were completely stocked out of inventory. We had a waitlist of 20,000 customers and it was just off to the races and we didn't spend a penny on marketing or customer acquisition until we were three years into the business. It was really all word of mouth and press until until that point.
So I wanna fast forward a little bit on, as I mentioned, you now have like this enormous number of brick and mortar stores. And I think, you know, as I think we're both New Yorkers, at least adopted New Yorkers, and you walk around here, you see all these different, like, direct to consumer brands, opening up brick and mortar stores. But I feel like when you guys started doing this, that wasn't an intuitive thing. There are so many other companies that just want it to be online only. Why did you go in the other direction?
Yeah, our initial thesis was that, you know, it'd be more efficient to to sell glasses online without the expense of operating bricks and mortar stores. And our e commerce business is large and continues to grow really quickly.
And we're excited really excited about e commerce but we really start opening stores by listening to our customers. And we've always thought of ourselves as a brand first, that doesn't really matter how we sell glasses or engaged with our consumers as long as we're providing good service and good product and I think we surprised a lot of people when we started opening stores. where people were saying that software is eating the world and bricks and mortars dead.
and you everyday read about traditional bricks and mortar retailers that are going bankrupt or shutting down stores. Our view is that physical retail is not dead but mediocre retail is dead and it's the companies that haven't adapted haven't innovated.
When when in the face of consumers having more choice than ever in terms of what they're buying, and for us, we sell a product that has a service component in terms of adjustments. People want to try on glasses, even a couple millimeter difference in terms of of the design effects, how something fits on on your face. A lot of people have questions about prescriptions as we open stores.
We also have the opportunity to have eye doctors in those stores or offer services in the stores which are helpful but we really kind of stumbled into opening our own stores by by listening to customers.
So we have this waitlist of 20,000 customers were completely stocked out of our home try on frames for nine months, our first nine months in business.
And we started getting calls from people around Philadelphia, where we're based at the time saying, I read about you in GQ. I really want to try and your glasses but there's this huge waiting list can I come to your can your store your office and we said well stores my apartment. But come on over and Philly have the second highest murder rate and we'd start inviting strangers in and people love the experience.
They love getting to meet the people behind the brand. They love being able to try on the entire collection. And we found that we learned so much from those interactions that we decided to experiment with some pop up shops.
We bought an old yellow school bus that we got it and turned into a store that toured the country for about two years and went to 20 different cities and we found that anytime that we had a physical presence, we got a really positive reaction from from consumers. And we've also found that it created a halo effect for our online business.
And so we were basically getting the the best of both worlds where we were giving people an experience in stores that they wanted, but also driving awareness and driving more online sales. And then so we said, okay, well, why don't we start to open a couple stores and see what happens.
And we've just been blown away by the response that we've gotten from consumers and economics that we're seeing out of the stores that are driving now a significant portion of our of our sales more than half of our sales are coming from our retail stores. They're all tremendously profitable.
And so we have plans to really rapidly increase our store count we have 75 stores now will be at 90 by the end of the year and soon we'll be in hundreds of stores in the US.
So just to make sure that all the brick and mortar stores are profitable individually these none of these are just serving as sort of like promotion for the website. They have to work on their own.
Absolutely. They're they're highly profitable on their own just measuring sales that happen within those four walls. We also don't have a high pressure sales environment. We built our own tech infrastructure. It's one one tech platform that powers or e commerce experience and our in store experience.
And so if you're shopping in one of our stores, we have a lot of people that can't decide or they want their husband or wife opinion. They want to check what their health insurance benefits are they where they're just in a rush, they don't have their prescription information and so they don't want to check out in our store.
Any of our advisors can take photo of you with their with their iPad, select the frames that you're looking at. It auto generates an email and you can then it's kind of one click Add to Cart from home. And so we've just tried to make the experience seamless. Whether people want to transact in our store or not, but on a standalone basis, the stores are highly profitable on their own.
And one of the other steps you've taken to make the online experience better is you can now do essentially prescriptions from your phone. And you just talk a little bit how that works.
Yes, one of the biggest friction points that our customers have is we will only like glasses with you have a valid prescription and prescription regulations vary from state to state. And we have a lot of frustrated consumers that know that they can see perfectly well their existing pair of glasses, they want to update their look, but we can't legally make them a pair of glasses because their prescription has expired.
And when we thought about what happens when you actually go in to get an eye exam at a doctor, you walk into a room, you sit in a chair that's a certain distance away from the screen there objects that are displayed on that screen, you indicate which ones you can see clearly which ones you can't and then Dr. reviews those results and writes a prescription.
We said, Well, we should be able to bring that experience in a digital world where everyone has a screen at home. Everyone has the device in their pocket. So we we built an iPhone app where we patented some technology where we compare your your phone with a screen that is in your home or office, we know precisely the distance that your phone is from that screen.
So we'll ask you to to walk back certain number of steps until we know that you're 12 feet away from that screen. We know that we the calibration of your screen so we can display objects of unknown size there. We have you use your phone as a remote to indicate which which objects you can you can see using various acuity tests, and then we have ophthalmologist, they're licensed in your state that can review those results remotely and write your prescription and so you can do that from your own home in about 15 minutes and costs $40 and so we're getting really great feedback from, from our customers that are just really excited about telemedicine in general, about increasing access and making it easier for people to, to get prescriptions.
So something I'm kind of curious about is, as a tech journalist, we get, I think, a lot of the other TechCrunch folks too get these emails that are always like, oh, we're Warby Parker for x. And I think, you know, even read headlines and there's like, just to explain the latest direct to consumer brand, they're often Warby Parker for something, how does it feel to you to see you know, other people sort of adopting the model even sometimes, like kind of openly aping some of the things you've done?
You know, it's flattering, you know, I think we were, you know, there were, there was no kind of playbook for what we were doing at the time we were really trying to solve our own problems and then have you I think one of the big advantages of being direct to consumer vertically integrated brand is that you have access to your end customer.
You get so much feedback and so much data that we're able to incorporate that and design new new products, new services, new offerings for those consumers. I think when some of the companies that we hear or Warby Parker of x, I think, take one element of what we're doing and not kind of the holistic package that I think has led to some of our success to date.
And I think a lot of these companies are also going after industries or categories that aren't as big or don't have the same dynamics as eyewear where it's a massive industry well over 100 billion dollars globally, where you have this massive concentration of power really high margins, the unsatisfied customers and trying to apply kind of similar models to smaller categories or categories where consumers have some decent options already, I think is a much tougher road.
And so yeah, it's been exciting to see some of these new new brands take off. But I think we're the jury's out around how many of these kind of new brands are going to be viable over the long term.
I mean, do you ever think, Oh, well, Warby Parker should also be the Warby Parker for this category and potentially expand into areas beyond eyewear?
Yeah, you know, we, we have a lot of ideas about other products that we could sell. But we tell our team that strategy is what we say no to. And I think one of the biggest reasons that we've had success to date is our focus.
And, you know, we tried to stay focused within our product category, also within geography. So we're only in US and Canada, even though there's a massive global opportunity and we will expand into other other geographies, other products, other services over time, but want to make sure that we're really treating our existing customers extremely well.
One of the, the metrics that we track most closely is Net Promoter Score or NPS is in the high 80s. And that's kind of our indication that we're doing things well. And, and I think that gives us permission to then think about adding other other products and services over time. But I want to make sure that we're not kind of getting getting distracted as business.
So we're almost out of time. But I guess one of the things I wanted to ask about which is related is I was surprised to realize, at least from what I've seen some from some of the articles is that Warby Parker, even though I think of it is so ubiquitous, still has, like less around or less than 1% market share. When you think about getting bigger than that. Do you think it's continuing the strategy already down or do you think something else has to happen to kind of get to the next level?
Yeah, I think that's the benefit of being in a really big category where we're growing really quickly. We have a pretty big business now. But there's still so much opportunity in front of us.
And we see massive opportunity within the core business with opening a new store. So this year will open about 30 new stores, we see a ton of runway to open additional bricks and mortar stores. e commerce, we think is is a massive opportunity. So it's still a less than 4% of the eyewear category.
And we think innovations like prescription check where you can get your prescription remotely is a key to unlocking additional e commerce sales. We also think that new cameras like the truth camera on the iPhone 10 that allows us to take 30,000 points on your face and recommend frames that we know are going to fit your face that we built into our iPhone app. I think these are innovations that are really going to help additional growth and so we've never been more excited about our growth prospects.
I think that's a good note to end on. Thanks, Dave.