Case 3 Warby Parker

Disruption with a Conscience

It was memorable. Four business students at the Wharton School at the University of Pennsylvania, sat together and asked a simple but perplexing question: Why are glasses so expensive? The answer, as it turned out, was because the eyewear industry had been dominated by a single company for a generationLuxottica.

An international conglomerate headquartered in Milan, Italy, Luxottica is the largest eyewear company in world. It owns Sunglass Hut, LensCrafters, Pearle Vision, Target Optical, and Sears Optical. It has 82,000 employees, operates more than 9,000 retail locations, and also owns EyeMed, which is one of the largest vision insurance providers in the United States. Luxottica, although a functionally vertically integrated company, may actually be best known in retail contexts for some of its more famous brands, which include Ray-Ban and Oakley. The company also manufactures eyewear under license for a large number of luxury labels as well, which include Chanel, Prada, Giorgio Armani, Versace, Polo, and Dolce & Gabbana.

For years, Luxottica held an overwhelming, quasi-monopolistic position in the retail eyewear market. This market dominance lead to an artificial inflation in retail eyewear pricing.

And, no competitor was going to upset this balance of power by taking on the heaviest hitter in this industry in an historically conventional way.

Enter the Wharton MBAs. It turns out that their answer to the question of why glasses cost so much would fundamentally disrupt the eyewear industry. Enter the startup called Warby Parker, described as founded with a rebellious spirit and a lofty objective: to create boutique-quality, classically crafted eyewear at a revolutionary price point. And enter a company with a social conscience. The founders called their business model eyewear with a purpose. The intent was to become part of the solution to a worldwide humanitarian problem of more than two billion people needing corrective eyewear but unable to afford them.¹ The Warby Parker commitment was to donate one pair of glasses to someone in need for every pair of glasses sold.

David Gilboa, one of the four cofounders of the now billion-dollar company, had lost his eyeglasses on a backpacking trip in Thailand. Being a graduate student with only a limited budget, he couldnt afford to buy a new pair when the new semester started. He recalls: When I went to replace them they cost $800 thats $600 more than my brand new iPhone 3G, a multiprocessing computer. It was nuts.² Gilboa quickly enlisted classmates Neil Blumenthal, Andrew Hunt, and Jeffrey Raider in his displeasure. The entrepreneurial result was the founding of Warby Parker.

Gilboa and his team realized that to compete they would have to approach their business in a new way. They couldnt build thousands of stores and hire tens of thousands of employees. But, they could use the Internet to connect directly with customers, source directly from suppliers and cut out the middleman, keep prices low, and keep their key stakeholders in focus. While Luxottica charged high prices for its products, Warby Parker would provide a high quality product at lowervery lowprices. It would do so with a nimble, cost efficient, easy-to-access Internet-based business.

The strategy was good, but not good enough for the four founders. Their startup would be a David competing against a Goliath. It needed a unique identity to distinguish itself and compete successfully against what for all practical purposes was a monopoly in the industry. And, this is where the founders social consciences stepped in to help. The company became the eyeglass firm that cares, the one that cares enough to help the people around the world who cant access or afford the glasses they need. It brought them to that identity as the company that cares.³

Through the Buy a Pair, Give a Pair program, for every pair of eyeglasses that Warby Parker customers buy, the company donates a pair to someone in need of eyewear who doesnt have access, either as a result of cost or because theyre located in remote areas where accessibility to eyewear is limited. Since the companys founding, it has donated more than 5 million pairs of eyeglasses to locations throughout the United States and in over 50 countries around the world, with a predominant focus in Africa and Southeast Asia.

Warby Parker is a company that caresabout its customers and about social justice policies designed to help people in need. The company cares enough to ensure that every customer gets the right glasses, at the right price, in a way thats convenient for their lifestyles. It cares enough for its employees to become known throughout the industry as a great place to work.⁴ Policies, leadership, and culture make new employees feel welcome, emphasize communication and contact, celebrate successes, and focus on people as learning assets and not just placeholders at a desk. And, Warby Parker cares about humanity and leads with its conscience. From the first day of operations, the company has made donations of new eyewear as a core commitment of its business.⁵

With an innovative model, Warby Parker has successfully tackled the problem of high-priced eyeglasses. It has done so not just through the application of astute business practices, but also with a social conscience. In so doing, it has managed to disrupt the status quo in a previously formidable industry, one pair of glasses at time.

Case Analysis Questions

1. Discussion In what ways can a newer, smaller competitor punch above its weight by taking advantage of the Internet? How can the Internet be applied as a tool to help businesses avoid some of the costs associated with doing business following more conventional or old school approaches? How do you see the balance of power in industries like the eyewear industry shifting as customers become more comfortable buying eyewear online?

2. Discussion What impact does Warby Parkers decision to donate a pair of eyeglasses for every pair purchased from them have on customers perceptions of the company? How does Warby Parkers focus on being a great place to work influence how the company is seen in the market?

3. Problem Solving As an operations management consultant, youve been contracted to help a large, traditionally configured clothing companyMarquee Clothesto become more Internet enabled and competitive in light of customers shopping habits, attitudes, and expectations. The company has a well-established supply chain infrastructure, currently has more than 50 retail locations, and has been in business for more than 20 years. Over the last several years, with increasing numbers of mall closings, the business has had to shut several of its stores and is seeing much of the foot traffic that traditionally was its bread and butter start to decline as well. Sales have been off the last three quarters, and the 56-year-old owner of the privately held company is concerned that shell have to close more stores if things dont turn around. Shes been convinced by her college-aged daughter that in order to continue to compete, the company is going to have to undergo a makeover and become a twenty-first-century player, with a fully fleshed-out online approach and strategy. What should she do? What are some of the first things that youd advise? What steps need to be taken to help take Marquee Clothes fully into the twenty-first century.