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An Unmissable Business DISRUPTION that Reframed The Industry
Plus new book recommendations
Cashflow Chronicles
October 06, 2023
Here's a sneak peek of what we’ll cover in today’s edition
✔️ How Warby Parker's "try-before-you-buy" changed the eyewear game
✔️ The secret behind Warby Parker's in-house eyewear chain revolution
✔️ How Warby navigated the treacherous waters of rising digital costs
✔️From online success to dominating brick-and-mortar retail with Warby Parker
✔️The financial transformation of Warby Parker from negative cash flow to $100M net income
✔️ Warby Parker's global reach — breaking into Canada, Italy, and beyond.
Hey Cashflowers,
In today's edition, we're diving deep into one of the most captivating business transformations of the 2010s.
And dive deep into why this unique startup redefined an entire industry, turning conventional wisdom on its head. Buckle up as we unravel the strategies, decisions, numbers and innovations that allowed Warby Parker to create a whole new business category and go public...
Case Study
How Warby Parker Gatecrashed An Industry To Become A US Startup Behemoth That’s Now Listed On The Stock Market
New York City, 2010.
The world of eyewear was comfortably resting on a business model that hadn't significantly shifted for years.
Physical stores and high-priced glasses from big-name brands were the norm.
Enter Neil Blumenthal, Andrew Hunt, David Gilboa, and Jeffrey Raider.
Four visionaries with an ambition that extended beyond just selling eyewear. Their brainchild? Warby Parker.
An audacious online startup offering a unique proposition to shake up the eyewear market: Why not let customers try before they buy.
Warby Parker's founders looked past the conventional and dared to ask…
What if customers could try on multiple frames from the comfort of their homes, choose their favorite, and only then commit to a purchase if they were 100% satisfied?
In an era where online eyewear sales made up a tiny 1% of the market, Warby Parker's approach was genuinely groundbreaking.
The simplicity of its execution magnified the idea's appeal. If you liked a frame online, they'd send you five personalized choices to try on for free.
You pick your favorite, send the rest back, and voila, your selected frame, complete with prescription, would be on its way to you.
The stage was set. The fashion world noticed, with iconic publications like Vogue and GQ singing their praises.
With style, affordability, and a unique purchasing model on their side, Warby Parker wasn't just on the map; they were set to redraw it…
Breaking The Mold
Reinventing the Eyewear Game
Warby Parker HQ (Credit: Phil Roeder)
Warby Parker's strategy wasn't just about a new way to purchase eyewear. It was a total overhaul of the eyewear industry's business model.
Think of the traditional eyewear industry like a multi-layered sandwich. At the core, you have the manufacturers. Wrapped around them are the designers, then the distributors, the marketers, and finally, the retail outlets.
Each layer adds its cost, and by the time the product reaches the consumer, the price is several times what it began as.
Warby Parker's founders decided to make a leaner sandwich. They brought everything in-house. From the designing to the manufacturing, marketing to distribution, they took control of it all and cut costs.
This is where the term "cutting out the middleman" isn't just a business jargon—it was Warby Parker's lived reality.
With the savings made from this approach, they could offer stylish, high-quality eyewear at a fraction of the industry's standard prices.
The pricing wasn't a marketing gimmick but a testament to their innovative business model.
Check out this article about the art of selling directly to consumers.
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Now back to the case study
Cashflow Roadblocks & Investment
Acquiring customers nearly doubled in two years
For a direct-to-consumer brand, especially one launching in the online space, digital marketing isn't just essential—it's the lifeblood.
Warby Parker entered the scene when digital marketing was experiencing a shift.
Traditional avenues were becoming more saturated, and the costs associated with attracting a new customer online were rising sharply.
To give you an idea...in 2018, acquiring a new customer digitally cost Warby Parker $25. But just two years later, that cost shot up to $40.
It wasn't an insignificant rise, especially for a business that relied heavily on online sales. But Warby Parker wasn't just any other online retailer. They were a disruptor, and disruptors find ways to overcome challenges.
Warby Parker's strategy was evolving.
First, they invested wisely. Since their inception in 2010, they have raised a whopping $572 million for development and expansion.
With such a financial backup, they could navigate the increasing costs of digital marketing without compromising on their brand's online presence or their commitment to affordability.
Secondly, perhaps more intriguingly, they reverted to the age-old charm of physical retail…
Shopify wrote a complete guide on Customer Acquisition that’s well worth a read.
The Power of Luxury Physical Retail
Inside a Warby Parker Store (Credit: Chad Davis)
Clicks to Bricks – Warby's Fresh Take on Physical Retail
It might seem counterintuitive for an online disruptor to delve into brick-and-mortar retail…
But for Warby Parker, it was a masterstroke.
Physical stores provided customers with the tactile, luxury experience of trying out frames—something even the best online try-on tech can't fully replicate.
But Warby Parker didn't just open stores randomly. They were smart. They utilized cold hard online data to decide on store locations.
High online search volumes in a particular area meant there was demand. And where there's demand, Warby Parker ensured there was supply.
This marriage between the physical and digital wasn't just a business strategy; it was Warby Parker's secret sauce.
They had crafted a model where online and in-store experiences didn't compete; they complemented each other.
When Warby Parker's first store sprouted in Manhattan, it wasn't just about selling glasses.
It was a statement—a billboard, if you will, proclaiming the brand's arrival in a concrete form.
The average sales in these stores were no joke either, raking in about $2900 per square foot annually.
For Warby Parker, it didn’t matter where the sale happened, be it through the hum of servers or the chime of a physical cash register, as long as it happened.
The aim was to be where the customer was and in their line of sight, digitally and physically.
Forbes wrote about this in their How Omnichannel Retail Is Changing the Way We Shop article
An Unstoppable Trajectory
A Decade of Dominance
A casual glance at Warby Parker's timeline and you realize this isn't a story of slow and steady.
This is a roller-coaster of rapid growth.
Founded in 2010, by 2011 they had launched their online store. And in 2011, their revenues? A cool million dollars.
Not a number to scoff at for a newbie. But fast forward to 2022, and the revenue number has a different tone altogether: $546 million.
That's not growth; that's a quantum leap!
However, revenues weren't the only metric where they showcased their prowess.
Their physical presence expanded beyond the borders, reaching the chilly terrains of Canada in 2018 and touching the fashion capital, Italy, in 2022.
Their expansion strategy was not just about casting a wider net but also about consolidation, achieved through mergers and acquisitions. In 2021, they acquired FramesDirect, further fortifying their position in the eyewear market.
And the numbers didn’t stop there…
Numbers That Speak Volumes
Mastering the Cash Flow Curve
Net income is a marker of profitability and here, too, Warby Parker didn't disappoint.
In 2022, they reported a net income of $100 million. That’s $100 million that trickled down after all the expenses, salaries, and overheads were taken care of.
This is a testament not only to the brand's popularity but also its operational efficiency.
Cash flow, often termed the lifeblood of a business, stood strong at $150 million from operations in 2022.
Cash flow is the real money moving in and out of a business, and this robust figure ensured that Warby Parker had the financial agility to pivot, invest, and expand as needed.
However, these numbers weren’t achieved overnight. In its early years, Warby Parker faced cash flow issues.
It had a negative cash flow of $10 million in 2011. For many companies, such a number would spell doom.
But by 2014, they had halved that negative number, and 2015 marked a monumental shift as the company not only became profitable but also boasted a positive cash flow from operations of $10 million.
For more reading on cash flow…
Check out The Ultimate Guide to Cash Flow Management by Harvard Business.
An Eyewear Revolution
Shaping the New Age of Business Ethics
In a span of just over a decade, Warby Parker didn’t just sell glasses; they redefined how drinks were sold.
They weren’t content being just another eyewear brand in an already crowded market. Instead, they transformed the way consumers thought about buying eyewear.
With over 13 million pairs of glasses donated through their 'Buy a Pair, Give a Pair' program, they stamped their commitment to social responsibility.
As we wrap up this chronicle of Warby Parker, it is a testament to the power of innovation, resilience, and a relentless focus on the consumer.
In a world where businesses rise and fall every day, Warby Parker stands tall, not just as a commercial entity, but as a beacon of how companies should be run in the modern age.
And for anyone looking to embark on a business journey, the Warby Parker saga is nothing short of an inspirational masterclass. I give you one of 'the best startups in US history'.
Until next time,
Cashflow Chronicles
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