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Where a business starts isn’t always where it ends up. Over the long term, what matters is that the expansion and changes along the way are guided by the vision that the company has for impact in the world.
The evolution of eyeglass company Warby Parker over a decade, as shared by company co-CEO David Gilboa during a keynote at ShopTalk in Las Vegas, offers a compelling look at how this can play out.
Founded in 2010, Warby Parker started as a pioneer of the direct-to-consumer (DTC) model, providing glasses via ecommerce at what Gilboa said was a lower pricepoint than eye doctors' offices or existing retail outlets. As it grew to reach a wider audience, the company added new channels for distribution and improved the experience for consumers. Some of the approaches, such as in-person retail and billboard ads, are familiar to any traditional retailer. Yet by applying a focus on listening to customers and a willingness to develop technology that served it well from the start, Warby Parker forged its own path.
The company's journey could point to where commerce is heading. Over a decade, incumbent brands and retailers watched the rise of DTC brands like Warby Parker and took lessons to build ecommerce operations. Yet as ecommerce exploded and DTC brands grew up, it was also clear that the insurgents could apply the tried-and-true tactics of incumbent retailers to scale, albeit with their own digitally native spin. The exchange only seems poised to continue over the next decade.
With an eye toward where it might play out, here's a look at key ways Warby Parker expanded. It’s a look at how a DTC brand grew by blending the strategies of the physical and digital eras.
In a Warby Parker store. (Photo by Phil Roeder | Flickr)
Ecommerce was key to Warby Parker’s initial model, ushering in buzzy growth over the first half of the 2010s. Along with trendsetting, dark-colored frame design that stood out, it offered a pricepoint that was below others in the optical industry and allowed glasses to be shipped directly to a customer. Further, the company's model included home try-on, in which a shopper could receive up to five pairs of glasses, choose the one they liked, then return the rest.
But over time, the model evolved to include opening retail stores. Now, it has over 200 in-person locations in the US and Canada, Gilboa said, and is planning to open 40 more this year.
The shift helped the company attract new customers, but its approach was not merely about offering a showroom. It also added an important element of the experience of purchasing glasses: An eye exam. It employed eye doctors onsite so that shoppers can update their prescriptions. With this presence, it also added new offerings, including contact lenses and progressive lenses.
That made it not only glasses company, but a more holistic company building around vision.
“Seventy percent of all glasses are purchased at the same time, at the same place that someone gets their eye exam,” Gilboa said. “For us, almost all of our customers historically have gone to a non-Warby Parker doctor, and have had to have the awkward conversation about why they’re not buying glasses from them, get their prescription, come to our site or one of our stores, buy glasses from us, and then go somewhere else to buy contact lenses. Now we’re focused on bringing all of those aspects together and making it as easy as possible to take care of our customers’ eyecare needs.”
The in-store model took a hit for many with the pandemic, and Gilboa said that was evident in cities like its Grand Central location in New York. But other stores in suburban areas saw increased traffic over the last two years.
“We are expecting by the end of this year that, on average, all of our stores across our fleet will be back to pre-pandemic levels,” Gilboa said.
Beyond the frames
With each new launch, Warby Parker added offerings that expanded the business' customer base while staying consistent with its product approach.
Progressive lenses allowed it to provide glasses for more customers who are 45 or older. This is the demographic in which people develop presbyopia, which is a loss of ability to focus that comes with age. Now, this age cohort is the fastest growing portion of the company’s business, Gilboa said.
When it comes to contact lenses, the company developed its own brand that drew on two early markers of success: the pricepoint, and design. In this case, design played out in the packaging. The end result reduced the amount of material used and proved more hygienic than other contact lens packages.
Warby Parker co-CEO Dave Gilboa speaks at ShopTalk. (Staff photo)
Customer satisfaction remains a primary marketing channel for the company, Gilboa said.
In the DTC space, the company's rise also coincided with a focus on the performance marketing tools provided by social media platforms and other internet providers to reach potential customers. While this has helped to propel businesses operating outside of typical retail channels, being over-reliant on one channel can lead to vulnerability when there’s a change. That has played out across the DTC landscape in the wake of privacy-oriented changes made by Apple with the release of iOS 14 in 2021.
The social-heavy strategy also has limits. Warby Parker has sought to reach a broad-based audience, and found that less targeted approaches worked.
“There are a lot of brands that we’ve seen that have fallen into the trap of relying on internet platforms that make it really efficient to reach individual customers, but those platforms, over time, charge higher and higher rents to reach those audiences, and every incremental customer costs more to reach,” Gilboa said. “We’ve found much more success in broad-based campaigns including traditional TV advertising where we can leverage fixed costs of creative, get benefit from media buys as we scale and [spread] that over larger audiences."
Owning the supply chain
Brands must also optimize the process for making a product, but there can be vulnerabilities there, as well. The supply chain issues that arrived early in the pandemic and inflation that followed this year painted a glaring picture of how brands can face pressure to raise prices due to forces that are seemingly beyond their control.
As Warby Parker grew, it made investments in its supply chain. The biggest cost is making lenses, so it opened an optical lab in Las Vegas to produce those itself. Likewise, the majority of its glasses are made in-house. This allowed the company to have more control over its costs in the face of the cascading challenges of the last two years, Gilboa said.
Warby Parker's virtual try-on. (Image via Warby Parker)
While some of Warby Parker’s expansion moves may have signalled a move beyond its digital roots, ecommerce has remained a key to the business. As the digital business grew, the company developed new technology tools to power the experience for shoppers.
As they weighed what kind of application to build, company leaders went back to what customers wanted.
“It always starts by looking at our customers and listening to our customers and ensuring that we’re solving problems for them,” Gilboa said. “What we heard from our customers over the years is that the two biggest issues they were trying to solve were how to find a pair of glasses that fits their face and looks good, and two, help updating their prescriptions.”
This led to a pair of applications designed to solve these problems:
- Virtual try-on, which uses augmented reality and Apple’s true-definition camera to show a true-to-scale representation of what a pair of Warby Parker glasses looks like on a customer’s face.
- Virtual vision test, which allows an eye doctor to renew a prescription by administering a vision test via app. The tool can detect when a user is standing 10 feet away from a phone, and provides the results within five minutes.
'A bigger stage'
Warby Parker went public on the NYSE in 2021. (Photo via Warby Parker)
In 2021, Warby Parker took a big step to becoming a large-scale business player as it became a publicly traded company on the New York Stock Exchange. It once again took its own path, with a direct listing approach that is increasingly being adopted by a new generation of digitally born businesses.
Going forward, this means it has wider visibility and different ways to access capital. It also means that its stock price and performance metrics are made public and under daily scrutiny. This has been evident as the stock price has slid in recent months, leading to wider questions about profitability for DTC-born businesses that went public. Asked about this, Gilboa said the company is looking to prove less that the DTC model can work, and more that, “You can build a great for-profit business that does good in the world without charging a premium for it.”
“That does mean that you need to build a durable business that can grow quickly that can be profitable,” he said. “By taking a step to become a public benefit corporation and going public, we recognize that we’re operating on a bigger stage and hopefully we can inspire a lot of other companies to think along the same lines."
Trending in Operations
"Fashion ecommerce is one of the most cumbersome customer experiences that exists," said Rent the Runway CEO Jennifer Hyman.
The rise of generative AI is bringing with it a groundswell of interest and concern about how the capability to automatically synthesize information and create something new will change how we work.
Given that AI will sit within the architecture of our digital lives, it’s also worth considering how the technology will introduce new tools for other aspects of life, as well.
For two ecommerce innovators in the apparel space, it’s a time to explore how it will transform shopping. Rent the Runway is set to roll out new AI-powered search capabilities, while Stitch Fix is drawing on a long history with data science and machine learning to personalize the inventory buying process.
Here’s a look at the initiatives underway at each company, and their visions for the future:
Rent the Runway: From search to concierge
Rent the Runway is putting a focus on the customer experience this year as it seeks to retain more subscribers and continue a yearslong push toward profitability.
This is resulting in the introduction of a variety of new initiatives, from the addition of an extra item to all orders to speeding up page load times. Yet as CEO Jennifer Hyman zooms out, she sees change being necessary on an industry-wide level in fashion. Beyond adding new features, AI can play a transformational role.
“I think that fashion ecommerce is one of the most cumbersome customer experiences that exists. You are searching through pages and pages and pages of content to find the items that you like and no one likes doing this,” Hyman told analysts on the company’s earnings call this week. “As an industry that still is selling physical products, AI is going to be -- fashion is going to be a major beneficiary as an industry.”
As a rental service, Rent the Runway has a distinct niche in fashion that lends itself to AI’s advantages, Hyman said. As opposed to a retailer that a consumer may visit a couple of times a year, RTR is used frequently by customers. So Hyman said there are opportunities to turn Rent the Runway into a “utility” by creating a more seamless experience.
This frequent use also provides a “highly unique” dataset, Hyman said. They know what a customer is planning to do based on what they rented. They know whether she liked or disliked an item, and many customers are reviewing 10 items per month. They know her size and how an item fits. This can be put to work in tools that allow customers to ask questions, and find answers.
The first application that combines AI and these advantages will appear in the coming weeks, when Rent the Runway plans to launch a beta of AI-driven search. The tool will allow customers to search for common terms or use cases for an item. So a person will be able to write “Miami vibe,” “‘clambake in Nantucket,” or “tropical motifs,” and receive results about what to wear for such an occasion.
The goal is to help customers sift through the endless aisle, and instantly finds what's right for them.
“I think that across all fashion sites, all over the world, the way that people are searching for product is fairly vanilla, it's fairly functional, right?" Hyman said. "You can go to a site and search for a T-shirt, you can go to a site and search for a black-tie gown. The fact that we're going to be able to enable our customers to search how they actually want to use this closet in the cloud, to search for items to wear to my beach bonfire this weekend, that is a completely different way to search, and I think that it really brings out the value proposition of what a closet in the cloud is all about."
Hyman sees this as a first step in the company using AI models to improve the product experience, and expects more tools to appear in the coming months. RTR is also introducing an SMS concierge experience for onboarding that allows customers to text with a member of the customer service team. The company is already exploring ways that AI can be incorporated into that tool, as well.
In the longer term, Hyman said the company has a vision that will leverage AI to allow customers to communicate with Rent the Runway asynchronously across different modalities, and have a stylist that is constantly available to recommend items, pick out new inventory and answer questions.
“If we are utilizing AI appropriately over the next few years, I see no reason why someone even has to come to our website,” Hyman said.
Stitch Fix: Inventory buying and beyond
Stitch Fix has long married AI with human curation to provide outfits on a subscription basis.
“For years, we have utilized capabilities in generative AI, injecting scores and language into our personalization engines and, more recently, automatically generated product descriptions,” CEO Katrina Lake told analysts. “We have also developed and implemented more advanced proprietary tools such as outfit generation and personalized style recommendations that create a unique and exciting experience we believe is unmatched in the market.”
A new area where the company is applying AI is inventory buying.
“We have historically utilized a number of tools to make data-informed decisions with our inventory purchases,” Lake said. “Now, directly leveraging our personalization algorithms, we have developed a new tool that creates an exciting paradigm shift, which will utilize math scores at the client level to drive company-level buying actions. We expect the clarity of demand signals at the individual client level to drive more proactive and efficient inventory decisions as a company. And because of this, we expect to see higher success rates on fixes and drive increases in keep rates and [average order value] over time.”
Early results are promising. When compared with existing buying tools, testing showed a 10% lift in keep rate and AOV. By the end of this quarter, Stitch Fix expects 20% of all purchase orders to be algorithmically informed.
With experience using AI and a team in place to build, Stitch Fix is investing in the technology. Like Rent the Runway, it also has a unique dataset that offers an immediate advantage.
Here are Lake’s thoughts about how Stitch Fix’s AI strategy:
One of the things that I love about our experience is that we have generative AI that's really in more of a visual format. And so, the outfits that we have in our app, those are actually taking into account your preferences, what we know about you, and then in combination with what we know that you own in your closet. And to be able to kind of continue to push that technology and to be able to continue to give people more value in their experience with Stitch Fix, that's a really good example of, I think, a capability that is, firstly, really aligned with our capabilities around data and personalization and really unique to us.
And then I think it's also really compelling because I really think that pushes us as we think about what that addressable market is. I think if we can push outfits to be something that can be an asset to everybody, I think that is a universal thing that people would love to be able to have, is to have access to advice on a daily basis around what to wear and how to wear it.
While these are distinct companies, their plans lead us to a common conclusion: While the talk around generative AI might be new, many technology-forward companies already have assets sitting inside them that can be leveraged to build new tools. Uncover what’s already there, learn about the AI’s capabilities and develop a solution that's right for your organization. Then, talk to customers to determine how to improve it. It might mean commerce looks different, but that’s okay. The point is to create a better experience.