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A decade ago, Warby Parker was among the pioneers of direct-to-consumer marketing tactics that helped to show the way for a new model that made it possible to start a brand without having to go through traditional retail or marketplaces such as Amazon.
Today, Warby’s marketing prowess is still bringing eye-catching results.
The brand is different now, with publicly-traded status and a growing fleet of stores that are making up a greater share of revenue each quarter.
Yet Warby Parker is still demonstrating a willingness to make bold marketing moves that unlock new efficiency and build on the direct-to-consumer model.
This time, it is driving big results by spending less.
This latest frontier underscores a metric that has been in focus for marketers over the last two years: Customer acquisition cost (CAC). With more brands advertising on social channels and the privacy-oriented changes of Apple’s App Tracking Transparency that made attribution more difficult, CAC has been going up.
In 2022, Warby Parker made a move to bring those costs down by reducing marketing spend.
“Over the back half of 2022, we purposefully brought marketing spend as a percent of revenue back to pre-pandemic levels,” co-CEO Neil Blumenthal told analysts on the company’s recent earnings call.
Warby reduced marketing spend from close to 20% of revenue to “low double-digits,” Blumenthal said. With this change, CAC was down 36% year-over-year in the second half of 2022.
Overall, the brand reduced marketing spend by 15%, but still grew revenue by 10.6% for the year.
So how does a brand reduce spend but still find gains? Co-CEO Dave Gilboa outlined three key drivers of these results:
Focus and refinement. While there are a growing number of channels, Warby is investing in what works. “As we pulled back on spend, we've allocated those dollars to the most efficient channels,” Gilboa said. “And as a direct-to-consumer brand, we get immediate signals from our customers around what's working and what's not, and we can constantly optimize our tactics and strategies.”
Find savings in media buys. In the advertising market, media rates have declined. Warby is reaching more customers on video, display and search engine marketing for the same dollars.
Get creative. Remember, marketing isn’t only about spend and performance. “I think our team has just done a great job on the creative front with new interesting collections, new collaborations that generate a lot of excitement and ensure that we're finding efficiency as we're spending dollars to promote those new products and collabs,” Gilboa said.
The move underscores how brands are approaching marketing at a moment when consumers are reducing discretionary spending, and costs continue to rise. With capital less plentiful, businesses are focused on profitability over growth.
“While lower spend will be a headwind to top-line growth in the first half of 2023, especially for our ecommerce channel, we believe it's necessary as we aim to drive sustainable, profitable growth over the long term,” Blumenthal said.
The results are showing up, as the fourth quarter of 2022 brought the most profitable end-of-year result to date.
Warby Parker plans to continue this approach in 2023.
“This year, you'll see us deploy a more balanced marketing mix and focus more on our younger customers,” Blumenthal said. “We'll also continue to launch unique partnerships, collaborations, and campaigns to fuel awareness and brand affinity. We believe the power of our brand and our ability to surprise and delight customers continue to differentiate us within the industry. The opportunity in front of us to tackle the large and growing eyewear market feels as exciting as ever.”
One of the keys to this approach is Warby Parker’s physical stores, which now number 200. In 2023, it will open 40 more, with 36 located in the suburbs.
While this fits in line with a trend toward in-person shopping, the stores also serve as a marketing tool. Warby is intentional about how it designs the exterior and interior of the stores, with an eye toward showing “striking representations” of the brand, and ultimately drawing traffic.
“Our stores not only enable us to offer great experiences for our customers, they also serve as a highly efficient customer acquisition tool,” Blumenthal said. “New physical locations are very effective at driving traffic and conversion in the month following new market penetration. We believe the combination of the 40 stores opened last year and the 40 openings we have planned for 2023 will significantly contribute to increasing awareness.”
Warby's approach today demonstrates how brand and marketing coincide. The stores raise awareness, while a more focused approach provides targeted digital marketing.
The DTC marketing playbook was designed to drive growth. Now, Warby is showing how the tactics it helped invent can be applied to finding profitability, too.
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Labor disputes on the West Coast could cause further disruption heading into peak season.
When the first half of 2023 is complete, imports are expected to dip 22% below last year.
That’s according to new data from the Global Port Tracker, which is compiled monthly by the National Retail Federation and Hackett Associates.
The decline has been building over the entire year, as imports dipped in the winter. With the spring, volume started to rebound. In April, the major ports handled 1.78 million Twenty-Foot Equivalent Units. That was an increase of 9.6% from March. Still it was a decline of 21.3% year over year – reflecting the record cargo hauled in over the spike in consumer demand of 2021 and the inventory glut 2022.
In 2023, consumer spending is remaining resilient with in a strong job market, despite the collision of inflation and interest rates. The economy remains different from pre-pandemic days, but shipping volumes are beginning to once again resemble the time before COVID-19.
“Economists and shipping lines increasingly wonder why the decline in container import demand is so much at odds with continuous growth in consumer demand,” said Hackett Associates Founder Ben Hackett, in a statement. “Import container shipments have returned the pre-pandemic levels seen in 2019 and appear likely to stay there for a while.”
Retailers and logistics professionals alike are looking to the second half of the year for a potential upswing. Peak shipping season occurs in the summer, which is in preparation for peak shopping season over the holidays.
Yet disruption could occur on the West Coast if labor issues can’t be settled. This week, ports from Los Angeles to Seattle reported closures and slowdowns as ongoing union disputes boil over, CNBC reported. NRF called on the Biden administration to intervene.
“Cargo volume is lower than last year but retailers are entering the busiest shipping season of the year bringing in holiday merchandise. The last thing retailers and other shippers need is ongoing disruption at the ports,” aid NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “If labor and management can’t reach agreement and operate smoothly and efficiently, retailers will have no choice but to continue to take their cargo to East Coast and Gulf Coast gateways. We continue to urge the administration to step in and help the parties reach an agreement and end the disruptions so operations can return to normal. We’ve had enough unavoidable supply chain issues the past two years. This is not the time for one that can be avoided.”