Transcript

00:00 Warby Parker made its splashy debut nearly 15 years ago with one core goal sell glasses for less as soon as Warby Parker launched its website. The orders began pouring in excitement quickly turned to panic when we realized that we had taken more orders than we had inventory for and we didn't have any soldout functionality but it would take more than a low price tag to succeed longterm. We thought that if we could bring prices down under $100 then could enable people to think differently about this product category and buy multiple. Pairs and think of them more like sneakers or handbags launched initially as an online direct to Consumer brand. By four grad students. The company has shifted its strategy. Over the years they were essentially trying to become the Amazon of optical retailing they ran into a wall pretty.Quickly. There are three numbers to look out for in Warby Parker's story $120,000. The amount the founders pull together to launch the company in 2010 $670 million the amount of money it brought in in 2023 and $1.8 billion the company's market value. Today. Here's how warie Parker disrupted the $ 150 billion Global eyewear industry with a pair of $95 glasses. I'm Neil Blumenthal co-founder and co-ceo of Orby Parker I'm Dave gilboa co-founder and co-ceo of Warby Parker. This is founder effect. In 2008 Neil and Dave met at an NBA program at the Wharton School of the University of Pennsylvania where they also met eventual co-founders Andy Hunt and Jeff Raider right before starting school Dave forgot his $700 glasses in the seat back pocket on a plane so I showed up the first day of business school and I had to buy two new things. One was a new phone.

01:56 Uh one was a new pair of glasses bought a new iPhone and it just blew my mind that I was going to have to pay several hundred more than that for a pair of glasses just didn't make sense to me. I remember vividly this conversation that Jeff Andy Dave and I had where I was like why are glasses so expensive before Wharton Neil worked at Vision spring a nonprofit that distributes eyeglasses to people in need around the world. I would visit the factories where eyeglasses were made and it was clear the pricing had more to do with distribution. It had more to do with slapping a logo on a pair glasses than it did with sort of the craftsmanship or the production cost of a pair of glasses so we got talking about this like well. Why can't we design the frames that we love work with these producers that can use premium materials but go direct to customers cut out the middleman. Instead of like charging these crazy retail markups. We can effectively charge wholesale prices and save people a lot of money. The the four students started working on a business plan. We recognized that most people weren't used to or comfortable buying glasses online and so what was really going to grab their attention. They thought charging just $45 for a pair of glasses would do it until a professor heard their plan.He said you can't do that number one it's not believable. Consumers are not going to believe it at that price point. You just can't get a 90% discount and believe that you're still getting great quality and number two you're underestimating your cost. The team surveyed potential customers for new price point. They landed on $95 a pair including prescription lenses and this starting cost remains in place. Today the biggest question mark was would people buy glasses online. The premise of the company was all about going direct to customers and at the time going purely online was the cheapest easiest way to do that.In the late 2000s direct to Consumer companies were a novel idea. The feedback from our classmates was like I don't know if I buy glasses online. We're like oh. My God. Like is this actually a good idea and you know building. A business is a roller coaster of emotion. Sometimes you feel super smart sometimes you feel super dumb. Warie Parker wasn't the first company to sell glasses online but one of the key components of its early success was the way it did with an atome triy on program having a home try on where people could try on. Five frames at home was a novel idea and that was a really big unlock that made us feel confident that this would be a viable business.

04:27 Even though they didn't have their business degree. Yet the founders knew. It was time to put a serious investment into the company. Neil Dave Andy and Jeff pulled their life savings and committed $30,000 each for a total of $120,000. We were also terrified of losing anyone else's money and so we didn't ask any of our family members or friends or try to raise money from Angel Investors. We weren't paying ourselves a salary. We didn't have an office. We had to pay Upfront for our initial set of inventory because we couldn't get any payment terms. We HED developers to build a website since we don't know how to code. I remember the day that our sort of first delivery of inventory came we're working out of our apartments and we had thousands of frames delivered to my apartment building about 10,000 frames and we get back from classes and the entire Lobby is stacked with boxes and the doorman's like what is going on here and we literally spent. I think it was like two days putting all these boxes on the carts going into the elevator. Going up cuz you could only take like a handful of boxes for every elevator trip but they were just stacked from floor to ceiling of all of our sort of initial inventory of frames in addition to acquiring inventory and developing a website. They also hired a fashion publicist.

05:57 In February 2010. They had a lucky break. Warby Parker would soon soon be featured in Vogue and GQ but they had a pretty big problem. The website wasn't live yet we had a bunch of bugs and Kinks that we still had to work out. So we were on the phone with our developer till like 4:00 a.m. finally the site was live and I had my phone set up to get a notification anytime. An order came in so a few hours later. All four of us were sitting in class and I got a buzz on my phone and I got super excited and then my phone buzzed again and then again that excitement quickly turned to panic when we realized that we had taken more orders than we had inventory for and uh we didn't have any soldout functionality. We were able to call our developer. He put up some weight list functionality and all of a sudden. We had a weight list of 20,000 customers and it was just all hands- on Deck trying to figure out how to fulfill this demand. We stayed up all night basically every night responding to customer service emails. We had our friends family members anyone that had a free hour kind of join the team and help us pack boxes respond to emails phone calls. I was just uh Off to the Races after graduation.

07:05 Neil and Dave took over his co-ceos while Andy and Jeff returned to the jobs they had before school though they still serve on Warby Parker's board of directors. The company relocated to New York City in August 2010 when we finally moved into a proper office. We actually dedicated a portion of it to be a showroom to be an active store with people could come in shop for glasses. Suddenly we were on track to do $3 million of sales out of our office and and that was the life bul moment. We're like we got to open up stores. In 2013 Warby Parker opened its first brick and mortar store in SoHo. A lot of people just don't want to buy eyeglasses online so that's why they shifted their strategy and started opening retail stores. Now. It's not about you know a home try on program. It's just about hey. We've got these beautiful stores and these you attractive downtown locations and we've got. This opening price. Point is $95. I kind of call them.The Apple Stores of optic retailing zeni and I by direct I mean. Those are just pure online um retailers and morie Parker that's obviously how they started their business. But they're really kind of. Shifting away from that and a big part of that is it's very difficult to separate the eye exam from the eyeglass purchase what's the smallest that you can r a p e o r s today. Warie Parker has over 260 stores across the US and Canada. Most locations now feature in store eye. Exams and customers can also shop for contact lenses. We want Warby Parker to be that One-Stop shop to provide holistic Vision Care for our customers. As we were building Warby Parker we ended up taking some Venture capitals.

08:48 It made sense to venture go public Warby Parker going public on the New York Stock Exchange through a direct listing in 2021 Warby Parker went public in a much hyped Direct direct listing that briefly valued the company at nearly $7 billion. That year Neil and Dave each received a base salary of $450,000 and stock awards worth nearly 100 million. They each currently own an estimated $130 Million worth of Warby Parker stock. Today. Warby Parker is valued at $1.8 billion with its stock trading around $15 a share. In 2023. It brought in about $670 million in Revenue. It's projected to bring in as much as 762 million in 2024 but Warby Parker remains a small competitor to Italian French industry giant esor Loda which brought in about $28 billion in Revenue in 2023 and is worth about a 100 billion today. If you own a pair of rayb bands Chanel Prada or Versace glasses or visited a Sunglass Hut or Lens Crafter store. They're all just some of the brands. Under the esor luxotica Umbrella I think War be part of some ex that they almost consider themselves the antias Exotica. One thing folks don't realize you know why are this is so expensive well. A lot of them are are licensed right so when you're buying Gucci frames or Tom Ford. There's a licensing fee that's being paid to Gucci or Tom Ford and that dramatically increases the price of eyeglasses while warie Parker's Revenue has grown from year to year.

10:22 The company is not currently profitable. I mean the fact that they're not currently profitable is not problematic to me largely because the company has has no debt whatsoever and generates fre cash flow so they can fund continued growth particularly given that so much of the market is these Mom and Pops who just don't have the pricing power that warie Parker is don't have the scale that warie Parker does don't have the brand recognition that rby Parker does but the company's finances are trending in the right direction reporting narrowing net losses. Each year. Plus more people are shopping at warie Parker every year. In 2023. It had about 2.3 million active customers a 30% increase since 2019. According to our projections I mean warry Park will be solidly profitable from a net income perspective by next year. Brick and mortar will be key to its long-term success with store. Revenue growing while website sales decline in 2023. 2/3 of Warby Parker's Revenue came from its stores. The company's long-term goal is to have more than 900 locations across the US and Canada. This year we'll open 40 stores and we can plan to continue on that Cadence for years to come. The store openings go hand inand with another warie. Parker mission.

11:42 One of the things that we continue to take a ton of pride in is our buir give a pair program for every pair of glasses we sell. A pair is distributed to someone in need and we do that around the world. But we also do it here at home. So far the company has donated over 15 million pairs of glasses. We want to want to create an organization that we felt proud to be part of one of the most important lessons that we've learned is just the power of focus. We sometimes say that strategy is what we say no to if you are kind of constantly chasing shiny objects sometimes you You Take Your Eye Off the ball and so we just try to stay very disciplined and as focused as possible on what really matters. We want Warby Parker to be one of the most beloved brands in the world. So when you're naming your favorite Brands Apple Nike we want Warby Parker to be in that same breath.