How Warby Parker’s Stores Are Setting The Stage For Direct-To-Consumer Brands

In 2010, five New York City-based customers entered the apartment of Neil Blumenthal, a cofounder and current Co-CEO of Warby Parker, to try on glasses. Neil and the other cofounders – Dave Gilboa, Andrew Hunt, and Jeffrey Raider – laid glasses out on a dining room table, positioned a mirror nearby, and pulled up the website on Dave’s laptop for checkout. The customers browsed and observed the workings of a budding start-up while the founders juggled their first in-person customer interaction with the numerous simultaneous virtual ones. This was the first Warby Parker in-store experience.

Almost thirteen years later, Warby Parker has opened over 200 stores across the US and Canada. Now a public company with a market cap of $1.79 billion, it’s only just getting started. And as one of the first digitally native brands with an authentic omnichannel experience, its reliance on stores has become an intriguing case study for the future of physical retail. So, what exactly are they doing that’s worth noting?

Pop-ups and shop-in-shops are critical to its expansion strategy.

In late 2010, Warby Parker moved to an office in Union Square, where it dedicated about a quarter of the space to a store. It then did the same in 2012 in its SoHo office, which early on was tracking about $3 million in annual sales. The company then opened a holiday pop-up and converted a school bus into a store that traveled across the US.

“Our journey to retail has really been one driven by the customers, marked by experimentation, and one in which we tried to de-risk the entire process. And eventually, we felt comfortable signing a long-term lease because we had proof that we could do several million in sales, and we opened up our first proper store on Green Street between Prince and Houston in SoHo.” Blumenthal shared.

Since those early days, the company has continued to test pop-ups and shop-in-shops – in various boutique stores, hotels, and Nordstroms. They’ve used the data collected from these tests to make educated decisions on new store locations, a hallmark of their expansion strategy.

Stores altered the roles of other channels, leading to an authentic omnichannel experience.

According to Blumenthal, about two-thirds of transactions take place in stores. That certainly wasn’t the case back in 2010. However, despite this shift, the company sees its channels as one; one intertwined customer experience.

“Their founding perspective was that a brand could be built digitally without incurring the costs associated with traditional retail. Their strategy quickly expanded into a home-try-on and, ultimately, a fleet of physical retail stores. The sequence of these strategy shifts suggests that for Warby and many other DTC Brands, there is too much friction for consumers with an online-only approach. This friction drives up the cost per transaction for DTC Brands, which ultimately becomes a surrogate for the cost of operating retail stores,” Nate Poulin, the founder of Digitally Native Consulting, shared.

This shift into other channels enhances the customer experience and likely reduces costs. For instance, when Warby Parker introduces a new tech feature to its try-on app, it finds that it drives conversion to stores. And when a store opens in a new market, that overall market grows more than 2.5x what it was the previous year.

Being digitally native doesn’t mean store count should be limited, or does it?

Store closures have become ubiquitous, and many retailers are decreasing their fleet size. It’s rare to hear about brands like Warby Parker opening 40 stores in a year. However, that’s what happened last year, and they have plans to continue growing at a similar pace. According to the Vision Council, there are around 40,000 optical stores in the US, indicating a vast opportunity for the company. This becomes more valid given that it recently added optician services and contacts to its stores, fully mimicking the offering of traditional optical retailers.

Whether it has the capital to get there is another question. The company has yet to become profitable, with Q3 of 2022 reporting a net loss of $23.8 million. In addition, its stock price has dropped to about $15 from its listing price of $54 in September 2021.

That said, Warby Parker’s revenue continues to grow, with a Q3 revenue of $148.8 million, up 8.3% to 2021, and similar results in other quarters. “I think the competitive advantage for us is knowing our customers and being able to respond to them faster than anybody else because of our vertical integration and our in-house technology team. Every day we’re trying to get better and better at everything that we do and, in particular, that shopping experience,” Blumenthal stated.

Warby Parker has come a long way since 2010 and has set an example for many direct-to-consumer and digitally native brands on the power of stores and the importance of an authentic omnichannel experience. The founders may no longer serve the store customers, but that first visit is arguably just as memorable.