Neil Blumenthal and Dave Gilboa, the bespectacled and boyishly handsome co-founders and co-CEOs of the eyeglasses purveyor, sit in wood-and-leather mid-century chairs around a long library table in a room lined to the ceiling with books shelved according to the color of their spines to create a rainbow effect.
Everything at Warby's offices in the SoHo neighborhood of Manhattan is as impeccably styled as this--a mashup of Mad Men-era ad agency and Ivy League reading room, with hidden doors to secret nooks and hand-drawn wallpaper depicting favorite moments in the company's history. The pair, both 36, are here with several staffers to demo a product that, they say, starts a new chapter for Warby.
Lauralynn Drury, a former JPMorgan Chase VP on Warby's strategy team, holds an iPhone in front of her and moves backward from a laptop facing her on a table. When she has stepped back a precise distance, the phone vibrates and a graphic tells her to stop. She's ready to start taking a vision test--no optometrist appointment necessary, nothing needed but 20 minutes and two screens found in almost every household.
Her phone has already asked her questions to determine whether she's eligible for the test. (When it launches, only unchanged prescriptions will go through, and patients with
eye complications will be disqualified.) Now, the laptop starts showing a series of C's--Landolt C's, in medical parlance--in different sizes, and asks her to swipe her phone in the direction each faces. There are a few glitches when I see the demo in February, but it's a revelation. Were Drury a customer, the results would be sent to an eye doctor for review, and within 24 hours she would have her new prescription.
Getting what Warby is calling Prescription Check as slick as this room, before a pilot version rolls out to users this summer, has been vital for the founders since they started working on it two years ago. "Somebody has to believe in it, be confident in
it, feel like it's better than going to the eye doctor," Blumenthal says.
Technically, he runs marketing and retail while Gilboa oversees technology and finance, but it's hard to overstate how collaborative their style is. Their desks are adjacent, and they often speak in tandem, one of them beginning and the other jumping in to supplement. Right now, for instance. "It's like when Jeff Bezos says you'd be irresponsible not to use Amazon Prime," Gilboa offers. "We're trying to change behavior around a medical product, so the value has to be that strong."
The vision test is a window onto the future of one of the most imitated startups of this century--a pioneering direct-to-consumer online play when it launched in 2010, which
has since inspired countless companies to apply its model to, among other things, mattresses, luggage, razors, and lingerie.
Several years ago, Warby started to experiment with brick-and-mortar retail locations; that online-to-offline migration has been widely imitated too. While the company has grown tremendously--it will haul in more than $250 million this year, Inc. estimates--it has moved deliberately, even slowly, for a trendsetting, venture capital-backed startup.
Unlike Uber, perhaps the only inspiration for more copycats in recent years, Warby has not trampled regulations or burned through billions in funding. Blumenthal and Gilboa have resisted leaping into new product categories and instead diligently hew to the path on which they started. They've raised $215 million in venture capital--the last round, in early 2015, valued Warby at $1.2 billion. "The majority is still sitting on our balance sheet," Gilboa says.
"There are so many opportunities where we could use that capital and grow faster in the near term, but we think that would result in distraction," he adds. "We believe you have to be the best in the world at the product or services you're offering. That's how you win." It's a typical statement for him and Blumenthal, a business-school bromide that, on second glance, reveals strikingly disciplined ambition: Warby wants to win by going deep, not wide.
That's why, aside from the vision test, earlier this year Warby quietly opened an optical lab--where lenses are cut, inserted into frames, and shipped--in the Hudson Valley town of Sloatsburg, New York, a first step to taking over more of its manufacturing. It's aggressively opening brick-and-mortar retail locations, and this year it will add 19
to its existing 50. In the past year, Gilboa says, such outlets brought in about half of Warby's revenue; astoundingly, in 2017, Warby will be primarily a brick-and-mortar retailer.
What the founders won't say, as they rile industry giants more than ever and prepare to wade into a fight with regulators over their vision-test tech, is that this next phase will probe the limits of their well-honed image as B-schooled Boy Scouts. This beloved--even cuddly--company's path forward will require channeling Uber or Amazon as much as Wes Anderson.
Blumenthal and Gilboa launched Warby along with two other Wharton classmates after Gilboa lost a pair of $700 Prada glasses while traveling. When he struggled to get a replacement pair quickly and cheaply, Gilboa had a classic founder's spark: Why are glasses so damn expensive?
They all soon learned that one company--Italian conglomerate Luxottica--dominates almost every aspect of the industry, from brands such as Ray-Ban and Oakley to retailers including LensCrafters, Sunglass Hut, and Pearle Vision. Blumenthal had run a nonprofit called VisionSpring that distributes glasses to those in need and had some industry connections. A business idea was born: Warby would sell its wares online, slashing retail markups and keeping prices low.
For every pair it sold, it would donate to eye care in developing countries, so customers felt good about their purchases. By emphasizing trendy design and clever, literary-themed marketing, it would seem like a must-have accessory, not something from the bargain bin. After a year and a half of incubating while the founders finished school (Andrew Hunt and Jeffrey Raider have left the company but remain on the board), Warby launched to immediate buzz.
Two key innovations have underpinned its success.The first came when the founders devised a home try-on program, thus making people comfortable buying eyeglasses online. The second innovation came three years later, when Warby started opening physical stores that turned buying glasses into a fun fashion experience.
In both cases, Warby reinvented a shopping process. People want to try frames on before buying, so Warby sends online shoppers five pairs of blanks. In the age of Instagram, people want to see how glasses complete their look, so the stores have full-length mirrors. "Nothing we're doing is rocket science," says Gilboa. "They're things that make sense for customers."
But the next chapter is a little more like rocket science. "The conventional wisdom is that these are brand guys, not tech guys," says Ben Lerer, co-founder of Thrillist and one of Warby's earliest investors. "And steps one and two were so much about brand. Step three is about technology and vertical integration."
Warby's vision test is not just an easier, quicker way to get a prescription. It's a bid to eliminate a huge roadblock. You can browse hundreds of styles on Warby's site or at one of the stores--but since doctors are not in all shops, you often need to go elsewhere to get a prescription. And when Warby sends a customer to an optometrist, "we're sending them to a direct competitor," Gilboa says. "You get an eye exam, and they say, 'Let's go to the front of the store,' " where they have a wall of frames. Independent optometrists make about 45 percent of their money selling glasses, so there's ample incentive to dissuade people from taking their prescriptions to Warby.
About two years ago, Warby created an in-house "applied research" team. "We wanted to make a product that would allow someone to take an eye exam, but only if we could have an intuitive way to solve the distance problem," says Joe Carrafa, managing engineer on the project. He's referring to measuring how far a user is from the screen displaying the actual test. The team considered everything from tape measures to sonar before hitting on a clever hack in which a phone's camera determines distance by measuring the size of objects on the computer screen--a solution for which Warby was granted a patent last year.
Warby is already a threat to the optometry industry, so getting into vision tests won't go over easy. A company in Chicago called Opternative already markets an app-based vision test that works like Warby's except that it measures distance (a bit crudely) by having users walk toe-to-heel. The American Optometric Association has called Opternative's test "foolhardy" and "dangerous," and last year filed an FDA complaint. Several states have laws limiting telemedicine, and the AOA is lobbying hard for more. By expanding into vision care, Warby is asking for a big public fight.
"What they do better than anyone ever is market themselves, and, in my opinion, that's all they are doing," says Alan Glazier, a Maryland optometrist and AOA member who fashioned himself a leader of the Warby resistance when he gave a talk called "Waging War on Warby" at an eyewear industry conference in 2015. He strode onstage in battle fatigues and began by throwing a pair of Warby glasses across the room--and this was before Warby got into eye tests.
"No legislator in their right mind would legislate a lower standard of care," Glazier says. "Most people don't understand that a vision test is only one piece of what happens in an eye exam. You could have glaucoma or diabetes, and only a doctor is going to check for that. [These apps] want to eliminate doctors from the process, and that's horrible."
Blumenthal and Gilboa argue that they're not trying to replace comprehensive eye exams, that the technology behind their test makes it precise, that every result will be reviewed by an eye doctor, and that, at least for starters, the test will be available only to low-risk consumers. "We want to take a very conservative approach with regulations," Gilboa says. "Very different from Uber's approach." For now, at least, the company is sending representatives to testify in front of state legislatures, and encouraging doctors to use the technology.
Warby shares investors with both Uber and Airbnb, so it knows a more aggressive playbook if playing nice doesn't work. But Blumenthal suggests Warby would never go there: "This is not an existential threat to us. We'll still be able to sell glasses and grow the company if we don't solve this vision-testing piece." Still, just a few minutes later, Gilboa says vision testing "will be transformational for our business," and Blumenthal points out that it represents a new, $6 billion market for the company. That's worth fighting for. And, make no mistake, one person close to the company says, the founders' guy-next-door vibe belies reality: "They have very, very sharp elbows. They do not like people who get in their way."
As recently as two years ago, Gilboa and Blumenthal say, Warby's physical shops were somewhat experimental--marketing, mostly. The CEOs figured they might end up with five. Then the numbers came in. Those first few shops were generating nearly unmatched sales figures--$3,000 per square foot, a number topped only by Apple stores.
At the same time, other calculations they made were overly optimistic. "When we launched, we said that e-commerce would by now be 10 or 20 percent of the eyeglasses market," Gilboa says. "It's grown a lot since then"--to about 3 percent--"but it's not as big as we anticipated, and that is one of the things compelling us to do more stores."
If it's surprising that physical stores have become Warby's biggest growth drivers, it's perhaps even more surprising that, according to Gilboa, average sales per square foot have stayed in the same stratospheric range--this while countless longtime retail stalwarts are collapsing.
One read might be that Warby's stores cannibalize its online sales--with higher overhead--but Gilboa says that's not true: "Once we open a store, we see a short-term slowdown in our e-commerce business in that market. But after nine or 12 months, we see e-commerce sales accelerate and grow faster than they had been before the store opened. We've seen that pattern in virtually every market."
Key to the company's retail success has been an increasingly sophisticated reliance on data and technology. The company built its own point-of-sale system, Point of Everything, so salespeople, who carry iPad Minis, can quickly see customers' histories--favorite frames from the website; past correspondence; shipping, payment, and prescription information--and, say, direct the customer to the frames she "favorited" online.
If a customer likes a pair of frames in the store, a salesperson can take a snapshot on the iPad and the system will send it to the shopper in a custom email so she can buy that pair later with one click. More than 70 percent of people who get that email open it, says Gilboa, and more than 30 percent end up buying.
Building the business online first has also given the company deep insight into where its customers are: It's been shipping to their homes for years. In the early days, in a famed marketing stunt, Warby turned a yellow school bus into a clubby mobile shop (dark wood shelving, old books) and sent it around the U.S. on a "Class Trip." It parked the bus on various corners in different cities and used the response it got to help determine where to open stores. That approach worked well enough in hipstery places like Austin, but now that the company is opening in Birmingham, Alabama, the decisions aren't as obvious.
Enter Warby's new data science team, which over the past year has built a model that analyzes census tracts of a few thousand people, scans where existing customers live, and goes beyond age, income, and education to determine whether people buy online and whether they buy from fashion brands or shop at gourmet food stores--129 variables, all told. The model not only spits out precise areas to target but, because the company has a few years of its own store data now, also offers a first-year revenue projection from any location. A staffer can type a shop's potential address into a tool the data team built and get instant feedback.
As the company ramps up its new optical lab, it's reaping key benefits of controlling production and distribution--better quality inspections, fewer shipping delays. So the data team is analyzing additional lab locations. "How big should the labs be?" asks Max Shron, Warby's chief data scientist. "How much does it cost to ship from any ZIP code to another? How much does labor cost for each step? There are billions of possible combinations. It's not something a human being could reason through."
Sucharita Mulpuru, a retail analyst who's followed Warby from the beginning, says its data strategy is surprisingly advanced for a company its size, but wonders whether Warby
is "using a nuclear weapon to go deer hunting." But, she says, "maybe it could productize the software and sell it [to other businesses]--the margins are much more lucrative than retail."
It's 8:30 A.M., and Blumenthal looks especially spry considering he bolted home yesterday, ghostly white, stricken with the symptoms of food poisoning. After about eight hours huddled on the floor vomiting, he says, he ordered a home IV treatment from the hydration-therapy company the IV Doc, got pumped full of anti-nausea medicine and Toradol and saline, and today is much improved. There is no time to be sick: He flies to Boston in a few hours to give a talk at Harvard ("Retail Is Not Dead; Mediocre Retail Is Dead"), and will then hurry back to New York tomorrow for another speaking gig.
But first, he and Gilboa lead Warby through its weekly all-hands meeting. Standing on a wooden landing at the base of a sleek staircase that rises through an atrium at the center of the office, Blumenthal starts with an update on a closely watched number, the Net Promoter Score, which measures the likelihood customers will recommend Warby.
In January, Warby's NPS was 83 (out of 100), Blumenthal announces, the 12th consecutive month it's topped 80--"incredible, because we haven't found a company in any industry with an NPS this high. Kudos to you!" Several hundred employees on the floor and leaning over the mezzanine applaud. "Even more exciting," he adds, "the NPS for customers served out of the new lab is 89!" The employees erupt into cheers.
Like all things Warby, the meeting is tightly scripted and upbeat. The CEOs wear sneakers, untucked button-downs, and Warby glasses (Blumenthal's are nonprescription)--chic and geek, perfectly on-brand. "Neil and Dave are the most deliberate founders I've ever met," says Lerer. "They have this meticulous, very careful approach to every single thing about how they are presented and perceived--it's amazing and infuriating. They have been that way since the minute they started the company. I can see one of them [still] running Warby in 30 years."
Yet the company needs to satisfy its venture capital investors, who, no matter how patient and carefully chosen they are (as the founders like to tout), expect monster payouts, most likely from an IPO. What might the next big moves be? "People ask us all the time if we're thinking about getting into fashion accessories or apparel, and that's too simplistic," Blumenthal says. "We look at things like Amazon Web Services"--the commerce giant's cloud-storage division. "AWS became a profitable business unit because Amazon needed cloud storage and services, and it realized it could do it better than anyone else."
In line with Mulpuru's suggestion that Warby sell its data science approach, the company has considered licensing its Point of Everything system and regularly fields inquiries from other businesses about it, as it does about its internal task-ranking system, Warbles. (Opternative has already licensed its vision test to 1-800 Contacts.) "It's a very real possibility that vision tests could be our first category expansion," Blumenthal says. "And POE could one day be sold to other customers. We have an unfair advantage in those areas." Despite the seductive surfaces, what's most interesting at Warby lies under the hood.