The Report

Warby Parker co-founder Neil Blumenthal dishes on the eyewear company's sudden success

Warby Parker co-founder Neil Blumenthal dishes on the eyewear company's sudden success

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Religiously enforce your company values and "focus, focus, focus," the co-chief executive urges.

PHILADELPHIA -- Eyewear company Warby Parker launched in February 2010 and immediately rocked a mature industry by selling fashionable eyeglasses online, direct to consumers.

Speaking at Philly Tech Week this morning, co-founder and co-CEO Neil Blumenthal described how his company navigated a surge of success and described some of the strategic decisions that have kept the company moving forward.

Below are his words, edited and condensed for clarity.

***

I love glasses. It's a little strange that I'm not wearing them this morning. When I got up to take the train from New York at five this morning, I was fumbling around and thinking, I'm coming down to Philly and I'm gonna keep it real. I don't wear glasses all the time.

I was born in New York. I was one of those guys who wanted to change the world, and thought that path was foreign policy. Like anyone who doesn't know what he wants to do, I went back to school. I returned to New York to work at a think tank. I thought, if we could get people to stop killing each other, then we could focus on the big issues, like health and education.

I met an eye doctor who wanted to sell glasses in low-income communities. I thought that this strategy to create jobs to distribute glasses made sense. You're providing people with the tools to see. Glasses are one of the most poverty-reducing tools on the planet. In terms of international development, 20 percent additional income is incredible. That's like an extra day of work a week.

So I went to factories to see how glasses were made and designed. One thing you realize is that they're not expensive to manufacture.

So we were sitting at Huntsman Hall at the University of Pennsylvania. My buddy was frustrated at losing a part on his glasses and not wanting to spend a lot of money to buy a new pair. I said, glasses really aren't that expensive to manufacture. And he said, why don't we sell them online? The opportunity of developing an e-commerce platform allowed us to deliver them direct to customers. Cut out the middle man. Because we could build our own brand, we could get rid of that 10 to 15 percent licensing fee. And we could transfer that to the customer.

Ray-Ban, Oakley, Oliver Peoples, Chanel, DKNY. And you'll pay for those brands with vision insurance like EyeMed. This whole ecosystem is owned by one company, a pretty large company. [Italy's Luxottica Group. --Ed.] That made a lot of sense to us, why glasses were increasing in price.

We decided to design our own frames and build a website. We mapped out every webpage on PowerPoint and asked friends what button they would press. It was the ultimate cheap user testing. We made wireframes, asked a friend to make it pretty, and got quotes from five web developers. One was half the price of the rest. We went with them. Six months later, all that money went out the window, and we had to start over. We learned that lesson the hard way.

Anybody can build a business in a pretty scrappy way. What's brought us success is to try and break down seemingly complicated issues into as many parts as possible. It's rare that you'll find one person that has the entire skill set to built a website. How can you break that process down as much as humanly possible?

How do we deliver exceptional value at $99 for a $500 product? Free shipping, free returns. One question was whether we could get people to buy glasses online -- people have differently shaped faces. We found some software where people could upload their photos and see the glasses on their face. We thought, this was good, but not great. We thought, we wouldn't buy glasses like this. It was a good gut check. This led us to the try-on-at-home [kit]. A tangential benefit was that it was a great marketing tool. GQ called us the "Netflix of eyewear." People would bring them to their office and ask everyone what they thought. They'd take photos and upload them to Facebook. It's a great customer acquisition tool for us.

The other great benefit of the home try-on program was the free returns. Lenses are the biggest part of the cost of goods sold. If people could try them on without the lenses, we could hopefully reduce return rates before fit.

Why were we successful? We try to focus a lot on storytelling. Narrative. A personal story, a pain point -- frustration at overpaying -- a solution, a potential bad guy, and a big hairy audacious goal: transform the eyewear industry, and billions of dollars to consumers. Companies can indeed be profitable, scale, and do good in the world without charging a premium. We think that's a powerful idea.

We had features in Vogue and GQ. The company took off like a rocket. We hit our first-year goals in three weeks, sold out of 15 styles in four weeks.

We think of ourselves as stakeholder-driven, rather than purely shareholder-driven. Thinking about customers, employees -- how do we create a learning organization? Most people leave for personal and professional growth; the other reason is their boss. We have an open plan office. Feedback sessions. Quarterly reviews and leadership workshops. That leads to more employee retention than compensation -- that's usually priority number three, four or five for people.

We spent a lot of time thinking about the purchase calculus of customers. The number one customer concern is, "How do they look on my face?" That's why we lead with fashion. Then it's value -- teflon coating and titanium screws. And the last part is social mission. It's the least important to our customers, but there's a strong rationale: it helps us retain and recruit talent, and it's a reason people refer us to their friends and help them be more loyal once they've made that purchase.

Over 50 percent of our traffic and sales is from word of mouth. We love that channel -- it's cheap. And a lot is driven by narrative, brand, customer experience. Our Net Promoter score is 91, and we look at that metric ahead of revenue because we look at it as a leading indicator of what will drive revenue going forward.

We now have 175 people, which is insane.

One of the investments we made early on is a consumer insights team; we started with a single guy from Bain & Company. They spend a lot of time understanding who are customers are and how they spend their time. One thing we found is that our customers are purchasing glasses far more frequently [than the rest of the industry]. We're seeing much higher repeat purchase rates than the average and more customer loyalty.

When we started the company, there were four of us. We were at a bar at 23rd and Walnut, Roosevelt's Pub, having a Yuengling. We promised each other two things: first, we would bust our butts and work really hard; second, we would remain friends no matter what. So we thought about the processes we could create to protect those friendships. So equal ownership. We created a vesting schedule up until graduation so people could leave without feeling resentful. The thing that had the biggest impact is that we'd go back to Roosevelt's every week, take a four-top and surface issues. It created a healthy work dynamic. People rarely have negative intentions when they send that e-mail at two in the morning; it's because they're excited. One of our core values is always presume positive intent. It's one of the foundations of our corporate culture.

Expansion? It's about focus, focus, focus. How can this business be like water and take the easiest path down? If I invest a million bucks in the U.S., versus the U.K., it's going to pay off much better right now.

As for partnerships, the way we evaluate what we want to do is through this decision filter: is it authentic to who we are and the brand? Is there a narrative to tell that makes sense? Do people want to talk about it at dinner; is there virality baked in? Is this worthy of talking about at the dinner table? And lastly, does it have a positive impact and do good in the world? Partnerships that fit all of these things, absolutely. We have a partnership with The Standard hotel group. We think we can learn a lot from hospitality. For example, we created these 1950s newsstands in the lobby of their Hollywood location where people could buy glasses.

I don't think we've ever had to be in a position where we've had to compromise our values. It's easier to be creative and innovative when you have some constraints. When there's too much blue sky, you don't know where to start. Constraints help the creative process.

One core value is do good. I would visit our factories. I'm not an expert of auditing from a safety or labor perspective, but we work with those that have a similar ethos. In doing so I've met some of the best auditing folks in the world, and now we can afford to pay them to ensure that we're upholding our values.

The easiest place to compromise is people you hire. We have a two-track hiring process. One is competency and skills; the other is culture and fit. We have a cultural SWAT team and designed questions to see if people's values are in line. So we ask one about being fun and quirky: what the last costume you wore? We want to see if you can inject fun into things. If you're a super-serious person, you're still awesome, but you might not be the right fit for us. How you answer that question informs our decision, and yours.

A lot what's driving our innovation is knowing who we are and what we stand for. One of those ways is awesome customer service. We respond to every tweet, every Facebook post. We thought our personalized video responses would be viewed three or four times, but they're viewed 80 times, because people are surprised to receive them and show their friends and pass them around. There's no science to virality.

We bought an old yellow school bus and thought it a fun idea to have a cross-country road trip. A lot of people are buying Airstream jets; is that us? The two Kerouac characters, Warby Pepper and Zagg Parker, are sort of the core "us." The bus has gone to nine cities in six months. We ripped out all the seats and hired a guy who builds the interior of yachts to put in all this wood shelving. People ask, why are you selling glasses out of a bus? But we're getting a lot of press and it's great for customer acquisition. When you buy glasses from the bus, they come in a brown paper bag.

You can build a business in any city. Ecosystem is definitely helpful, Philly has a strong one. We moved back to New York because two of our wives were still living there. The business rationale was that we were building this fashion brand, and New York is the epicenter of fashion, media and retail. We also thought we'd be closer to, and have more access to, capital. Things are changing. It's easier to start a business in New York, Philadelphia or Austin than Oklahoma City. How can you play to the strengths of that city? Can you access capital?

I don't think the "disruptor" word is bad for the industry. We help get people more excited about glasses and hopefully get more mindshare. If more people buy glasses, a rising tide lifts all boats. But now and then, an industry needs a swift kick in the butt, to drive better customer experiences across the board. We think prices are coming down. We've seen our creative replicated in some places. It feels like we're having an impact. Some folks in the industry are scared by us. Despite the rise of e-commerce, bricks and mortar will never disappear; the future of retail is the convergence of the two. In five to 10 years, nobody is doing to be using the word "e-commerce." It's just retail.

I've never seen an example of a company being disrupted disrupt the disruptor. So we're not concerned from that perspective. Our success and ability to grow is really driven by our ability to execute, not by what our competitors do. We don't spend a lot of time thinking about competitors. When we see people copy our creative, is that frustrating and painful? Yes. Do you get that feeling in your stomach and you go to your team and they saw that Google Alert too and they've been working 14-hour days, does that suck? Yeah it sucks. When someone copies your business model, your website and hires one of your employees? Yeah, that's frustrating.

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Andrew Nusca

Editor Emeritus

Andrew Nusca is editor of SmartPlanet and an associate editor for ZDNet. Previously, he worked at Money, Men's Vogue and Popular Mechanics magazines. He holds degrees from the Columbia University Graduate School of Journalism and New York University. He is based in New York but resides in Philadelphia. Follow him on Twitter. Disclosure