IN FEBRUARY 2008, FOUR MBA candidates at the Wharton School of business wondered: Why weren’t eyeglasses sold online, for a heck of a lot cheaper than in stores? It wasn’t a completely random thought. One of them, Neil Blumenthal, had run a nonprofit called VisionSpring that trains women in the developing world to give eye exams and sell glasses.
“Why are glasses so expensive? I’ve personally been to the factories,” Blumenthal says. “I’ve known that they didn’t cost that much to manufacture. What were keeping prices so high in the U.S.?”
Blumenthal and the others (Dave Gilboa, Andy Hunt, and Jeff Raider) began investigating. “What we found is this industry is dominated by a few large companies that are keeping prices artificially high,” he says. Italian company Luxottica, for instance, pretty much owns the eyewear business, controlling 80 percent of the industry through brands that include Prada, Ray-Ban, and even Sunglass Hut and Lenscrafters. After realizing that, the four begin thinking: “We could come in and disrupt and charge one-fourth of what they’re charging—and hopefully begin to take market share,” according to Blumenthal.
And with that, a business model featuring a significant competitive advantage was born. Two years later, the four launched WarbyParker.com, selling prescription glasses for $95—far cheaper than brick-and-mortar competitors who typically charged upwards of $500.
Today, Warby Parker is worth more than $1 billion. The company has always differentiated itself by selling online—it lets customers select up to five styles of eyeglasses online and have them delivered to their homes to test out for free. (Warby Parker has since expanded to 46 retail locations, too.) Blumenthal believes that the Netflix-type model allows the company to handle shifting consumer preferences better than its competitors.
One unique advantage: It has attracted millennial consumers, who like to support socially conscious companies, with a one-for-one charity model. Warby Parker pledges to donate a pair of glasses to those in need for every pair sold. To date, Warby Parker has donated more than two million pairs of glasses.