The Exchanges

Q been to Warby Parker stores, I've gone on the website, and the one-to-one model doesn't seem like it's emphasized as much. I know you still do it, right? You still give one pair of glasses away for everyone you sell, but Um, I was surprised that it's not like front and center of how you position your business. So can you talk a little bit about that for a moment?

A Sure. I, I think we've learned, um, and we learned this very early on. In fact, actually when we were working on the business plan is what's most important to customers. Um, and when they're buying glasses, what's most important is the glasses look good on their face. Then how much do they cost? And then is it good quality and is it good service? Um, lastly, you know, is there a social ethos behind the brand and is my purchase sort of helping and serving others? So with that knowledge, When we're meeting new customers for the first time, we lead with fashion, right? Glasses are a core part of someone's identity. We want them to look great. Then we tell them that's only 95 dollars, right? Including all the bells and whistles. And frankly, it's not until usually after they purchase that they even learn that for every pair of glasses we sell, we distribute one to someone in need.

AI assessment note: “when we're meeting new customers for the first time, we lead with fashion”

Q What do you remember about that meeting in the computer lab, Neil? What, like, what were they asking you?

A Um, it was sort of like, why are glasses so expensive? And when I was working at that nonprofit VisionSpring, I had actually designed eyewear, and I would go to the factories to produce these glasses, and so I knew a little bit about, ah, the optical industry, and, um, it's dominated by a few very large companies, one of which is Luxottica. Luxottica has a market cap of about thirty billion dollars. They, um, own Oakley, Ray-Ban, Oliver Peoples, Persol, and Arnett, They license almost every major fashion brand under the sun, like Ralph Lauren and Chanel and Prada and Dolce & Gabbana. Um, they also own a lot of the major retail chains like Lens Crafters and Pearl Vision and Sunglass Hut.

AI assessment note: “it was sort of like, why are glasses so expensive?”

Q So, so, so you guys wanted your glasses to obviously to be much cheaper than the competitions, like even less than a hundred bucks. How, how did you decide on the exact price?

A Our initial thought was to sell glasses for 45 dollars, and we remember going into the head of the marketing department's office at Wharton, and we sit next to him, slide the deck on his desk, and say, hey, we're gonna transform the optical industry, we're gonna charge 45 dollars for a 500 dollar pair of glasses, um, and he kind of just laughed at us and said, no way, it won't work, and we're like, wait, you didn't even, like, read our deck, like, every graph goes up and to the right, um, and he said, I'm sorry guys. Like, first of all, price is the biggest indicator of quality and it's just outside of the realm of believability that you can sell a product for a 10th of its price. So we walked out of this meeting pretty deflated, but it led us to investigate pricing a little further. And it showed us that yes, price is, um, indicator of quality. There's a psychological barrier around a hundred dollars. So one thought was, should we charge 99 dollars? And we felt that was too discounty and cheap, and we were building an aspirational brand. So we actually settled on 95 dollars using just our instinct, thinking that this doesn't sound cheap and that it looks deliberate and visually looks decent.

AI assessment note: “So we actually settled on 95 dollars using just our instinct”

Q But you guys were totally hustled like this. I mean, why would these huge magazines, like, trust a bunch of business school students who didn't even have a company? Like, if you went to the website at that point, there was nothing up there. Like, it's crazy to think that they would have done that, right?

A Yeah, I, you know, I think there were a few things that worked in our favor, right? One was identifying the right PR person to help represent us, but we often say that PR is, I think, 30% the messenger, 70% the message, and for us, the message, this was pretty novel at the time, right? There was nobody selling glasses online, so the idea of selling glasses online was novel. The 95 dollar price point for 500 dollar glasses was pretty novel. The home try-on program was novel, so in fact, GQ actually called us the Netflix of eyewear in the article they, they put. So I think there were, like, these hooks that writers and editors could get excited about.

AI assessment note: “I think there were, like, these hooks that writers and editors could get excited about.”

Q What do you remember about that meeting in the computer lab, Neil? What, like, what were they asking you?

A Um, it was sort of like, why are glasses so expensive? And when I was working at that nonprofit VisionSpring, I had actually designed eyewear, and I would go to the factories to produce these glasses, and so, uh, I knew a little bit about, uh, the optical industry, and, um, it's dominated by a few very large companies, one of which is Luxottica. Luxottica has a market cap of about thirty billion dollars. They, um, own Oakley, Ray-Ban, Oliver Peoples, Persol, and Arnett. They license almost every major fashion brand under the sun, like Ralph Lauren and Chanel and Prada and Dolce & Gabbana. Um, they also own a lot of the major retail chains like Lens Crafters and Pearl Vision and Sunglass Hut.

AI assessment note: “it was sort of like, why are glasses so expensive?”

Q are still really running the thing together. Um, but it's uncommon, right, to have such a long working relationship that's successful. Co-CEOs, you're both the CEOs. How do you explain it? I mean, for me, I think a lot of it is just chemistry, that people have chemistry that just happens to work, but it still takes work. What works in, you know, in your relationship to make that possible?

A Completely. I think it comes down to trust and respect. Uh, we implicitly trust each other to make any sort of decision, but also to seek each other's advice. Um, and if I am thinking through a challenge, um, you know, I immediately want to share it with Dave because I know that, you know, whatever ideas I have, he'll enhance them and make them better. Um, and we still sit next to each other. So for 15 years, we've been sitting next to each other. In between meetings, we're constantly talking to each other. You know, often, uh, we might call each other on the way to work or late at night, much to our wives' chagrin. Um, but it, it's just been a, a lovely partnership, um, in which we both make each other better.

AI assessment note: “I think it comes down to trust and respect.”

Q podcast on the radio, uh, six or seven years ago, it actually grew our podcast audience because even though radio is a legacy medium and it's, you know, the audiences are, are declining. It still does have an impact. People might then go and subscribe to the show on their iPhone or whatever, however they use it, right? And so is that more or less what happens with the stores?

A That's exactly right. Um, what we found is that if we're going into a new market and we open up that first store, there is some e-commerce cannibalization for a short period of time. The way to think of it is there's a certain size pizza in that market. The store comes. There's a bunch of people who have been buying online who actually prefer to go in store. So once that store is there, they start going there. But having that store there Increases awareness. It increases the size of the pie. So while you might have now a two thirds bricks and mortar, one third online split over the long run, the point is, is that the market is so much bigger now because now people know of Warby Parker. They trust Warby Parker. They're ready to purchase from Warby Parker because of that store being there. The other thing that's happened in the last few years is our business has changed pretty dramatically. So in addition to opening up, you know, 240 stores. We've moved towards a holistic vision care offering. And what we mean by that is that in addition to selling glasses, right, we have eye doctors and provide eye exams. We have contact lenses. And so folks sort of engage with those products and services, both online and offline. So someone might come to our store, get an eye exam, buy a pair of glasses, maybe make an initial purchase of contacts, but then do all the reordering online going for…

AI assessment note: “That's exactly right. Um, what we found is that if we're going into a new market”

Q stores, more competitors, you've gone public, and we'll talk a little bit about all those things, but let's just talk first about the competitive landscape and the challenge of breaking through. I mean, when you've got all these new competitors in the space, how have you responded? You know, for example, on price, like if a competitor is all of a Does it affect how you guys price your products?

A We think the best brands and the best companies really understand the market and you have to be constantly evaluating pricing right across the board. And of course, because of the internet, right, it's made pricing very transparent. Um, we've always believed in providing exceptional value and we define that as charging a fraction. So literally a fourth or a fifth of what other people charge. So We launched with 95 dollar glasses, um, we still sell 95 dollar glasses today. Now we've introduced some additional frames that have more complex construction that cost more to manufacture, like our precision progressives offering, um, which is a top-of-line progressive lens, generally for people over the age of 45 that have a complicated prescription. Those start at 395 dollars, whereas they would cost well over a thousand dollars elsewhere. So, We're always looking at providing exceptional value. And then also we don't foresee a lot of new entrants challenging us in, in the short term. And if we look at the overall market, 88% of glasses are sold in bricks and mortar. Um, so it's still only 12% online penetration, which is really low. So if we want to really scale, um, and, and tackle this market, right, we got to be focused on that, you know, 88 to 90%. And Those are the big optical chains that have a thousand plus locations. There's also a long, long tail of independent optical shops…

AI assessment note: “We launched with 95 dollar glasses, um, we still sell 95 dollar glasses today.”

Q Why would these huge magazines, like, trust a bunch of business school students who didn't even have a company? Like, if you went to the website at that point, there was nothing up there. Like, it's crazy to think that they would have done that, right?

A Yeah, I, you know, I think there were a few things that worked in our favor, right? One was identifying the right PR person to help represent us, but we often say that PR is, I think, 30% the messenger, 70% the message, and for us, the message, this was a Pretty novel at the time, right? There was nobody selling glasses online, so the idea of selling glasses online was novel. The 95 dollar price point for 500 dollar glasses was pretty novel. The home try-on program was novel, so in fact, GQ actually called us the Netflix of eyewear in the article they, they put. So I think there were, like, these hooks that writers and editors could get excited about.

AI assessment note: “I think there were, like, these hooks that writers and editors could get excited about.”

Q just a quick question. I mean, is there a world where, at this level, maybe he even thinks about, like, a fractional Head of ops. I mean, there, you know, he's still small. I mean, one, one and a half to two million is great, but, uh, it, it may, you know, it may make sense to tap into like a freelancer at this point, or what do you think?

A Yeah, I think that's a great idea. And, you know, especially if you can define specific projects, that works really well for contract work and, you know, getting somebody to come on for a period of time. They have some pattern recognition because they've seen this before. And, you know, not everything needs to be permanent. Not every relationship, right, needs to extend for a decade. You know, what I often tell our team at Warby is Is this train is going for a very long journey, and people get on at different points in the journey, and they get off at different points in the journey, and that's completely okay, and we can stay close with those folks, and we hope that their time at Warby, they're thriving, they're learning, they're, they're growing, um, but, you know, people leave, and the needs of the businesses change over time.

AI assessment note: “Yeah, I think that's a great idea. And, you know, especially if you can define”

Q Awesome. Great question. And a very solvable one, Neil, I want to bring you in. Um, first of all, questions or thoughts for Brian?

A Sure. Well, congratulations. Um, I love the rebrand. Um, and it immediately evokes health and wellness for me. So exactly what the mission of, of the company is. Um, um, I'm not an expert in franchising per se, right? Warby Parker owns and operates all of our own stores, of which we have over 300. Um, we certainly go through quite a vetting process to hire our store leaders. And I actually still interview every single one, um, because we think that the key to success is people and culture. Um, and if you look at enduring brands, right, it all comes down to people and culture and what is culture. It's shared values, uh, shared rituals, um, right. And, and a shared mission. Um, so I think you're on the right track here and saying like, Hey, selecting is really important. So I think the first thing is Putting out into the world what the company stands for, what your mission and your values are, then people are already self-selecting, right, and reaching out to you. Then, do you actually want to put some barriers in place?

AI assessment note: “I think the first thing is Putting out into the world what the company stands for”

Q around political issues like abortion. This is not new, but it's newer, right? Like in the past, companies just didn't weigh in. In general. Now it's more common, but it also is tricky and treacherous because it means that when you don't say something about one thing, people ask, well, you said it about this other thing. So how do you think about your role in speaking out around issues?

A We have a framework by which we make decisions, um, and it's often about impact on our stakeholders, our employees, and our customers, and then also our ability to have impact on a particular issue. So as we thought about our racial equity strategy, for example, roughly two percent of optometrists in America are Black. Um, we hire a lot of optometrists. Can we work with Optometry schools. Can we work with partners to raise awareness of the profession of optometry in black communities and increase the number of black optometry students so that way we can have better representation within the field of optometry and perhaps better health outcomes, right? That, that's how we sort of think about some of these issues. You know, making bold proclamations or performative statements can sometimes not lead to desired impact and may actually lead to disruption and, and distraction. So it's something that we think a lot about.

AI assessment note: “We have a framework by which we make decisions, um, and it's often about impact”