This "Disruptor" Lost Money Each Year Over The Last 3 Years
Its net revenue grew to $ 394m in the most recent fiscal year yet its net loss widened to $ 56m. For comparison, its sales stood at $ 273m in 2018 and $ 370m in 2019 while its net loss reached $ 22.9m in 2018 and it broke even in 2019.
Direct To Consumer
The company began in 2010 and sought to provide an online alternative to existing and more expensive options. In order to win over customers, it launched the "Home Try-On program" which enabled prospective buyers to try glasses from the comfort of their home. In recent years, the company has expanded to in-store sales in order to grow and cut down on shipping and returns expenses. It now runs a network of 145 stores.
“There’s still room for us to open hundreds of stores, [...] When we look at our competitors—the large public optical retailers—they all have well over a thousand locations across the U.S. At the end of the day, the vast majority of Americans need glasses and prefer to buy those in person.” Neil Blumenthal, co-founder and co-CEO of Warby Parker
Growth?
Warby Parker is now over 10 years old and growth is slowing down. According to Bloomberg data, the annual sales gain from 2016 to 2019 averaged 25% but slowed to 7% in 2020.
“They’ve been around for a while, and people who would have had a proclivity to try them by now already have, [...] Their biggest challenge is growth. How do you find the next tranche of customers?” Sucharita Kodali, retail analyst at Forrester
In recent years, the company has been trying to remove the need for customers to transfer a prescription. However, this isn't particularly easy as consumers often develop a trusting relationship with their eye doctor who then sell them glasses.
Direct Listing
In its most recent round of funding, the company raised $ 245m at a valuation of around $ 3B. It now counts investors as General Catalyst, Tiger Global, T. Rowe Price, D1 Capital Partners and Durable Capital. According to reports, the company is now looking to go public through a direct listing at a valuation above $ 3B.
BENCHMARK’S TAKE
- Direct-to-consumers companies such as Casper, Away and Warby Parker are learning fast that the only way to sustain growth is to open shops across the country
- This enables them to cut on return expenses, target a new tranche of offline consumers and grow their presence
- However, this might pressure their margins and turn these disruptors into conventional B2C players
- We are staying on the sidelines and wait for Warby Parker's profitability to improve
Disclaimer
Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.
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