An interesting evolution has been taking place in the world of online retail. If you’ve ever purchased a pair of glasses from Warby Parker, a skirt from Nasty Gal, or a custom-made men’s dress shirt from J. Hilburn, then you already know what this evolution means in terms of savings for the consumer. A rising number of startups are upending the traditional retail cycle and not only creating their own brands online—but their own distribution platform as well.
“Historical e-commerce websites like Amazon, Zappos—the website is a brand, and the products have essentially been branded by the website,” said Index Ventures Partner Mike Volpi, in an interview. “We’re seeing a rise in brands that are selling entirely online, like Nasty Gal—it’s their own brand with no physical retail location.”
In a typical retail supply chain, you have the brand that designs and produces the product, and then the distributors and retailers that get the product to the end user. But an increasing number of consumer products businesses are simply opting to wear both hats.
Upending the Supply Chain
Take Warby Parker, which designs, manufactures, sells, and ships its own brand of chic eyeglasses direct-to-consumer. And they do all of this with virtually no physical store location.
When you’re talking to a typical online retailer, they always have a specific set of issues to worry about—selection, price, and shipping. Amazon has a little bit of everything, at a lower price point than most other retailers, and you can order it and have it on your doorstep within a day or two.
Meanwhile, the brands who are creating those products have their own set of challenges to deal with, like sourcing materials, manufacturing at the lowest possible price point, and—in the case of fashion brands like Warby Parker—they also have to be uniquely stylish and on the pulse of current fashion.
What happens when you decide to worry about all of those things? Two things: you probably live on Red Bull, and you save a lot of extra money that’s not going to pad out someone else’s profit margins.
In the case of Warby Parker and other innovative online brands, the money they save on running the entire supply chain themselves is passed on to the consumer in the form of low cost, high quality products.
Challenges of Doing it All
But it’s not easy. There’s also the question of marketing. “The more cutting edge companies are using social mechanisms to generate brand awareness. It’s much more cost effective than traditional marketing methods. Nasty Gal created a lot of brand awareness from its Instagram and Twitter presence,” said Volpi.
And what about inventory? There are little tricks and techniques to managing stock and overages, like only running a few items at a time.
But why go through all the hassle?
“We saw an industry where every piece of the supply chain was controlled by a handful of large companies,” said Warby Parker co-founder Dave Gilboa. “There is one company, Luxottica, that owns most large eyewear-only brands like Oakley, Ray-Ban, Oliver People's, Persol and Arnette. They also have exclusive eyewear licenses to most major fashion houses like Chanel, Ralph Lauren, Versace, DKNY and Dolce Gabbana. Then they own Lenscrafters, Sunglass Hut, PearleVision, Target Optical, Sears Optical and a bunch of other retail chains. They also own EyeMed, the 2nd largest vision insurance plan in the US.” He added: “We didn't like the idea of becoming a retailer and selling Luxottica brands or becoming a brand selling through Luxottica retail stores.”
A cursory glance through a LensCrafters store will reveal a price spectrum of $129-$400, with the most bland, basic glasses at the low end, and edgy, stylish glasses at the high end.
Warby Parker, on the other hand, offers top notch style for a fraction of the price. All glasses start at $95, where comparable glasses at LensCrafters would cost a good $200, easily. One of the interesting upshots to this is the fact that if high quality, fashion forward glasses can be purchased cheaply, people will purchase more of them as accessories to bust out for different outfits and occasions. Gilboa says that Warby Parker is seeing that happen, with some customers buying upwards of 25 pairs.
Staying Ahead of the Curve
“We need to ensure we are innovating and optimizing every part of our business, from the design of our glasses and website to the logistics of delivering custom made-to-order products to customers as quickly as possible,” said Gilboa.
There’s a lesson to be learned here, though:
“The flipside is that because we have a direct relationship with our customers, we have a continuous feedback loop that allows us to incorporate what we are hearing from customers into every part of our business and are able to be much more nimble than companies that are not as vertically-integrated.”
Improved communication means Warby Parker can create an even better experience for the customer. I can only imagine that this is why Amazon has gone from being an online retailer to being a hardware and content company as well. If they can see through the sales lens what their customers want, and evolving technology has made it easier to run the entire supply chain yourself—why not?
What’s particularly interesting about brands like Warby Parker and Nasty Gal is that they’re doing everything completely online, with no brick-and-mortar store. There are obvious challenges to this—like the problem of trying on glasses. Warby Parker has two groundbreaking solutions to this: the virtual try-on and the at-home try-on. The virtual try-on lets you upload a picture of yourself from your webcam or a photo and see how you would look in a particular pair of glasses. The at-home try-on lets you select up to five frames, have them shipped to your home for free, where you can try them on and then send back them back using a prepaid return package.
Creating a Brand
A more nebulous challenge facing online brands like Warby Parker is that of gaining credibility as a fashion brand.
“There has never been a major fashion brand that has been created entirely online. So gaining credibility in the fashion world was something we wanted to address from day one,” said Gilboa. “We were able to launch with features in GQ and Vogue and have continued to place a heavy focus on cultivating relationships in the fashion world to ensure they understand the kind of brand we are building.”
Indeed, one of the reasons stylish glasses are so expensive is because of the name attached to them. Creating that name without a physical location is a challenge in itself, but one that has gotten significantly easier with the rise of social media, which allowed Nasty Gal founder Sophia Amoruso to build a worldwide following. The site now has over 500,000 Facebook fans, 500,000 Instagram followers, and 78,000 Twitter followers. Likewise, Warby Parker has cultivated its own unique following, with over 880,000 Facebook fans and some 30,000 Twitter followers.
But Dave Gilboa admits that if some 98% of all glasses are sold through traditional brick-and-mortar stores, it would probably make sense for Warby Parker to have some sort of physical presence as well. To that end, the company created a showroom in its Fifth floor office in New York City, and Gilboa says they get hundreds of customers a day coming in to try on glasses. They’ve replicated that model by opening show rooms in existing boutiques across the country. The company also purchased a yellow school bus that will be touring the country as a mobile Warby Parker shop. But in even bigger news, Warby Parker will be opening its very first retail store in SoHo this year.
Gilboa tells me: “it will be a very unique space that looks nothing like a traditional eyeglass store.”
Image source: etsy.com