Warby Parker Luxottica Mainly Online Sales + Trial Program One of the First Companies to Think About Selling Optics Through Internet

Corporate Entrepreneurship & Design 2017 Esteban Solis, Jangbae Lee, Jeongsun Park and Marjo Koivisto

Content

Introduction 01 About Warby Parker 02 About Luxottica 03 Business model: Why B2B vs B2C? 04 Retail models 05 Innovation 06 Decision making 07 Ethical Approach 08 Design-centric or design-driven? 09 Who is entrepreneurial? Corporate Entrepreneurship & Design 2017 10 What’s next? Esteban Solis Jeongsun Park [email protected] [email protected] Final words Jangbae Lee Marjo Koivisto Resources [email protected] [email protected] Introduction

The eyewear industry We started our project by searching that can even change our perceptions of to make such a statement? That is what for interesting and successful startups. this research and analysis is trying to This case study is made as a course such an old and static industry. Most of them seemed to concentrate discover. group project for the master’s level on virtual products or services, so when course Corporate Entrepreneurship and Warby Parker tries to take over the we found an eyewear startup, we got By looking closely at the comparisons Design, in Aalto University. The task was eyewear industry with their customer- curious, as all of us saw the eyeglass between these two companies, we aim to to think about similarities and differences centric, ethical and technology-driven industry as boring and static, where new unveil what is the key component of the between entrepreneurial activity in model and that has been successful innovations happen rarely. entrepreneurial practice of Warby Parker large established corporations and and growing at such a rate that they that can compete with the organizational organizations versus startups and young have proclaimed themselves the direct Warby Parker, an American company model of the biggest eyewear company companies, and recognize and propose competitor or Luxottica, the biggest that started as an idea and frustration, in the world. We also aim to discover how companies could benefit,especially and the most powerful company in quickly became a successful startup what is the role of design and how it is the big ones of startups’ company culture, the industry, the one who owns and and nowadays is a company that can or could be tied to these companies ideology and methods in the future. produces almost 80% of the eyeglasses compete with the biggest monster in the and eyeglass brands consumed in the destinies. First of all we can take a look eyewear industry. It is interesting to see United States and also in the world. So to each of the companies profile. entrepreneurs that aim to disruption and how a group of american students came Team Esteban Solis Jeongsun Park Jangbae Lee Marjo Koivisto CoID/(IDBM) CoID/(IDBM) CoID CoID/(IDBM) 01 About Warby Parker

Warby Parker is an American startup came up with an honest business model brand of prescription eyeglasses and that cuts the costs that Luxottica’s sunglasses. Warby Parker was founded monopolistic practices had brought in 2010 by David Gilboa, Neil Blumenthal, to the industry and that disrupts it by Andrew Hunt and Jeffrey Raider It being technology-driven and customer- was born from the need of accessible centered. eyewear through a transparent and honest business model that makes the Today Warby Parker is known as a most out of technology. successful and independent online- based eyewear manufacturer and The story of Warby Parker starts with retailer, who also designs all their a young David Gilboa forgetting and products. They mostly concentrate on losing his $700 Prada glasses in a plane. selling products online through their Frustration led him to think about why “Home Try-On program”, but they eyewear is as expensive as an iPhone and currently also have 61 physical retail how ridiculous this situation is. showrooms and stores in the United States and Canada. They are known The idea of offering cheap glasses for their tailored customer experience, was complemented by the serendipity collaborations and service model that moment, as described by Andrew Hunt Ben Lerer from Lerer Hippeau Ventures Home-Try-On program Buy a pair, give a pair -program in an interview for FastCompany (2015), suggests, “sweat every detail and every “Home-Try-On program” allows custom- From the day one, Warby Parker has of meeting Neil Blumenthal who had touch point.” Now, Warby Parker is ers to choose five frames from the web- used a “buy one, give one” model, where experience working for Spring Vision valued in $1.2 billion and they have 500 site, get them delivered for five days try for each pair of glasses purchased, the program which focus on teaching people employees. on at home. Sending them back is free. company pays for the production of from poor communities to survive another pair of eyeglasses for someone through the optical health industry, and in need through VisionSpring, non-profit therefore, knew every aspect of it. They organisation. 02 About Luxottica

Luxottica Group S.p.A. is the world’s So not only does the italian giant owns largest eyewear company. It is based in most of the brands available, but their Milan, Italy. It was founded by Leonardo business model is a circular one that del Veccio in 1961.The organisation owns offers a sweet illusion of diversity to many of the eyewear market brands and their customers but, in practice, is just a retailers and is also producing frames big monopoly that controls the product, under fashion and designer brands. the retailing process and the additional services related to eyewear. An article from FastCompany (2015) described it from the point of view of Luxottica has owned a fair amount of the American territory quite accurately power and innovation by acquiring more in the following way: “Founded in 1961, small brands and companies that may the Milan-based company takes in about either compromise their comfortness $9 billion a year, running the eyewear and status or that might bring new Divisions: Makes eyewear under license for: business for most major fashion houses. markets to them. Luxottica is valued Ray-Ban Persol Giorgio Armani Bulgari Luxottica markets its own frames too: in $25.9 billion, and they have 82,282 Oakley LensCrafters Brooks Brothers Burberry Oakley, Oliver Peoples, Persol, and Ray- employees across the world. OPSM Sunglass Hut Ban are all Luxottica brands. Consumers Eyemed Apex by Sunglasshut Chanel Coach find these frames for sale at LensCrafters, Glasses.com Sears Optical Dolce & Gabbana DKNY Pearle Vision, and Sunglass Hut, all of Onesight Pearle Vision Michael Kors Miu Miu which are (you guessed it) Luxottica subsidiaries. Luxottica also happens to The house brands: Polo Ralph Lauren Paul Smith own one of the top vision-insurance Alain Mikli Arnette Spectacles Prada companies, Eye-Med, which, if you have Oakley Oliver Peoples Ralph Lauren Starck Eyes coverage from Aetna or Anthem Blue Persol Ray-Ban Cross Blue Shield, is your carrier.” Sferoflex Vogue Eyewear Tiffany & Co. Tory Burch Eye Safety Systems (ESS) Valentino Versace 20102010 20112011 19611961 19671967 19741974 FoundedFounded by by 100 100000 000 pairs pairs of of FoundedFounded by by StartedStarted to sell to sell AquiredAquired a a DavidDavid Gilboa, Gilboa, SupermanSuperman wore wore glassesglasses donated donated LeonardoLeonardo eyeglasseseyeglasses under under distriputiondistripution com com- - Neil NeilBlumenthal, Blumenthal, theirtheir glasses! glasses! CertiﬁcatedCertiﬁcated as B as B Del VecchioDel Vecchio in in LuxotticaLuxottica brand brand panypany Scarrone Scarrone AndrewAndrew Hunt Hunt and and CorpCorporationoration Agordo,Agordo, Italy Italy JeffreyJeffrey Raider Raider 60 employees60 employees

20132013 19901990 19811981 FirstFirst physical physical ListedListed in in FirstFirst international international storestore to SoHo to SoHo NewNew York York subsidiarysubsidiary to to 100 100employees employees GermanyGermany

20142014 20152015 20002000 20032003 1 million1 million pairs pairs of of EstimatedEstimated value value ListedListed in Milan, in Milan, AquiredAquired OPSM OPSM glassesglasses donated donated 1.2 billion1.2 billion ItalyItaly (Australia)(Australia) 10 physic10 physical storesal stores

20172017 20162016 20172017 20072007 3 million3 million pairs pairs of of 30 physic30 physical al AquiredAquired Essilor Essilor AquiredAquired Oakley Oakley glassesglasses donated donated storesstores (France)(France) (US)(US) 300300 employees employees Warby Parker timeline Luxottica timeline 2010 2010 2011 2011 1961 1961 1967 1967 1974 1974 Founded by Founded by 100 000 pairs of 100 000 pairs of Founded by FoundedStarted by to sell Started to sell Aquired a Aquired a David Gilboa, David Gilboa, Superman wore Supermanglasses wore donated glasses donated Leonardo Leonardoeyeglasses under eyeglasses underdistripution com- distripution com- Neil Blumenthal, Neil Blumenthal, their glasses! their glasses!Certiﬁcated as B Certiﬁcated as B Del Vecchio in Del VecchioLuxottica in brand Luxottica brandpany Scarrone pany Scarrone Andrew Hunt and Andrew Hunt and Corporation Corporation Agordo, Italy Agordo, Italy Jeffrey Raider Jeffrey Raider 60 employees 60 employees

2013 2013 1990 1990 1981 1981 100%100% carbon carbon neutral neutral First physical First physical Listed in Listed inFirst international First international store to SoHo store to SoHo New York New York subsidiary to subsidiary to 100 employees 100 employees Germany Germany

2014 2014 2015 2015 2000 2000 2003 2003 1 million pairs of 1 million pairs ofEstimated value Estimated value Listed in Milan, Listed in Milan, Aquired OPSM Aquired OPSM glasses donated glasses donated 1.2 billion 1.2 billion Italy Italy (Australia) (Australia) 10 physical stores 10 physical stores

2017 2017 2016 2016 2017 2017 2007 2007 3 million pairs of 3 million pairs of 30 physical 30 physical Aquired Essilor Aquired Essilor Aquired Oakley Aquired Oakley glasses donated glasses donated stores stores (France) (France) (US) (US) 300 employees 300 employees 100% carbon neutral100% carbon neutral 03 Why B2B vs. B2C?

Bringing the giant down. The modern David and Goliath:

One of the main things that caught On one hand, Warby Parker follows On the other hand, Luxottica is basically 2. Considering that companies that might our attention when researching and a B2C model, which means that they a B2B company that owns brands and rival Warby Parker in the market belong comparing these two companies was the serve directly to the customers and works to provide to those brands as to Luxottica and most of their actions are fact that they are actually not playing in all their efforts and strategies work separate business branches and to triggered from Luxottica’s office, it makes the same ligue, not only because of the towards that. In other words, they serve other businesses as well. In essence, more sense to compare them to the giant size or presence of them in the world, but the people directly. both companies have different goals that pulls the strings of all the rest of the because basically they have completely and so, they act and behave in a very eyewear companies. different businesses orientations. different level and if they do, why are we comparing them? Wouldn’t it make Once said this, we can proceed comparing more sense comparing Warby Parker the two companies in order to find out their to Ray-Ban, for example? We have two relation with entrepreneurial approaches main answers for these questions: and design. For this analysis we chose four different relevant categories: retail models, 1. In almost every interview or video innovation approach, decision making and B2B B2C we have come across, Warby Parker ethical approach. co-founders have always pointed out Luxottica as the main competitor they vs. have. Even if they are not in the same league, Warby Parker is the self-declared competitor that aims to bring the giant down. BasedLeading in the matrix tool presented growth in the lecture 13.11.2017 by Katarina Segerståhl.

Before Warby Parker Now Opening showrooms to Luxottica had the monopoly build and expand their position for a long time and no brand worthy competitors WARBY LUXOTTICA PARKER

Survive by Grow by optimising Survive by Grow by optimising differentiation and scaling differentiation and scaling

Bought a company to develop their own service for e-commerce to defend themselves

LUXOTTICA

Grow by divergence and Survive by buffering and Grow by divergence and Survive by buffering and regeneration transforming regeneration transforming

Complexity of organisation Complexity of organisation 04 Retail models

Warby Parker Luxottica Mainly online sales + trial program One of the first companies to think about selling optics through internet. The company solved the problem of internet-skepticism Mainly sales through retailers and physical shops towards fashion or “wearable” items by complementing their As Luxottica controls most of the retailers in the US, their retail online sales model with their “Home-Try-On program” which model relies on the sales through physical stores. They also allows customers to receive up to five frame models so they can produce frames and lenses sold in even their competitors shops. try them on at home and can buy those which they really liked. Warby Parker has also opened 61 stores in the United States and Canada expanding their retail model out of the web.

Monopolistic actions Reputation and work + partnerships Beside the design of many of their main brands’ frames and licence From the beginning, Warby Parker has been known for their brands’ frames, Luxottica also produces and offers insurance for work towards pleasant user experience, strong unique brand its customers creating a monopoly around a circular business. and thinking every detail of their business carefully. This has led them to a quick growth since beginning. They are also willing collaborate and support different companies and that has given Warby Parker a solid reputation not only among their customers but partners too. Worldwide presence Luxottica controls most of the market in the world. According US and Canada to Luxottica’s web page, Luxottica is present in 150 countries, At the moment, Warby Parker has a strong presence in North approximately 9000 retail stores, 13 distribution centres and 12 America, specifically the US and Canada. This has positioned manufacturing facilities mainly in Italy, China, United States, India them as a “local” brand in the eyes of many customers. and Brazil. 05 Innovation culture

Warby Parker Luxottica

Technology-driven Business control The company has disrupted the industry by innovating the optical Luxottica have been in control of the eyeglass market for a long retail market online. Before it haven’t been possible to order time, so creating new or innovating hasn’t been an issue for them prescription eyeglasses online, without visiting at the physical until now. store even once.

Service and branding Caring service and strong, clear and unique graphic style and Retail strategies brand. For Warby Parker, customer experience, service and The strategies and effort are directed towards how to sell more. branding are the main targets of innovation.

Customer centric Innovation acquisition Customer and user experience extremely important, no matter Not clear innovation culture inside the organisation. Luxottica what it costs to Warby Parker. Innovations are inspired and doesn’t have too much resources, time or interest in developing developed with the customer in the center. innovation so they buy innovations as acquisitions instead when needed. 06 Decision-making

Warby Parker Luxottica

Effectuation Corporate mindset Taking actions regardless the risks. Action has a bigger weight Actions are carefully planned, based on how the market behaves. than planning. As Luxottica is a massive organisation, it takes a lot of time and effort to make changes.

Static over years Spontaneity The industry has remained static and so is the company. So most Quick actions and testing to find out what works fast and without of the decisions are made relying to numbers, based on just a big time and money investments. revenue.

User inspiration Luxury and fashion inspired Users are involved to give their opinions and as source of The decisions are made towards becoming a luxurious and inspiration to develop new products, improve their service and fashionable brand. their experience.

Survival (new) Ethical value After Warby Parker came to shake Luxotticas monopoly, the Most of the decisions are made from an ethical perspective taking company has strived and nowadays, some of their decisions like values such as sustainability, transparency and justice to account. the acquisition of Glasses.com, are a clear signs of Luxottica taking action to defend themselves and their position. 07 About ethics

Warby Parker Luxottica

Ethical origin Monopolistic control Warby Parker was founded with strong ethical values and Luxottica is known for his monopolistic control. They don’t allow approach. These values are still a driving force. more competitors. In the past, when competitor has appeared, Luxottica has bought them. Problem solved.

Buy one, give one From the day one, for each pair of glasses purchased, the company pays for the production of another pair of eyeglasses for someone in need through VisionSpring, non-profit organisation. Ethics not a focus Each sub-brand and license brand has their different ethical approaches and so does Luxottica, but there isn’t clear Sustainability & Environment information about it. Warby Parker is one of the only carbon-neutral eyewear brands in the world. They also engourage people to change only lenses when needed and keep the old frames when possible.

Employee appreciation Different opportunities for employees to develop and grow with the company. 08 Design-centric or design driven?

Based on our comparison, we have involving them to get ideas but not to recognized two different kinds of co-creating quite yet. Based on this, our companies, with aims and strategies conclusion is that Warby Parker is on it’s Warby Parker Luxottica that differ a lot. However, after all this way to become a design-driven company analysis we were curious about what’s but still needs more conscience about Holistic approach Product-centered the role of design in these companies? design, its correct use and potential of Design+Service but low competition Are these companies design-centric or its practices like co-designing. +Experience design-driven? Luxottica, on the other side, is a product- As the companies didn’t have clear centered/profit-centered company that Investigation+ and planning description of their design practises, aims to design the most luxurious and Disruption and+ effectuation like Apple or BMW has, we had to make desirable products. For many years, the conclusions based on our reseach. company has been comfortable without any competitors. The way it works is On one hand, Warby Parker has a holistic by investigating and forecasting the Development+ through approach of the business combining markets and fashion, and planning based Development+ through market insight graphic, product, service and experience on that. They develop through customer user insight design, even if they don’t claim it in those insights meaning that the user is a mere words, since they refer to experience as inspiration that dictates which path to branding. Warby Parker has proven to take to keep the sales. = = be a practitioner of effectual reasoning, which means they believe in “doing” more So we can conclude that, in contrast with DESIGN-DRIVEN DESIGN-CENTRIC than long-term planning. On top of this, Warby Parker, Luxottica aims more to a (not the right way) they aim for disruptive innovation rather design-centric approach, however, the (but not quite yet) than other levels. Finally, their interactive vision of design is still quite superficial relationships with the users give them and is merely a resource part of a strategy insights. However, that focuses more on but not the strategy itself. 09 Entrepreneurial? Warby Parker Luxottica The best businesses solve real on that core mission. Its easy to get problems. Think about frustrations distracted by new shiny objects We are pioneers of change. We accountability and transparency in your own lives, things you often and explore new opportunities see opportunities that others don’t model the way we lead. hear people complaining about, or constantly, but discipline and focus and understand the value of taking things that just don’t seem to make tend to lead to the best outcomes. risks so that we continue to be the -Excerpt from sense. And once you hone in on innovators of our industry. Respect, Luxottica webpage “solving that problem, stay focused -Dave Gilboa to USA TODAY College “

Based to our research, we can confidently systems, and it can be really difficult to If we reflect the quote above to what we marketing and service & user experience say yes. As Warby Parker is a young change the whole company culture. have concluded based to our research, centered consuming, so it is relatively company, founded in a time of startups, what he says is not what we see. If difficult, expensive and time consuming online retail and marketing, they have Warby Parkers entrepreneurial actions Luxottica has entrepreneurial practices, to transform themselves and their whole been able to build their company to meet we saw where: quick actions, fast testing, it is not visible in their website and organisational culture like that. But now, the needs of the users today straight investment to services and experience, other sources. However, as Luxottica because of Warby Parker, they are forced away. constantly seeking for innovations is a massive organisation with many to defend themselves and start to invest and marketing with the values that subsidiaries, it is possible that some of and make a change. As have born in a time when services, are important for customers today. them is really entrepreneurial, as we user experience and sustainability has However, we didn’t find any sign of them couldn’t research them all. been important to the consumers, they using now so fashionable design thinking have been able to build their production anywhere. The reason for that can also be Luxottica is so big and old company that systems, ways of doing and company that mentioning and highlighting design they don’t “ride“ or advertise themselves culture based on that from the very thinking doesn’t say anything to their with the inspiring origin story like Warby beginning. With big, older companies target customers, if they don’t happen Parker. Luxottica was born in a time it is a huge investment to change their to be designers. way before startups, online shops or 10 What is next?

For us, eyewear users, competition in is trying to take a twist by answering Final words eyewear industry is more than welcome. the need of replacing the lenses without Now that Warby Parker has entered to the needing to change the frames. Basically Comparing entrepreneurial activities and the game against Luxottica, the door has they act as a direct link between labs and company culture of young startup/small been opened for more entrepreneurs customers and the service is quite similar company and big old organisation is not to enter the industry of eyewear. This to Warby Parker’s one. Customers an easy task. It is easy to find that kind of is particularly interesting since it will be contact to Lenslab in internet, send them information of the young companies, as they design, strategy and an entrepreneurial their old glasses and get them back with market themselves with that, but comparing mindset which will determine the future new lenses directly to their homes. it to the organisation what doesn’t have of both companies. that information available that easily, is In the future, startups like Lensabl can challenging. We have seen Warby Parker starting become a strong competitor for Warby from the idea of cutting down the cost of Parker and to the already decadent However, exactly the fact that it was the ridiculously expensive frames from Luxottica. Could they keep their actions challenging makes it a good practice for Luxottica’s brands to a more affordable entrepreneurial enough to keep their learning. We really had to think and discuss price, but newcomers like Lensabl, are innovation level at a competent level or what we found out through research, planning to enter the game, even if it’s would they see the potential of design to reflect them to our opinions, experiences not in the same level. This small startup maintain the magic? and learnings from the lectures and course materials. Resources http://college.usatoday.com/2017/06/30/how-we-became-eyewear-entrepreneurs- warby-parker https://hbr.org/2017/06/the-4-types-of-innovation-and-the-problems-they-solve https://www.fungglobalretailtech.com/research/warby-parker-versus-luxottica https://www.lensabl.com https://www.fool.com/investing/2016/07/10/could-warby-parker-be-worth-more- than-luxottica-on.aspx https://www.linkedin.com/pulse/warby-parker-vs-luxottica-compare-valuations- chris-knight http://www.luxottica.com/en https://www.warbyparker.com

+ Lectures and course materials