Stiff macroeconomic headwinds are in focus for online eyewear brand Warby Parker, which is moving deeper into omnichannel territory via the opening of 40 new physical locations by year’s end, a 25% jump in store count that will put the retail at 201 locations.
“Now that our mix shift looks more like it did in 2019 in terms of where orders are being placed in stores versus online, we do have confidence that our stores serve as billboards and don’t need as much marketing support [as eCommerce],” Co-Founder and Co-CEO Dave Gilboa told investors on the company’s second-quarter earnings call Thursday (Aug. 11) morning.
“In general, we tend to see that our eCommerce business is more highly correlated with marketing spend and performance marketing dollars,” Gilboa added, saying the present environment looks more like it did in 2019 than in the past two years.
While conceding that a portion of the demand slowdown that Warby has seen could be attributable to its pullback in marketing, the company said that decision was in response to softening demand and lower foot traffic.
A Changed Business
A lot has changed since the New York-based vision care retailer went public 11 months ago in a highly sought-after listing that saw heavy demand from investors eager to get a piece of what was seen as one of the most successful D2C brands.
Read more: All Eyes on D2C Darling Warby Parker as Trading Opens Amid Wide Losses
While Warby’s stock has fallen 70% since then, shrinking its market value below $2 billion, the company’s founders and leaders said they are simply adapting to a changing environment, noting that caution and conservative outlooks were not a reflection of lost confidence in the brand’s broader mission.
“Given the deteriorating macro environment, we are taking a more conservative view into the rest of 2022,” Gilboa said, adding that “we continue to believe in the resilience of the optical industry and expect these headwinds to be temporary, but we are no longer counting on optimism or demand recovery until we see it materialize.”
Citing lower consumer demand earlier in the year from the pandemic’s Omicron variant disruptions to a slowing of consumer demand that began impacting performance strong in May-June, executives talked up omnichannel and a more “holistic” service offering in the future, including an expansion in eye exams and adjacent vision services to diversify the mix.
Knocking Down Barriers
In addition to the store openings, Co-Founder and Co-CEO Neil Blumenthal told analysts the company was pursuing a four-pronged growth initiative to address market volatility and depressed retail traffic as inflation presses down on sales.
“Our surveys show that the biggest barriers to purchase from Warby Parker include not having a store nearby, not being able to get an eye exam and not being viewed as a place that serves all of their vision care needs,” Blumenthal said. “While our growth this year has trended lower than our long-term targets, we remain confident in the recovery of our category.”
In addition, the company plans to continue to nurture the outsized growth but low-margin sales of its contact lens business, noting that one-third of these customers go on to buy glasses too.
At the same time, Warby will also be delving into higher price points and new products for its frames to boost margins and deepen its push into telehealth and online vision testing.
“In Q2 the number of prescriptions requested through our virtual vision test app increased more than 100% year over year,” Blumenthal said.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More