Warby Parker’s David Gilboa: ‘Every retailer is facing increasing consumer expectations’

Warby Parker is now valued at more than $1 billion after raising more than $290 million in funding. New and established brands are looking to it for inspiration on how to build retail locations, and how to develop online interfaces that resonate with younger customers. Digiday spoke to co-founder and co-CEO David Gilboa on his plans to grow the brand and on the forces shaping the industry.

Your retail model is seen as a playbook for DTC retailers; it’s inspiring other consumer-facing businesses to build connected online and offline experiences. What are your plans to evolve the model?
We’re generally flattered when we hear about businesses that are launched as the Warby Parker of a particular category. We try not to spend too much time looking at those businesses and focus on providing value for our customers.

What we’re focused on now is providing a holistic experience for consumers, and what we mean by holistic is serving all the customer’s eye care needs. One of the biggest pieces of feedback we got from customers is that it’s frustrating to get new prescriptions. Last year, we introduced a vision test from home for $40 and it takes less than 20 minutes. We’re excited about telemedicine as an opportunity to enhance the vision testing experience for customers and the entire industry. Eye exams alone is a $6 billion market that really hasn’t seen any innovation for the digital world so we see that as a really big opportunity. We also see opportunities to innovate on things like vision insurance.

Warby Parker is a great example of an online business that successfully scaled offline. How does data influence your plans to build new stores?
We have this really large database of customers across the U.S. We know where they live and we can use that data to help inform where we’re going to open new stores and we have our data science team has built a model to help predict the performance of new stores. We can enter in any address in U.S. and it spits out a range for first-year sales if we were to open a store there and it takes into account over 100 variables, but the most meaningful predictor of store performance is the number of customers that we have in the vicinity of that address. Consumer journeys are more complex than most retailers realize 75 percent of customers that transact in our stores [initiated them online]; having systems that allow for seamless data transfer between channels allows us to design a better experience.

What’s the influence of outside forces in the DTC and retail industry, like Amazon and Facebook?
[Amazon’s] continued growth in most consumer product categories, but more meaningfully, how they’re changing consumer expectations around the speed of delivery around goods. As more and more people use Amazon Prime and are used to next day or same-day shipping, every retailer is facing increasing consumer expectations.

The No. 1 marketing channel for most direct to consumer brands is Facebook, and Facebook continues to charge higher and higher rents for access to their audiences. The jury is out on if any of the more recent press and attention Facebook has received is going to impact data that companies are able to use to target audiences. Expect that more and more retailers are going to look at alternative ways to reach consumers.

As the DTC ecosystem grows, what does that mean for traditional retailers?
You’ll continue to see landlords being challenged where a lot of traditional retailers that haven’t innovated are going to continue to shut down stores, and you’ll continue to see bankruptcies.

At the best shopping malls and the premier shopping streets, you’ll continue to see a flight to quality where you’ll see a higher concentration of legacy brands and newer brands.

So you’ll see more DTC retailers in places like Times Square or Oxford Street?
That’s right. It’s partly a symptom of recognizing that they can’t continue to scale on Facebook, and there are diminishing returns. Each incremental customer you acquire through platforms like Facebook becomes more expensive and so opening physical stores becomes more attractive. Direct mail, TV and radio [also] become more attractive channels to reach consumers.

Warby Parker was an early mover in developing its own point of sale system. Do you see yourselves moving towards an Amazon Go-style “just walk out” model?
We built all the technology in-house; we didn’t see any point of sale options out there that met our threshold for the experience that we wanted to offer consumers. There are some similarities to the Apple Store. You walk in, there’s no checkout line and our retail advisers have an iPad where we have our point of sale, which we call the “point of everything”. We can build functionality on top of the point of sale to enhance the customer experience. If you have created a list of favorites online for example and you walk into our store our adviser can see the frames you favorited, they can see if you bought a pair of sunglasses and can provide you with recommendations and they can help you check out on the iPad.

I think what Amazon has done is very impressive, in particular, the technology that blends into the background and we think that’s where the world is going, but we also recognize the importance of having a human touch.