To: Professor
Clark Hansen
From: Mary
Ramzy, Principal, AMDP
Date: March 1,
2016
Subject: Potential
Investment Opportunity—Warby Parker
Professor
Hansen, you recently asked me to find a potential business investment that
would diversify AMDP’s portfolio. After conducting extensive research, I am
recommending that AMDP make an
investment in Warby Parker, a prescription eyewear company. Warby Parker’s
objective is to offer consumers designer eyewear at a reasonable price.
Additionally, for every pair of glasses sold, Warby Parker contributes a
monetary donation to a nonprofit organization that provides those in need with
eyeglasses. The company’s objectives align well with our guiding principals:
triple bottom line, corporate social responsibility, social enterprise and
carbon footprint –
all of which are
described in detail below.
AMDP’s Guiding Principles
Triple Bottom Line
The Triple
Bottom Line is an accounting framework that incorporates three dimensions of
performance: social, environmental, and financial. These dimensions are also
known as the 3Ps’: people, planet and profits.
- · People: A measure in how socially responsible an organization has been throughout its operations.
- · Profit: The difference between the amount earned, and the amount spent by the organization throughout its operations.
- · Planet: A measure of how environmentally responsible the organization has been.
Corporate Social Responsibility
The World
Business Council for Sustainable Development describes Corporate Social
Responsibility (CSR) as “the continuing commitment by a business to contribute
to economic development while improving the quality of life of the workforce
and their families as well as of the community and society at large.”
Social Enterprise
There is
currently no globally accepted definition of “Social Enterprise.” Nevertheless,
Social Enterprise USA describes social enterprises as “businesses whose primary
purpose is the common good. They use the methods of business and the power of
the marketplace to advance their social, environmental and human justice
agendas.”
Carbon Footprint
The US
Environmental Protection Agency (EPA) describes the Carbon Footprint as “the
total amount of greenhouse gases that are emitted into the atmosphere each year
by a person, family, building, organization, or company.” Most environmental
informational organizations measure carbon footprint by gathering and assessing
information about lifestyle choices and business operations. It is important to
reduce our carbon footprint in order to help our environment and reduce the
effects of global warming.
Warby Parker
History
The idea for Warby Parker first came about
when its founders[1] were
still in school at the Wharton School of Business (University of Pennsylvania).
Whilst on a backpacking trip, one person in their group unexpectedly lost their
glasses. He spent the rest of his first semester of graduate school without
them because the cost of replacing them was too expensive. Thus, the students
felt the need to create an alternative solution to their friend’s problem.
The students formally founded the company
in 2010 after participating in the Wharton’s Venture Initiation Program. Their
goal was to give their customers fashionable eyewear at a fraction of the
price. Warby Parker has been able to raise a substantial amount of money
throughout the past several years via numerous rounds of fundraising. In April
of 2015, Warby Parker was valued at 1.2 billion dollars (Roberts 1). This
appraisal made the company “one of only a handful of online retail startups to
grow beyond a $1 billion valuation before going public or getting acquired”
(Macmillan 1).
Warby Parker has accomplished their
original goal by “circumventing traditional channels, designing glasses
in-house, and engaging with customers directly” (Warby Parker). In addition, the founders wanted to use their business
to help those in need. This desire inspired Warby Parker’s core beliefs, which
state that “everyone has the right to see” and that “glasses are one of the
most powerful poverty alleviation tools in the world” (Robiscon 1).
In a very charitable manner, Warby Parker
partners up with different nonprofits in order to help the one billion underprivileged
people who lack access to glasses. The charities receive donations from Warby
Parker, and with those donations, purchase glasses that they later distribute
to entrepreneurs. The
entrepreneurs undergo business training and thus, gain both skills and an
income by giving eye examinations and selling eyeglasses. Meanwhile, those who
would’ve otherwise never had access to glasses are being given access to
eyewear. This model effectively creates jobs and brings sight to the world!
Disrupting the Eyewear Industry
Warby Parker decided to take on the vision
industry, which is largely dominated by Luxottica Group—an organization that
controls 80% of the industry (Weisul 1). The Luxottica Group is a mammoth
corporation that owns: Lenscrafters, Sunglass Hut, Pearle Vision, Sears Optical
and even the Eyemed vision care plan! The founders of Warby Parker have stated
that the “companies that control this industry mark up glasses between 10x-20x”
(Bobkoff 1). The founders thought that the best way to cut costs was to go
directly to manufacturers and have their products made on the same production
lines as their competitors. Warby Parker would still make a profit that
wouldn’t make the consumers’ hurt.
However, the company didn’t just cut costs
for consumers—they revolutionized the shopping experience, made it more
convenient, and fun! Consumers are given the ability to go online and ship up
to 5 pairs of glasses for free so that they may test out different frames. Once
the customer has decided on their preferred frame, they send all of the frames
back, mark their preferences, and send the company their prescription. Once the
company receives this information, they make the glasses with the appropriate
prescription and send them back to the customer.
Taking Risk out of the Business Equation
While at Wharton, preparing to write their
business plan, the students consulted with one of their trusted professors for
advice. The professor suggested they send out a market survey for research and
development purposes. Here were their findings:
- 1. Raise the price of your product to increase perceived desirability: “People’s willingness to purchase glasses from Warby Parker actually increased as the prices went up” (Weisul 1).
- 2. Keep a good relationship with your clients: Warby Parker realized that “brands build relationships with customers just as humans do, through vulnerabilities” (Neil Blumenthal).
- 3. Remember, research happens in the real world: Although the survey results were informative, the founders sought to have more face-to-face interactions with potential clients. (Weisul 2).
Warby Parker’s B-Corporation Report Card
B-Corporations are “for-profit companies
certified by the nonprofit B Lab to meet rigorous standards of social and
environmental performance, accountability, and transparency” (B-Corporation). Warby Parker gained its
B-Corporation certification in 2011 and currently has a grade of 112. The total possible number of points a company
may score on the assessment is 200. However, thus far, the highest scores ever achieved
by certified companies have ranged between 160-170 points. Therefore, given
that Warby Parker is a young and creative company, there is still plenty of
room for improvement that will allow them to achieve higher scores in the
coming years.
Final Recommendation
Although the
vision industry is currently dominated by Luxottica, with support from AMDP
Warby Parker can continue to grow, profit, and give back to those in need. The
company has garnered a positive reputation in the media due to their positive
social impact and low cost model. However, it is their ability to innovate that
differentiates them from other eyewear companies and makes them the perfect
candidate to invest in. Given all of this research, I highly recommend
investing in Warby Parker.
Works Cited
1.
Bobkoff, Dan. "Meet
the Founders of Warby Parker, the Eyewear Company Disrupting the Highly
Secretive Luxottica Monopoly." Business Insider. Business
Insider, Inc, 30 Oct. 2015. Web. 04 Mar. 2016.
2. "Buy a Pair, Give a Pair." Buy a Pair, Give a
Pair | Warby Parker. Warby Parker, n.d.
Web. 04 Mar. 2016.
3. "Corporate Social Responsibility." WBCSD - World
Business Council for Sustainable Development.
World Business Council for Sustainable Development, n.d. Web. 02 Mar. 2016.
4. "Learn the Basics." Learn the Basics | A
Student's Guide to Global Climate Change. United
States Environmental Protection Society, 3 Mar. 2016. Web. 04 Mar. 2016.
5. Macmillan, Douglas. "Eyeglass Retailer Warby Parker Valued at
$1.2 Billion." WSJ Tech.
Wall Street Journal, 30 Apr. 2015. Web. 04 Mar. 2016.
6. Martin, Roger L., and Sally Osberg. "Social Entrepreneurship:
The Case for Definition (SSIR)." Social
Entrepreneurship: The Case for Definition. Stanford Social Innovation Review, 1 Apr. 2007.
Web. 05 Mar. 2016.
7. "Our History." History | Warby Parker. Warby
Parker, n.d. Web. 04 Mar. 2016.
8.
Roberts, Daniel.
"Warby Parker Gets Its Unicorn Horn." Fortune Warby Parker
Gets Its
Unicorn Horn Comments. Fortune, 30 Apr. 2015.
Web. 05 Mar. 2016.
9.
Robiscon, Noah.
"The Vision Thing: Warby Parker's David Gilboa Disrupted An Industry And
Improved The World's Sight." Fast Company. Fast Company, 01 Dec. 2011. Web. 05 Mar.
2016.
10. Slaper, Timothy F., and Tanya J. Hall. "The Triple Bottom
Line: What Is It and How
Does It Work?" The Triple Bottom Line: What Is It and How Does It Work? Indiana
Business Review, 1 Apr. 2011. Web. 02 Mar. 2016.
11. "Triple Bottom Line." The Economist. The
Economist Newspaper, 17 Nov. 2009. Web. 02
Mar. 2016.
12. Warby Parker." Warby Parker | B
Corporation. BCorporation.net, 2015. Web. 03 Mar. 2016.
13. Weisul, Kimberly. "How Warby Parker Took the Risk Out of Its
Business." Inc.com. Inc,
28 May 2015. Web. 03 Mar. 2016.
14.
"What Is a Social
Enterprise?" - Learn about Your Enterprise. Social Enterprise
Canada, n.d. Web. 02 Mar.
2016.
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