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Q&A: Supply chain for online prespription glasses
Here is a story in the New York Times (click here) on how a company Warby Parker has created a business model of selling designer prescription glasses online. Comment on the important role played by supply chain management in the success of this idea.
Warby Parker is successful because it can offer its designer glasses for $95. It can sell for significantly less than its competition because it has a streamlined supply chain. Traditional designer glasses companies go through a licensing middleman that designs, manufactures, and markets the glasses. Warby Parker has cut out the middleman by designing their own glasses and manufacturing them at the same plants as the licensing companies. They insert their own lenses and avoid retail markup by marketing and selling the product directly through their website and a few physical locations in major cities.
The success of Warby Parker comes from their ability to produce the same glasses customers can find at a Pearle Vision or similar store for $300-500 and sell them for less than $100. Warby Parker does not have to deal with licensing because they manufacture and design their own glasses in the same factories as the brand-name companies. Cutting out the middleman allows them to avoid markup costs and they then market and sell the product on their own.
A core competency of Warby Parker is its efficient Supply Chain. It is able to practice a cost cutting strategy because of its supply chain in an industry where products may cost up to hundreds of dollars. For example, its able to cut costs by minimizing procurement, it only designs the glasses and sources manufacturing to firms that have a comparative advantage. The company keeps prices low by ordering from manufacturers and selling directly to consumers, avoiding expenses like brand licensing fees and retail markups along the way. Also, the supply chain has dealt with the issue of people’s hesitation to buy experience goods online (good you must try on before you buy) by using facial recognition technology, loaner frames and renting rent space in stores. The push/pull supply chain allows Warby Parker to be successful. I think this is the best possible strategy for a recent startup because by cuts costs, the firm increases demand for its products and the firm can achieve a higher growth rate. Finally because of its efficient supply chain, customers benefit mainly because it increases their consumer surplus, who pay only $95 instead of several hundreds for a similar product.
I love the idea of Warby Parker. I remember my roommate being sent 5 pairs to try out and thinking it was the coolest thing. In order to be successful in their non-traditional business model of selling eyeglasses online, they need to have a strong relationship with suppliers. By designing their own glasses, ordering from manufacturers and selling directly to consumers, Warby Parker is able to keep their prices low. This low price is the result of effective supply chain management. Essentially, they successfully eliminate the middle man. Warby Parker orders the acetate for the frames from Italy, has them made in China and then inserts the lenses in New York. Their simply supply chain greatly contributes their success and the fact that they are able to charge only $95 as opposed to hundreds of dollars for eyeglasses.
Warby Parker developed a business model that allows them to offer designer eyeglasses at a lower price than its competitors. The company designs its own glasses, order materials directly from suppliers, and manufactures them in the same factories that the big companies use. By taking out the middleman, Warby Parker is able to avoid expenses like brand licensing fees, thus cutting costs and passing the savings to its customers.
The success of Warby Parker depends very much so on the efficiency of the supply chain. This ranges from the price of the glasses to the speed at which they are delivered. Warby Parker’s main sales point is the ability to undercut other glasses stores on their prices and target the niche market of 20 year old first glasses buyers. This ability is dictated by how efficiently Warby Parker is able to procure there different materials and then how quickly and cheaply they can than get that product to the customer.
Supply chain management was core action done that truly enabled Warby Parker to succeed. In order to ship thousands of pairs of glasses, both purchases and loaners out every day and then process returns requires a very efficient and controlled supply chain. The entire company is centered around rapid online processing of orders and returns, both of which need to then be registered within the inventory management sector of the supply chain and then continued on to the end consumer. Stock levels, inventory tracking, and consumer management all need to coordinated effectively in order for the business to even work let alone be profitable.
I personally own two pairs of Warby Parker glasses and can attest to how well they execute their supply chain. Warby Parker has successfully implemented an e-commerce supply chain that cuts out the retail middle man in the eyeglasses industry. The company orders from the manufacturer and ships directly to the consumers, which allows them to avoid expenses like brand licensing fees and retail markups along the way. This also enables them to lower the cost of its frames and focus on technologies/services that increase customer demand/sales such as their home try-on program. Warby Parker as found a new e-commerce model that other eyeglasses companies cannot easily imitate.
Warby Parker structured its supple chain in a way that allowed it to deliver an eyeglass product of similar quality as designer styles at a much cheaper price. By understanding the supply chain Warby Parker was able to eliminate the cost of retail channeling and brand licensing, allowing the company to supply trendy high-end eyeglasses for $95. It has structured its distribution channel to start at a manufacturer and send directly to a customer. Such structure has decreased costs for Warby Parker allowing eyeglasses to be sold at a reasonably low price. Similar styles can be found at prices 4 times the amount all due to the addition of a designer label and in store retailing!
Warby Parker has fully maximized the value of their supply chain so they can sell their designer prescription glasses for only $95 versus the several hundred dollars its competitors charge. By ordering from manufactures and selling to customers, Warby Parker has cut out all the expenses of retailing, such as price markups and licensing fees. This use of the supply chain to remove the middle man from the equation has allowed Warby Parker to have a price advantage over its competition as well as provide a more convenient way of buying designer prescription glasses for its customers.
Be able to create their own glasses by sourcing the materials and using manufactures that were already creating glasses was they key to success for Warby Parker. They avoided all the extra nonsense that goes with brand mark ups and licensing fees. They don’t have to pay to have lenses fit into other companies’ frames. This saves them even more money and allows that to have such a low average price.
Warby Parker is becoming a successful online eyeglass retailer because of its streamlined supply chain. They buy the supplies in Italy, manufacture the frames in China and then insert the prescription lenses in New York. They make all of their glasses to avoid brand licensing fees that come along with brand name frames. They also avoid having a middleman and retail markups. Because of this, customers are provided with high quality glasses at an affordable price. Aside from their supply chain tactics, Warby Parker also provides great customer service by using an innovative facial recognition technology to try on virtual glasses, and they send out multiple pairs of glasses at a time, all of which are returnable.