WP EXAM

Strategic Problem:

Low Market Share: 1% of the eyewear market

Increasing Financial Losses

Stock underperformance with 80% decline in market valuation from peak $1.4B

Luxottica dominates distribution and marketing

Business Model Analysis WHO IS THE CUSTOMER?

• Price conscious consumers who prefer affordable, stylish glasses/eyewear. Also those who shop online but appreciate in store experiences.

• Ranges from everyone who needs eyewear but mostly Gen Z to Millenials as they are more frequent online shoppers.

Business Model Analysis WHAT IS THE NEED THE ORG FILLS?

Affordable high quality prescription eyewear that has a convenient DTC shopping experience with home trials.

Business Model Analysis HOW DOES THE ORGANIZATION CREATE THE OFFERINGS?

By an omnichannel approach with online sales & some retail locations. Supplies are designed in house, manufactured w partners and sold DTC.

Business Analysis What activities need to be done to fill the customer need?

• Great customer service with return and trial methods to create brand trust and seamless experience

• Trendy and stylish designs but functional at a low cost

• Cost efficient with quality

• More physical stores to strengthen brand presence and have quick returns instead of customer having to package and ship back.

Business Analysis WHERE DOES VALUE COME FROM?

• Low cost high quality alternatives

• Direct to consumer pricing as it eliminates extra costs keeping prices down

• Mission driven company with an ethical business model

Business Model Type:

• DTC + Omnichannel

• Social Impact Model (Buy one give one)

Implications of Business Model Analysis

• The DTC model cuts cost vs competitors with traditional methods

• Mission-driven branding

• High operating costs due to physical store costs

• DTC may not be enough for profitability

Threat of New Entrants

• Low barrier to entry as anyone can start an online eyewear brand

• It is hard for newcomers to match WP’s identity so they have differentiation through their model

• It is capital/monetarily intensive for a new brand to expand the same way

• Brand recognition and loyalty aids a little in position

• Manufacturing costs that Warby and Luxottica use costs $6 (From the case) (Cheap to bulk produce)

Power of Suppliers (HIGH)

• Luxottica dominates eyewear manufacturing and retail, controlling some suppliers

• Suppliers can easily decide to raise prices, leaving lower profits

Industry Rival (HIGH)

• Luxottica and Private labels dominate the market

• COmpetition from budget brands (Zenni Optical, eyebuydirect) and Premium brands (Ray-ban, lenscrafter etc)

• Price wars and promotions could hurt margins

Power of buyers (HIGH) 

• Customers have alternatives (Cheaper brands or designer)

• Low switching costs 

• Customers are price-sensitive so it limits Warby to increase prices

• Reviews empower buyers and influence others

Threat of Substitutes

• Contact Lenses

• LASICK surgery

• Cheap fast fashion eyewear

• In-Store prescription fulfillment (Costco, Lenscraft)

Complementary Products:

• Health insurance partnerships

• Blue-light fiilters and smart glasses

• Eye Exams & Prescription services

Implications of Porters

• Strong Supplier power and high competition

• Threat of substitutes is tricky as long-term technology is advancing and being accessible

• Opportunities:

  • Expanding in complementary products

  • Control over manufacturing and insurance parrnerships

SWOT ANALYSIS STRENGTHS

• Strong brand and customer loyalty

• Control in design, production leading to fast product development and good quality conntrol

• DTC Business model cuts middlemen

• Low prices compared to competitors

• Expanding product lines (Scout line) 

• Omnichannel and Tech driven

SWOT ANALYSIS WEAKNESSES

• Profitability issues as they are operating at a loss

• Low market share as WP has 1% of eyewear market struggling to gain more

• Depending on direct sales only

SWOT ANALYSIS OPPORTUNITIES

• WP Could market their speed and trend-driven designs as competitors rely on third party manufacturers

• Expanding on omnichannel presence as Hybrid shopping is key

• Can fully integrate with insurance options to coincide with a larger customer base

• B2B partnerships with companies or universities

• Expand Lenses

SWOT ANALYSIS THREATS

• Industry giants such as Luxottica and Costco

• New online competitors such as EyeBuyDirect

• WP positions as an affordable luxury but if customers tighten budget or economy recedes they might opt for cheaper alternatives

Implication SWOT: WHy is this important?

• WP has strong branding but limited market share creates long-term risks

• Without profits and market share growth will be difficult

SWOT IMP: What should WP do with the info?

• Differentiate more

• Find new revenue streams like collabs, premium lines, new deals

SWOT IMP: WHat does this mean for strategy?

• Needs to expand beyond their current product (Take a risk)

• A partnership or acquisition could be possible.

Strategic Choice:

Acquisition or Partnership

Strategic Choice Acquisiton

To enhance profitability and compete with giants, they can acquire a small optometry network to implement in their stores to give physical services allowing them to integrate eye exams, prescription,s and insurance into the business model. It would compete as a one-stop shop for vision care while maintaining its DTC advantages

Strategic Choice Partnership:

 Partner with trendy Lens brands like Hapakristen. Gen Z will become their next target market in the years, and brands like HapaKristin, a Korean lens brand, have successfully captured the demographic with affordable and stylish contact lenses. WP could either distribute these lenses in their physical stores as Hapa only has around 2-3 flagship stores in the U.S. or develop a lens collection or give an offer when buying glasses with every purchase. This would expand WP’s reach beyond eyewear as it would grow their lens market but also Hapa can allow them to reach a global audience like Korea if they begin to use this opportunity to position their glasses in Korea as well, which could allow for future opportunities in other countries.