The godfather of direct-to-consumer, Warby Parker, proves why storefronts aren’t dead

August 25, 2021, 2:13 PM UTC

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Direct-to-consumer companies are known for being digital first, launching their storefronts online rather than on New York’s Fifth Avenue. Perhaps unsurprisingly, their rise fueled worries over the accelerated death of commercial real estate. After all, if a company could sell directly to consumers online, why would they bother with a costly rent?

But the company that helped jumpstart the bevy of direct-to-consumer companies, a category that includes everything from selling mattresses to dog toys, is living proof why storefronts aren’t anywhere close to dead.

Warby Parker, the eyewear retailer with at-home try-ons, said in its Tuesday filing to go public that a surprising majority of its revenue came from in-store sales.

The company estimated that 65% of its net revenue in 2019 came from store locations, with the rest from online channels. While that balance flipped during the brunt of coronavirus-related lockdowns in 2020, the company says it has seen a shift “back towards pre-COVID-19 levels,” with 50% of revenue in the first half of 2021 sourced from its physical locations.

In a sign that the company believes stores will continue to be important despite predictions that the coronavirus will shift consumer preference to online channels, Warby Parker added on net 26 stores by the end of June 2021 compared to the end of 2019.

If that’s not enough, the company’s own description of how it views its physical footprint also speaks to the importance it places on in-store: “Our retail stores serve as valuable marketing vehicles for introducing new customers to our brand and driving repeat purchases.”

And Warby Parker isn’t alone in its continued expansion of storefronts: Amazon is reportedly planning to open department stores, per the Wall Street Journal, which is expected to have a smaller footprint compared to the traditional department store.

Meaning the new age of retailers might not be as different as they say from the previous generation—storefronts after all are not dead. But the war for customers might not only be in the internet, but also in the look and feel of the physical stores themselves.

That said, Warby Parker’s growth did slow in 2020 in part due to much of its demand coming from physical channels: Revenue grew just 6.3% to $393.7 million while losses fell about 2.8% to $55.9 million despite an increase in media spend to point customers to its non-physical services, like telehealth and e-commerce. That figure rebounded slightly in the first six months of the year, with revenue up 53% to $270.5 million and losses that doubled to $20.4 million.

THE GHOST OF ELIZABETH HOLMES: Blood testing startup Theranos is dead. But its founder Elizabeth Holmes remains a ooming figure for female entrepreneurs, who are finding themselves unfairly compared to the now bizarrely canonized figure, per this important story from the New York Times’ Erin Griffith. One founder, Julia Cheek of Everly Health, says that those around her even suggested she dye her hair to stop the comparisons.

ONLYFANS BLAMES THE BANKS: When OnlyFans banned explicit sexual content last week, it blamed its “banking partners and payout providers” for the decision without naming the parties involved. Much of the ire then fell on the Visas and Mastercards of the world. But Mastercard said it had no part in the decision. OnlyFans CEO Tim Stokley on Tuesday said it was the Bank of New York Mellon that drove the decision in an interview with the Financial Times. The Bank however declined to comment.

And then in an odd twist, OnlyFans said it paused the ban in a tweet: Wednesday “We have secured assurances necessary to support our diverse creator community and have suspended the planned October 1 policy change.”

Lucinda Shen

Jessica Mathews compiled the IPO and SPAC sections of this newsletter.


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