When Warby Parker (NYSE: WRBY) first launched its online eyeglass shop, its goal was simple: Make eyewear more accessible and affordable for consumers. One of the ways it managed to do that was by selling directly to customers rather than dealing with the expense of maintaining physical stores.
The model was simple yet unique. Customers could go online, browse Warby Parker's selection, and choose several pairs of glasses to try on at home. Once a customer found an appealing pair of glasses, they'd upload prescription details and wait for their customized frames to arrive in the mail.
Through the years, Warby Parker began introducing physical stores into the mix, all the while depending heavily on its online store for the bulk of its sales. But now, Warby Parker has gone public -- a testament to its explosive growth. And its current business model looks very different from the model it relied on when it first launched.
The need for physical stores
When it started out, Warby Parker was among the most well-known direct-to-consumer brands -- brands that maintain an online presence and ship goods directly to customers' doors. But now, the eyewear giant relies just as heavily on its physical stores as it does its website.
These days, Warby Parker's sales are split evenly between its online store and its more than 140 brick-and-mortar locations. And that's positive news for real estate investors.
In the wake of the pandemic, a lot of customers are making online purchases, and the fear is that as that trend takes off, it'll drive physical stores into extinction. That would, in turn, be terrible news for investors in shopping center and mall real estate investment trusts.
As it is, commercial landlords have lost their share of tenants, thanks to the pandemic. So, the emergence of a strong brand with a robust physical store presence is a good thing for shopping centers and malls with vacancies.
Warby Parker's physical stores have helped the brand tremendously. The eyeglass maker's sales average $2,900 per square foot annually.
But Warby Parker doesn't just rely on its stores to generate sales. Rather, it relies on its physical locations to act as marketing points for consumers who aren't familiar with the brand. People who stumble across a Warby Parker store may be inspired to pop in for a visit. The result? The potential for more revenue.
Plans to expand
By the end of 2021, Warby Parker plans to have opened over 30 new stores, and it intends to continue scaling in the coming years. But let's be clear: The eyeglass maker has no plans to abandon its online store. Quite the contrary -- its whole business model centers on having its online and in-store experiences work together to drive sales.
In time, Warby Parker could actually grow to become a shopping center and mall mainstay, as it fulfills a basic need at a price point that's far more affordable than its competition. That expansion could benefit real estate investors in a very meaningful way.