$5M & 15% of eyewear wholesale cost is licensing fees

Source: Businessweek, Jun 2011

Gilboa and his shopping companion that day, Neil Blumenthal, aren’t disinterested observers: They are co-chief executives and co-founders of Warby Parker, a 17-month-old company that sells eyewear online. Customers test the startup’s retro-style glasses, which go for $95, including prescription lenses, through a mail-order, try-it-at-home program.

The startup’s success—Warby Parker has sold more than 50,000 pairs of glasses, says it’s profitable, and raised $1.5 million from investors in May—is inspiring competition from more established retailers.

Warby Parker uses the same materials and the same Chinese factories as Luxottica. It can sell its glasses for less because it doesn’t have to pay licensing fees, which can be as much as 15 percent of the $100 wholesale cost of a pair of glasses. Warby Parker doesn’t have to deal with retailers, either, whose markups can double or triple prices, it says.

Competitors have begun eyeing Warby Parker’s corner of the market. In June the discount fashion site Bluefly (BFLY)introduced Eyefly, which sells custom, vintage-looking glasses for $99. Says Blumenthal: “They blatantly stole our business model, our aesthetic, our checkout process, even one of our photographs.”

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