David Kind and the Eyewear Goliath(s).
With Luxottica and Warby Parker both dominating eyewear, David Kind is carving out a high-end moat in a category that’s ultra competitive at the low end.
One of the oldest and most infamous recorded upsets of all time involved some rather basic tools. A rock in a sling, unflappable nerves, impeccable aim, and a bit of luck — that was all it took for a gritty young David to reset Goliath’s legacy from that of a feared warrior into a popular stand-in for business school case studies. Make no mistake, it was a stunning result. But even accounting for the odds stacked against him — and the very real winner-take-all stakes at play — David’s triumph might have been overstated. After all, he only had to deal with one lumbering giant bearing down on him — not two at the same time.
But two Goliaths is exactly what a modern-day David — Los Angeles-based online eyewear operator David Kind — is faced with today. Squeezed on either side by two industry behemoths — Luxottica, the eyewear conglomerate that controls nearly 90 percent of the industry on one side; and Warby Parker, the seven-year-old VC-backed unicorn, and the biggest player in the online eyewear business, on the other — its task, and that of its CEO, another David, appropriated named, Dave Barton, has been made twice as complicated.
An eyewear veteran spanning two decades, Mr. Barton is faced with establishing a moat for a small company that’s operating in a bustling online category where Warby Parker dominates. Without the same set of resources (David Kind is funded from personal debt, savings, several angels, and a strategic investor, rather than hundreds of millions in venture capital) it won’t come easy.
The online market is especially crowded, largely owed to Warby Parker’s surge. Since its debut in 2010, a bevy of direct-to-consumer eyewear upstarts around the world have sprung up in its wake. In doing so, they’ve rapidly transformed the eyewear market from a calm and primarily local one, where people relied on their neighborhood eyewear store, into a rambunctious and vastly global one, where consumers, especially those in their 20s and 30s are looking to online firms first. Brands starting out today must be able to compete on the global stage, not only in terms of compelling design and branding, but also in infrastructure and order fulfillment. Consumers, accustomed to the convenience of the direct-to-consumer model, demand a flawless experience, and expect nothing less.
And that’s just on the e-commerce side. The traditional optical market is even more daunting. Luxottica, with a sprawling eyewear infrastructure, absolutely dominates here. E-commerce is making a dent in their market share, but not as much as one might assume. Stores still account for the lion’s share of market revenues, according to Adeline Ho, Eyewear Industry Analyst at research firm Euromonitor. “I would say that these emerging brands, while not at the kind of scale of traditional retailers yet, are certainly set to affect the market share of established players,” she tells us. But, she explains, brick-and-mortar sales still drive 90 percent of eyewear sales in the US, which, at $2.8 billion in sales in 2016, happens to be the largest global market for the online category. In other words, “online retailers still have a long way to go before they truly dominate eyewear retailing,” she says.
The future, as with many sectors in the modern luxury space, is in omnichannel retail — the convenience of being able to buy in store or online — and this helps in part to explain Warby Parker’s aggressive retail expansion across the US (and recently in Canada). But for David Kind, which operates no stand alone retail stores in a category that still rewards such moves, the brand’s prospects remain somewhat capped without that presence.
Opposite other modern luxury companies (MLCs), David Kind’s origin story is not that of the well-worn industry outsider trope. Instead, it’s the product of smart observations owed to Mr. Barton’s career as an eyewear insider at some of the top names in the industry. He worked at action sports brand Spy Optics from 2001 – 2006, then landed at Oliver Peoples in 2006 heading up product development and merchandising. It was here where he truly started grasping the inner workings of the optics industry as a whole. “I feel like I got my PhD in eyewear at Oliver Peoples,” he jokes.
Through the position, he made connections with factories and manufacturers throughout Europe and Asia, which would prove to play a big part in the launching of David Kind. And working under Oliver Peoples founder Larry Leight also proved valuable, helping him absorb the finer details of proper eyewear design and the process of replicating the perfect pair of frames. “There’s a lot of tribal knowledge there,” he says. “I really came in and started learning where the magic was happening, and how to put it down on paper so you could repeat it.”
After Luxottica acquired Oliver Peoples in 2007, Mr. Barton turned down an executive role there, choosing instead to brave the entrepreneurial waters. He started KBL, a contemporary, high-end wholesale brand with a friend from Oliver Peoples. The brand was initially successful in landing accounts with Saks and Barneys, but the partners quickly discovered just how difficult it could be competing as a small, young brand in a market with well-established rules. The wholesale model was a catch 22: Luxottica’s brands had the big budgets required to control prime shelf space, but for small brands operating in the pre-e-commerce era, stores and shelf space were requirements. Either that, or upstarts built out their own small shops.
“To compete at retail as a wholesale brand, the retailer is a huge asset, but also a huge obstacle,” says Mr. Barton. “You’re competing with ad dollars for shelf space with the Luxotticas. It’s a resource-heavy venture, and it’s not always the best product that wins, honestly. The incumbents usually have the advantage.”
Internally, there was also conflict. His partner leaned fully in favor of wholesale. But Mr. Barton believed the future was online. Yet selling online would have alienated the wholesale retailers, which would immediately cause their biggest accounts to start looking at them as competitors. Stuck at a crossroads, Mr. Barton departed KBL and began developing the concept for David Kind.
His time at KBL, Oliver Peoples, and Spy Optics revealed the lack of a true meritocracy at the retail level, which prevented consumers from choosing the best quality at the best price. But the direct-to-consumer model completely changed that dynamic. “I said, ‘Let’s try to create an experience online that leverages high-tech and is actually a better experience than you would get at the best level offline,’” he says. “I was just unsatisfied with the ability to get the best products in customers’ hands.”
His solution? Building a premium eyewear brand that produces the best prescription frames and lenses on the market, at a fraction of the price shoppers would expect to pay at retail. All this, while making the experience for customers as painless, personal as possible. Rather than building a brand around a retailer, David Kind would be built with consumer at the center. The result is an operation that sells best-in-class prescription eyewear that’s manufactured in Italy and Japan — and that would normally retail between $500 and $900 — for a less bloated $295. In effect, the company democratizes the search for the highest quality optics on the market.
Mr. Barton bristles at the inevitable Warby Parker comparison. And as an online brand with a similar try-at-home model, those comparisons come often. Protest though he might, in some ways the it’s an apt one, if by virtue of the fact that both David Kind and Warby Parker represent a new generation of eyewear companies going direct-to-consumer. Beyond that, though, and things start to diverge.
While Neil Blumenthal and Dave Gilboa have created a billion dollar business selling quirky, inexpensive prescription eyewear and sunglasses to younger shoppers mostly in their teens and mid-twenties, Mr. Barton is aiming for an older shopper. They’re mostly in their mid-thirties to forties, have money to spend, and appreciate the step up in quality that a company like David Kind provides. The brand’s customer typically makes around $75,000 per year, is more likely to go for smaller niche brands like Mr. Barton’s, and as part of an age group that tends to be overlooked as marketers obsess over younger generations, are elated when they find a company that’s angled towards them. And they tend to remain loyal to brands like these.
This is David Kind’s silver bullet. It is through their premium positioning, and their catering to a more established generation of shopper, that David Kind is able to compete and carve out some significant wiggle room as its two much larger competitors look to widen their stance even further. Euromonitor’s Ms. Ho agrees: “David Kind is not joining the crowded lower-end market (which is where [Warby Parker] is),” she says, “and is instead setting itself apart by being more premium and offering better quality and service.”
Pricey — for a reason.
Still, getting customers to disassociate online eyewear as being cheap presents the biggest challenge for Mr. Barton. After four years of operation (the brand launched in November 2013), the business has yet to cross over into profitability — largely due to the budget required to re-educate consumers, who are used to paying around $100 or less for their online frames. “Consumers are still conditioned to seek deep discounts online,” says Ms. Ho, “so as the premium end of the spectrum, [David Kind] will have to take quality, fit, service, and setting up physical shop more seriously than other retailers.”
Their mission will be to make clear for shoppers that with David Kind’s steeper prices come some very real upgrades. And there are three particular advantages that together equate to a deeper level of care — and long-term servicing of the frames — that set Mr. Barton’s firm apart in the DTC eyewear category.
The first involves investment in product and the value in pricing. David Kind’s frames are top quality, and Mr. Barton claims to spend four to five times more than its competitors to make that possible. The pricing is not inflated by the branding, marketing, and structural costs that affect Luxottica brands, but Mr. Barton is also not driven by the idea of “cutting out the middleman”, a common refrain among online upstarts. “That may work when cutting out low value overhead when selling t-shirts, shoes, and handbags,” argues Mr. Barton, “but not when looking for a quality pair of eyeglasses.” That’s because in eyewear, the middleman is the optician — a trusted, credentialed professional offering a necessary service. And there are drawbacks to taking that person out of the equation: misaligned lenses, for instance, which impact a company’s remake rate. By embracing the optometrist’s role — David Kind has four on staff — it’s remake rate is 2 percent in an industry that hovering around a 12 percent rate on average.
David Kind also offers a program called “refresh your frames”, which is the second advantage. “When you get a new prescription, and you buy a new pair from us, we’ll refurbish your existing pair with new lenses and a tune up for free,” says Mr. Barton. (They also offer the service for a fee, if shoppers aren’t looking to purchase a new pair of frames.) “No one else is doing this online due to the ‘disposable’ nature of [our online competitors],” he adds. “In contrast, our eyewear is intended to last.” This shows a higher emphasis on personal service and on long-term customer retention, and it justifies the premium-priced product. Even so, David Kind is not singular in this: Warby Parker has just opened its own optical lab in New York’s Hudson Valley to offer more accurate and faster in-house prescription turnarounds for its customers. Still, as MLCs mature, expect to see increased dedication to long-term repairs and service. David Kind is ahead of the curve here.
The third advantage, also a continuation of long-term preservation and repairs, is that the company also offers a ten year warranty against defects. Competing brands like Persol and Oliver Peoples only offer two years (and Warby Parker, less than that). This again helps to set David Kind apart.
Mr. Barton certainly has his work cut out for him. But in an era, and a in category, that sees the direct-to-consumer model as the avenue for billion dollar valuations, he is one of a growing number of many modern luxury players who is comfortable with not reaching that milestone. Operating as a niche firm serving a highly-focused customer group is the ultimate motive, and rather than shooting for the stars, a business selling $10 million of frames per year, is perhaps more realistic — and more palatable for Mr. Barton.