Piyush Bansal makes Lenskart 5 Billion Dollar Company

Piyush Bansal makes Lenskart 5 Billion Dollar Company

Lenskart is one of the most revolutionary startups in the Indian business ecosystem what started as a garage startup by three engineering boys has now become such a strong player in the Indian eye space that today it has grown to serve more than four lakh customers on a monthly basis and claims to account for nearly 30 % of India’s organized eyewear market and what was absolutely stunning to me was that when the financial year ended in 2020 while titan eye plus revenue grew by just 6 % from 511 to 544 crores.

Lenskart’s revenue exploded by 98 going from 485 crores to over 963 crores and because of this Lenskart took a major lead in the eyewear market of India and not just that today they have more than 800 stores in 120 cities across the country and are valued at 5 billion dollars with their first year of profit in 2020.

So the question is how did Lenskart beat the giants like titan in the eyewear industry what was Lenskart’s business strategy and as entrepreneurs and investors what are the lessons that we need to learn from Piyush Bansal and his legendary team at Lenskart.

Eyewear Market

This is a story that dates back to early 2000s back in the day buying specs was a cumbersome procedure you first had to take time out and go to the optician select suitable frames from a limited collection check on various styles choose your glasses and then finally wait for nearly six to seven days before receiving your glasses.

Now although it looks pretty simple on paper only the ones who have gone through this procedure will understand how cumbersome this is not just that if you look at the eyewear market of India back then while 95 % of the market was filled with unorganized players selling cheap products with no guarantee or no warranty.

On the other side in the organized market although the service was good the cheaper specs you could buy used to start from 1500 rupees which was Titan eye plus entry product that too only from 2007 onwards and below this category that is below 1500 rupees price range there were barely any reputed brands.

Now when you see this cost range most people would assume that the reason why the prices are so high is because of the high making cost or perhaps the low margins in the eyewear market right well guess

What this is what the margins in the eyewear market look like

If you look at a normal brand like Warby Parker while frames and lenses cost them 10 dollars shipping costs them 10 dollars trade and advertising costs 5 dollars the total cost of a typical product stands at 25 dollars.

Whereas their selling price is 95 dollars which means you are looking at a crazy profit margin of 73 % not just that if you look at Luxortica which is secretly a monopoly in the eye-wide space of the world.

Their royalties cost 2 dollars marketing and ads cost 6 dollars frames and lenses cost 24 dollars which I already think is an exaggeration by the way and lastly their shipping costs 2 dollar so total cost is 34 dollar but their typical selling price is 200 Dollars which is a margin of 83.

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Now the obvious question over here is with the margins being so high and the cost being so exorbitant why don’t these brands bring down the cost to make it affordable for the common man well there is a not so sweet capitalistic intent behind it.

You see guys whether you are a rickshaw driver or school teacher or even a businessman if you know that your child needs vision correction you will have to buy a pair of glasses and even if it costs 1500 rupees if a rickshaw driver knows that his kid cannot see without it, he will shell out his entire life saving just so that the kid can study well.

Piyush Bansal makes Lenskart 5 Billion Dollar Company

So you see it’s a mandatory high stake pain point that needs to be addressed and hence in spite of the high pricing people will stretch their limits to be able to offer them this is the same reason why diabetes meds are so costly and the same reason why colleges ask for exorbitant donations without bothering about the affordability of the opposite person because it is a mandatory high stake pain point.

But this is where ladies and gentlemen our shark Piyush Bansal and his co-founders saw a mammoth business opportunity and they spotted three problems that needed to be addressed in the eyewear market of India.

Three Problems Of Eyewear Market

The first problem was obviously the costing which gave them a huge scope to play in the 250 rupees to 1500 rupees segment

Number two was that eye wear was still being treated like a medical equipment which did not make the people with glasses feel good. It was very similar to how people with hearing aid feel today and lastly.

Let alone affordability even accessibility to opticians was very very limited in India more than 500 million people need vision correction and yet not even 200 million people are actually doing something about it on top of that in the tier 2 tier 3 cities even today, there is a higher need of opticians.

Solving The Problem Of Eyewear Market By Lenskart

This is the reason why Piyush Bansal and his co-founders started Lenskart with a vision to correct the vision of India. So riding the e-commerce wave Lenskart entered the prescription glasses market with three value propositions cost convenience and variety while the cheapest branded product which was tied in eye plus was priced at 1500 rupees.

Lenskart cut its margins and started selling at a bare minimum price of 250 rupees while local options took 6 to 7 days to deliver your glasses Lenskart started sending them in just 72 hours while local opticians had just a few hundred designs Lenskart had 5 000 designs to choose from while local opticians did not give any guarantee or warranty on unbranded products Lenskart gave away one year warranty on frames one year for lenses and to make it even better they even introduce the 14 days no questions asked return policy.

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Therefore lenskart provided all the perks of a branded product at the cost of an unbranded product on top of that while the glasses from local opticians often had a margin of error Lenskart delivered their products with zero error tolerance and merely because of this massive scale lens squad was able to completely eliminate the middleman through its online model and was able to cut the cost by nearly 70 %.

This is the reason why they could sell their products at such low prices and this is how Lenskart entered the Indian market with a bang but just like any other new age business model lens kart tackled the adoption challenges very very elegantly to lure the skeptics of e-commerce.

Piyush Bansal makes Lenskart 5 Billion Dollar Company

They rolled out crazy offers like a free frame and heavy discounts to tackle the lack of trial problem they came out with their revolutionary virtual try on feature and they spent a ton of money in making eyewear look cool with lifestyle marketing and most importantly they very very strategically eliminated the very need to go to the opticians to tell you about it.

When people doubted their vision they had to go to an optician who had equipments to check their vision and then they gives the power figures to the customers now since people have already stepped out of the house many people were more likely to order glasses from the same optician herself.

Otherwise they have to come home open the computer because mobile internet wasn’t that good back then then go online enter the power on lenskart.com and then place the order and this friction itself reduce the chances of people going to Lenskart.com.

TThis is the reason why Lenskarts started making some strategic partnerships and investments in companies like 6 over 6 and this enabled them to do home visits for eye checkup so now Lenskart’s own eyewear specialist would visit the customer’s house for a free trial carrying 100 best-selling frames.

This way using the lens meter solution the field executors could run low cost vision test at home eventually eliminating the very possibility of customers going to opticians and now not only could the customers get the power checked but even the frames could be tried and the customers could make a purchase with the executive himself.

Therefore Lenskart made it super easy to place orders and reduce the friction of the process of going to the optician coming back home and then placing the order this is how through variety cost getting and convenience and by carefully addressing the adoption challenges, Lenskart successfully got a huge chunk of the Indian audience to add up to online shopping for eye web on top of that they even entered the semi premium and premium market with their brands like John Jacobs and Vincent chase.

But you know what guys what was absolutely astonishing to me was that their accuracy of giving the right product to the customers is so amazing that their return rate was as low as 4 %.

This number is super crazy because in e-commerce even a 15 return rate is considered to be excellent.

Revolution in Lenskart

But you know what guys something strange happened in 2014 as we saw suddenly Lenskart started opening physical stores all across the country in 2014 itself.

Lenskart launched 20 offline stores in partnership with optometrist in tier 2 and tier 3 cities of India but now the question is did Lenskart become exactly what they were trying to disrupt and if not why did they open up stores.

Well there are three reasons for that number one like we saw before 95 of India’s eye market was filled with unorganized brands which had no way of online access and still people bought from them and back in 2014 internet penetration itself was too low.

So by being adamant with the online only model Lenskart was missing out on a ton of customers in tier 2 tier 3 cities who were still shopping offline merely because of skepticism secondly because Lenskart was investing in their manufacturing.

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They already had systems in place that could produce high quality glasses at very cheap cost and that too with the supply chain so robust that they could deliver to thousands of pin codes all across the country in just three days and lastly because of digital marketing and its delivery model the name of Lenskart had already reached the corners of the country which by default made them far far superior as compared to unorganized brands and at the same time the organized players like lawrence and mayo did not have a strong presence in tier 2 tier 3 cities of India.

So the only thing needed for Lenskart was the touch and feel factor so you know what Lenskart adopted something called the endless aisle strategy which is a perfect mix of both online and offline models and this is how it works out just like you walk into a physical store you walk into a Lenskart store which has the best selling frames an online catalog and an executive who can help you make the perfect choice.

Piyush Bansal makes Lenskart 5 Billion Dollar Company

Here you get your power checked choose the frame you love and the store manager will place an order through his online portal and when this is done your process is complete and the rest of the process that is fitting manufacturing and delivery of your product will come from lenskarts conventional supply chain itself.

So to put that straight the physical store is merely being used to give you the sense of touch and feel and the rest of the supply chain is still the e-commerce supply chain only.

Now the question is what exactly are the benefits of doing this number one while normal optician orders 2000 frames at a cost of 200 rupees average and has to do stock keeping in his physical store.

1. Lenskart could place an order of 2 lakh frames at barely 100 rupees average cost which is stocked up in its warehouse and this stock could be shipped all across the country so the Lenskart store itself does not have to worry about dead inventory

2. While opticians only have 500 frame choices Lenskart stores can offer 5000 designs without worrying about dead inventory this way Lenskart can offer both lower prices and higher variety and lastly

3. since both ways you have to wait for the glasses to be made Lenskart has a massive advantage here while Lenskart uses its superior manufacturing technology to manufacture its glasses and still delivers it early opticians do not have such advanced tech which results into both higher cost and less precision cherry on the cake.

Because of this cost cutting and high margins of the industry Lenskart is able to give a healthy commission of 25 to 30 to its franchise owners which further makes it viable and desirable for local options to get converted into a Lenskart store and when this got combined with a 14 day return policy and a quick delivery system the barrier to entry for local opticians increased by a large extent as a result the number of customers of Lenskarts started peaking this laid such a strong foundation for Lenskart that when the pandemic hit while the opticians had to keep their shops closed while big brands like Lawrence and Mayu had limited reach.

Lenskart was seamlessly able to deliver its products through the length and breadths of the country this is the reason why lenskart grew by 98 from 486 crores to 963 crores in revenue while tide and eye plus grew by just 6 % to just 544 crores and now they have already started dominating the premium eye space with John Jacobs in the 3 000 plus base and vincent chase in the 1000 to 1500 range and if done right these brands could become the biggest eyewear brands in India and this brings me to the most important part of the episode and that are the lessons from the case study.

Lessons From Lenskart

The case study lesson number one every time there is a technological revolution more often than not you will either have to change your product or your supply chain or sometimes both of them in this case while the product which is a pair of glasses remain the same the supply chain of these glasses were revolutionized due to e-commerce and Lenskart happened to become an opportunist and built a low cost highly efficient supply chain to dominate the eye wear market in India

lesson number two every time you see a mandatory undisabled pain point that is being leveraged by corporations you are looking at a mammoth business opportunity in this case it was a pair of glasses but if you remember from the gillette case study it was the exorbitant cost of razor blades and lastly while most people think that brick and mortar stores will be dead the concept of endless isle is a breakthrough in retail that will redefine the way we shop and if you want to read about in detail please read about how warby parker is using the endless aisle concept to sell eyewear in the u.s.

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