(Saturday Deep Dive) - Lenskart

The list of trailblazing startups in India is brimming with familiar names: Flipkart, Paytm, Byju's, Oyo. However, scroll down a bit, and you'll find Lenskart, a company that's revolutionizing how Indians buy eyewear. And that is the company we will dive deep into this week.

Lenskart has taken an extremely fragmented market and created a behemoth that has redefined the industry in India and is ready to start competing on the international market.

Enjoy!

Lenskart was founded in November 2010 by Peyush Bansal, Amit Chaudhary, and Sumeet Kapahi. Peyush Bansal, an alumnus of McGill University and a former Microsoft employee, initially dipped his toes into e-commerce with ventures like SearchMyCampus and Flyrr.com, the latter targeting the U.S. eyewear market. Seeing the untapped potential in India's eyewear market, Bansal launched Lenskart to bridge the gap in accessibility and affordability of quality eyewear in the country. Starting with just contact lenses, Lenskart quickly expanded its inventory to include eyeglasses and sunglasses by March 2011, establishing itself as a comprehensive eyewear retailer.

Lenskart's growth journey has been nothing short of remarkable. The company embraced an omnichannel approach, seamlessly blending online and offline experiences to meet the diverse needs of its customers. It rapidly scaled its physical footprint, boasting over 1,300 stores across 313 cities in India by 2024, while continuously enhancing its online platform. Technological innovations, like AI-driven eye exams and a virtual try-on feature, played pivotal roles in attracting and retaining customers. Strategic acquisitions, such as the Japanese eyewear brand Owndays in 2022, further strengthened its market position.

Unlike many startups that prioritize growth at all costs, Lenskart has been profitable for several quarters over the past two years. The company has focused on maintaining strong unit economics and achieving profitability rather than burning through capital. This balanced approach has ensured its steady rise in the competitive eyewear market.

Today, we're diving deep into the story of Lenskart, exploring its origins, growth strategy, challenges, and future prospects. We'll cover:

• Lenskart in Context

• The Founders' Vision

• The Omnichannel Strategy

• Technological Innovations

• Strategic Acquisitions

• Financial Health and Profitability

• The Road Ahead

It's our pleasure to introduce you to Lenskart, a company that's not just selling eyewear but redefining an industry.

The Indian eyewear market, while promising, presents several challenges for players in the industry. Here’s an in-depth look at the primary obstacles:

1. Fragmented Market: The eyewear market in India is highly fragmented, with a significant presence of unorganized players, accounting for about 70-80% of the market. This fragmentation leads to inconsistent pricing, quality, and consumer trust issues.

2. High Cost of Branded Eyewear: Branded eyewear in India is often perceived as expensive, limiting its accessibility to a broader audience. This high cost barrier is a significant challenge for organized players looking to expand their market share.

3. Lack of Trained Professionals: There is a shortage of trained optometrists and eye care professionals in India, especially in rural areas. This gap affects the quality of eye care services and impacts the overall growth of the eyewear market.

4. Inadequate Eye Care Infrastructure: Poor infrastructure for eye care services, particularly in rural and semi-urban areas, limits the reach of eyewear products. Many regions still lack access to proper eye care facilities and professional services.

5. Online vs. Offline Sales Channels: The eyewear market is transitioning from traditional brick-and-mortar stores to online platforms. However, the online market is still nascent, making up only 3% of total sales, though it is expected to grow. Balancing between these channels and ensuring seamless omnichannel experiences is challenging.

6. Inventory and Supply Chain Management: Managing inventory efficiently is a significant challenge. Retailers need to ensure the availability of popular styles while avoiding overstocking, which requires precise data analysis and forecasting.

7. Consumer Awareness and Education: Many consumers are unaware of the importance of regular eye check-ups and the benefits of high-quality eyewear. Raising awareness and educating consumers about eye health is crucial for market growth.

8. Intense Competition: The market faces intense competition from both local and international players. Companies need to continuously innovate and offer unique value propositions to stay competitive.

9. Government Regulations and Standards: Compliance with stringent government regulations and standards can be a hurdle. These regulations are essential for ensuring quality but can add to operational costs and complexities.

10. Fluctuations in Raw Material Prices: The eyewear industry is sensitive to fluctuations in raw material prices, which can impact production costs and pricing strategies.

These challenges necessitate strategic planning and innovation for companies to thrive in the Indian eyewear market. Leveraging technology, improving supply chain efficiency, expanding into untapped rural markets, and enhancing consumer awareness are critical steps towards overcoming these obstacles.

Before Lenskart emerged as a significant player in the eyewear market, two global leaders dominated the industry: EssilorLuxottica and Johnson & Johnson Vision Care. Here’s a detailed look at why they were considered global leaders and what set them apart:

EssilorLuxottica

USP and Leadership:

1. Merger Synergy: EssilorLuxottica was formed by the merger of Essilor, the world's leading ophthalmic optics company, and Luxottica, a leader in the design, manufacture, and distribution of fashion, luxury, and sports eyewear. This merger combined the strengths of both companies, enhancing their product offerings and market reach globally.

2. Innovative Products and Technology: EssilorLuxottica is known for its innovation in lens technology and eyewear design. They introduced products like the Varilux series of progressive lenses and Crizal coatings, which offer superior vision correction and comfort. They also leveraged technology for precision manufacturing and customized eyewear solutions.

3. Extensive Distribution Network: The company has a robust global distribution network, including retail outlets like Sunglass Hut, LensCrafters, and optical stores worldwide. This extensive reach allows them to serve diverse markets effectively, maintaining a strong presence in both premium and mass-market segments.

4. Strong Brand Portfolio: EssilorLuxottica owns several well-known brands, including Ray-Ban, Oakley, and Persol. These brands have strong consumer recognition and loyalty, contributing significantly to their market leadership.

Johnson & Johnson Vision Care

USP and Leadership:

1. Focus on Contact Lenses: Johnson & Johnson Vision Care, a division of Johnson & Johnson, specializes in contact lenses under the Acuvue brand. They are pioneers in the development of disposable contact lenses, which revolutionized the contact lens market by offering convenience and improved eye health.

2. Advanced Technology and Innovation: Johnson & Johnson Vision Care invests heavily in research and development to innovate in lens materials and designs. Their products include lenses with advanced moisture retention and oxygen permeability, providing enhanced comfort for users.

3. Comprehensive Eye Health Solutions: Besides contact lenses, Johnson & Johnson offers a range of eye health solutions, including surgical products and eye care pharmaceuticals. This holistic approach to eye health helps them address various consumer needs comprehensively.

4. Global Reach and Market Penetration: Johnson & Johnson Vision Care has a vast global distribution network, reaching consumers through partnerships with eye care professionals, retail chains, and direct-to-consumer channels. Their strong relationships with optometrists and ophthalmologists help them maintain a leading position in the market.

Comparative Edge

What They Did Better:

• Innovative Product Development: Both companies led the market by consistently introducing innovative products that met evolving consumer needs. EssilorLuxottica's advancements in lens technology and stylish frames, and Johnson & Johnson's innovations in contact lens materials, set them apart.

• Extensive Distribution Networks: Their well-established distribution networks ensured wide availability and accessibility of their products globally, enhancing their market penetration and consumer reach.

• Strong Brand Portfolios: Ownership of multiple strong brands allowed these companies to cater to different market segments, from luxury to everyday use, maintaining consumer loyalty and brand strength.

• Focus on Quality and Compliance: Both companies prioritized high standards in product quality and compliance with stringent regulatory requirements, ensuring consumer trust and safety.

These strategic advantages enabled EssilorLuxottica and Johnson & Johnson Vision Care to dominate the global eyewear market before the rise of new players like Lenskart.

Here's a comparative table outlining some non-financial metrics for Lenskart and its global competitors in the hybrid eyewear market:

Lenskart's Growth and Adaptation Strategies

Lenskart's growth in the Indian eyewear market can be attributed to a combination of strategies inspired by global leaders like EssilorLuxottica and Johnson & Johnson Vision Care, tailored to the unique conditions of the Indian market. Here’s an in-depth look at their strategies and challenges:

Strategies Adopted from Global Leaders:

1. Omnichannel Presence:

   • Global Inspiration: EssilorLuxottica and Johnson & Johnson have extensive distribution networks that include both physical stores and online channels.

   • Localization: Lenskart adopted a hybrid retail model, combining online sales with an expanding network of offline stores. This approach addressed Indian consumers' preference for trying on eyewear in person before purchasing.

2. Technological Integration:

   • Global Inspiration: Johnson & Johnson leveraged cutting-edge technology in contact lens materials, while EssilorLuxottica used advanced manufacturing techniques.

   • Localization: Lenskart introduced innovative services like 3D try-ons and AI-driven recommendations to enhance the online shopping experience. This not only improved customer satisfaction but also differentiated Lenskart from traditional opticians.

3. Strong Brand Portfolio and Marketing:

   • Global Inspiration: EssilorLuxottica's strong brand portfolio and strategic marketing campaigns have been crucial to its global success.

   • Localization: Lenskart employed aggressive marketing strategies, including celebrity endorsements and robust social media presence, to build brand recognition and trust. Their marketing also included unique initiatives like free home eye tests and the "First Frame Free" campaign to attract first-time customers.

Localization Strategies:

1. Affordable Pricing and Discounts: Lenskart localized its pricing strategy to suit the Indian market by offering affordable eyewear and frequent discounts. This strategy helped in capturing a larger market share in a price-sensitive market.

2. Franchise Model: To expand quickly into tier 2 and tier 3 cities, Lenskart adopted a low-cost franchise model. Franchisees handled store setup while Lenskart supplied products and technology. This helped in reaching underserved markets without bearing the full cost of expansion.

3. Customer-Centric Services: Lenskart focused on providing excellent customer service through initiatives like free home eye check-ups and easy returns. This customer-centric approach helped build loyalty and trust among Indian consumers.

Challenges Faced:

1. Fragmented Market: The Indian eyewear market is highly fragmented with numerous local players and traditional opticians. This fragmentation posed a significant challenge for Lenskart in establishing a unified brand presence.

2. Operational Complexities: Managing a hybrid model with both online and offline stores introduced complexities in inventory management, logistics, and ensuring a uniform customer experience across platforms.

3. Consumer Skepticism: Initially, Indian consumers were skeptical about purchasing eyewear online. Lenskart addressed this by opening physical stores and providing virtual try-on features to bridge the gap between online and offline shopping experiences.

4. Supply Chain Disruptions: Global events, such as the COVID-19 pandemic, disrupted supply chains, affecting inventory and delivery times. Lenskart had to navigate these disruptions to maintain service levels.

5. Brand Perception: Aggressive pricing and discount strategies sometimes led to the perception that Lenskart's products were lower in quality compared to premium brands. Balancing affordability with quality was a continuous challenge.

Lenskart's ability to adapt global strategies to local market conditions, coupled with customer-centric approaches, has enabled it to overcome significant challenges and become a leader in the Indian eyewear market.

A recent McKinsey report explores Lenskart's impressive growth and strategies. The report emphasizes how Lenskart's use of technology and innovative business models has driven its expansion. Specifically, Lenskart uses AI for personalized eyewear recommendations, virtual 3D try-on features, and home eye check-up services, all of which have greatly improved customer experience and operational efficiency. This approach has helped Lenskart serve over 7 million customers each year and grow to over 1,300 stores worldwide, including major markets in Southeast Asia and the Middle East.

Furthermore, a KPMG report on the advisory and consulting services sector highlights Lenskart's smart use of funding and investments to boost its international growth. The report notes that Lenskart has received significant investments from global firms like KKR, Abu Dhabi Investment Authority, and SoftBank. These investments have been key to expanding Lenskart's operations and enhancing its technology, making it a leading player in the global eyewear market.

A Short History of Lenskart

The journey began with a spark of ambition. Fresh out of college and working in the US, Peeyush Bansal was eager to do something revolutionary. The idea began with a classified startup focused on student housing. This was the foundation; the core team was formed, and a culture began to build.

Initially, it was just him and a developer. They worked on student housing classifieds, going to Delhi University every weekend to understand student needs. The idea took off, and soon the basement was full.

Bansal had a small team of about 20-25 people, all driven by the same philosophy: create customer value. Inspired by his time at Microsoft, where the mantra was always to think about the customer, he wanted to do something truly impactful. After two years, they had about 30 people on board. Though student housing was a problem they were solving, the desire for something more revolutionary kept pushing them forward.

Luck played a part, as they always sought new projects and kept an open mind. One day, an article caught Bansal's eye: 40% of the world’s blind population was in India. That was the spark! Peeyush also remembered that one intern from IIT Delhi suggested they try something with eyewear.

Initially, only a fraction of their time went into this, but it soon became their main focus. The pivot came when they launched the website and got their first order for Ray-Ban specs from Chennai. They realized the significant demand and shifted their efforts.

They started with the goal to revolutionize eyewear in India, aiming for a 50% market share. But online sales alone wouldn’t cut it. They had to address the need for eye exams and the desire to try specs before buying. This led to their biggest milestones: offering home eye exams and opening stores for customers to touch and feel their frames.

They realized consumers weren’t buying from a channel; they were buying a pair of specs. These specs needed to be significantly better in value. At 2000 rupees, they aimed to offer something worth 20,000 rupees. Industry specialists often wondered how they provided such value, but that was their milestone: to deliver unparalleled quality and value.

And so, from a small garage team to a leading eyewear company, Lenskart's journey was driven by a constant desire to innovate and create customer value.

Fundraising

Securing their first round of funding, in 2011, was a long struggle. The primary challenge was convincing investors of the viability of selling eyewear online in India - a market not yet accustomed to e-commerce for such products. The founders faced significant concerns about consumer trust and the logistics of online eyewear sales, including ensuring accurate prescriptions and fitting.

To tackle these issues, Lenskart implemented a bold strategy: a 14-day 'no questions asked' return policy, which they later extended to a full year. They also established a dedicated call center to handle consumer grievances, building trust and scaling the business. This proactive approach to customer service caught the attention of IDG Ventures India, which decided to invest $4 million in the company.

However, the funding came with strings attached. IDG Ventures insisted that Lenskart diversify its product range to include bags, watches, and jewelry, mirroring the strategy of its competitor Titan Eye Plus. This led to the creation of additional ventures like BagsKart, WatchKart, and JewelsKart. While these new ventures quickly grew in sales, they also incurred losses, forcing Lenskart to juggle multiple businesses simultaneously.

Despite these hurdles, the strategy of diversification initially worked in Lenskart's favor. However, it also meant that the founders had to split their focus between multiple businesses. This situation reached a turning point in 2013 when media mogul Ronnie Screwvala advised Peyush Bansal to concentrate solely on Lenskart. Following this advice, Bansal shut down the other ventures, allowing Lenskart to refocus on eyewear. This pivotal decision helped Lenskart scale more effectively and secure further funding, setting the stage for its growth into a leading eyewear company in India.

The company’s growth trajectory continued with remarkable momentum. In 2016, Lenskart raised $60 million in Series D funding, followed by a substantial $275 million in Series G from SoftBank Vision Fund in 2019. This influx of capital pushed its valuation over $1 billion, cementing its status as a unicorn. By 2023, Lenskart had amassed over $1.6 billion in total funding across 17 rounds, with significant contributions from heavyweight investors like Abu Dhabi Investment Authority and ChrysCapital.

Till date, Lenskart raised more than $1.58 billion from investors.

Now, lets understand Lenskart’s manufacturing prowness. They’ve mastered the art of keeping their production lean through some smart practices and latest technology.

Manufacturing Facilities and Technologies

Lenskart’s factories are something to behold. One of their largest, located in Bhiwadi, Rajasthan, alone can churn out up to 50 million glasses a year. It’s like stepping into the future with advanced robotics, artificial intelligence, machine learning, and IoT technologies, all courtesy of Addverb Technologies. These high-tech setups include automated storage and retrieval systems and pick-to-light technology, making everything run smoothly and with pinpoint accuracy from production to dispatch.

Lean Manufacturing Practices

Lean manufacturing is at the heart of Lenskart’s operation. They’ve got this system down to a science, using a pull system to manage inventory, keeping work in process (WIP) to a minimum, and focusing on continuous improvement, also known as Kaizen. These practices keep their production process streamlined, costs low, and quality sky-high.

In-House Production

By keeping production in-house, Lenskart ensures strict quality control and optimal cost management. This setup lets them innovate constantly in product design and development, allowing them to quickly adapt to market demands and customer preferences.

Strategic Moves and Expansion

Lenskart is also making some savvy strategic moves. They’re consolidating their manufacturing operations in India to take advantage of cost benefits and boost efficiency. This includes plans to move their Southeast Asia manufacturing, including from the recently acquired Japanese eyewear chain Owndays, to their Bhiwadi facility.

Investment in Technology

Lenskart isn’t just stopping at manufacturing; they’re investing heavily in advanced technologies. Robotic lens manufacturing and assembly, for instance, ensure 100% precision and top-notch quality. Their distribution centers are equally high-tech, with robotics and AI driving operational efficiency.

Continuous Improvement and Innovation

Even during tough times like the COVID-19 pandemic, Lenskart has been investing in plant and machinery to boost production capacity. This focus on technological advancements and efficiency keeps them at the forefront of the eyewear industry.

Future Plans

Looking ahead, Lenskart is planning to expand even further. They’re considering setting up a new mega factory near Bengaluru airport, which will significantly boost their manufacturing capacity and efficiency. This move is all part of their strategy to cater to a larger global market and continue their rapid growth.

For those eager to delve deeper into Lenskart’s operations and strategic initiatives, the company’s official website and detailed business analyses on platforms like Strategy Boffins and Work Theater offer a wealth of information.

Acquisitions

Lenskart has acquired three companies so far. Let’s get into the details of each one of them:

Tango Eye (October 2023): In October 2023, Lenskart acquired Tango Eye - a firm that offers AI-based image and video analytics solutions. This acquisition will fall right into place with the strategy of Lenskart to ramp up the tech quotient and improve customer experiences in the physical stores. Advanced analytics technology enables Tango Eye to measure store footfall, analyze customer behavior, and improve efficiency.

Owndays (June 2022): The deal size of this Japanese eyewear brand is $400 million, thus making it the most significant buy for Lenskart. This strategic acquisition was concluded to widen the range of premium Eyewear at Lenskart and aggressively push the market share in the markets of Southeast Asia. Owndays is said to be the largest standalone eyewear company in the region, with a focus on effective in-store customer service. This acquisition of technology is said to complement Lenskart's omni-channel strategy.

DailyJoy (April 2021): Startup DailyJoy has been working in delivery-for-daily-essentials and was based out of Hyderabad. The main reason for this acquisition is the technological and operational boost from acquiring DailyJoy. It was supposed to integrate the team and technology of DailyJoy into Lenskart to increase logistics in delivery and customer service. This acquisition doubled the current technology team and further opened a new technology center in Hyderabad to move faster with innovation in their eyewear services.

It is in this broader strategy that associates with acquisitions at Lenskart; this company is looking to use technology and innovation in offering a streamlined path of customer experience alongside enhancement in operation—all while boosting its customer portfolio in India and beyond.

Marketing, Branding, and Promotions

Lenskart employs a multi-faceted marketing strategy that leverages digital marketing, social media, celebrity endorsements, and influencer partnerships to enhance its brand presence and drive sales.

Branding and Promotions

Lenskart focuses on delivering high-quality yet affordable eyewear. Their unique selling proposition (USP) lies in cutting out middlemen by using in-house robotic technology for manufacturing. They offer a wide variety of frames and a seamless online and offline shopping experience, including home eye tests and trials.

Celebrity Endorsements

Lenskart has partnered with several high-profile celebrities to boost brand visibility and credibility. Notable endorsements include Bollywood stars like Katrina Kaif and Karan Johar. The company uses these celebrities in various campaigns to create engaging, relatable content that resonates with their target audience.

Influencer Marketing

Influencer marketing plays a crucial role in Lenskart’s promotional strategy. They collaborate with lifestyle, fashion, and tech influencers to reach a broader audience. Noteworthy is their partnership with YouTube star Bhuvan Bam, which helped them tap into a younger demographic effectively.

Digital Marketing Campaigns

1. The War of Fair Prices (#KaranVSPeyush): This campaign featured Karan Johar and Peyush Bansal to highlight the fair pricing of eyewear, utilizing humor and relatable scenarios to engage viewers.

2. Nazar Ghati Durghatna Ghati 2.0: Launched during the IPL season, this campaign used humorous ads to stress the importance of good vision, promoting their augmented reality feature for virtual try-ons.

3. #HalkaRakhYaar: This campaign, fronted by Bhuvan Bam, promoted their lightweight AIR range of eyewear with a free-spirited, humorous approach.

4. Pride 22 (#SeeTheLove): This inclusive campaign celebrated LGBTQ+ pride with a collection of bold, colorful eyewear, emphasizing acceptance and self-expression.

Social Media and Content Marketing

Lenskart maintains an active and engaging presence on platforms like YouTube, Facebook, Instagram, LinkedIn, and Twitter. They use these platforms to post updates, promotional offers, and influencer content, creating a dynamic brand image. Their content strategy includes quirky ads, unboxing videos, and meme marketing, which helps them connect with a younger audience.

SEO and Paid Ads

Lenskart’s SEO strategy focuses on optimizing their website for better visibility and ranking, generating substantial organic traffic. They also invest in paid advertising strategies like PPC, social media ads, and banner ads to drive traffic and conversions. Their retargeting strategy involves regular email and SMS reminders to convert leads into sales.

E-commerce and App Strategy

Lenskart’s e-commerce strategy is anchored by a user-friendly website and mobile app, which offer features like 3-D virtual try-ons, home eye tests, and flexible payment options. This approach ensures a seamless shopping experience and boosts customer satisfaction and loyalty.

Conclusion

Lenskart’s marketing strategy is a blend of traditional and digital tactics, focusing on celebrity endorsements, influencer collaborations, engaging content, and a strong online presence. This comprehensive approach has helped them establish a significant foothold in the competitive eyewear market. Their commitment to quality, affordability, and customer experience continues to drive their success and growth.

Future Plans

Lenskart envisions a future where their mission-driven growth and technological integration transform vision care on a global scale. With a goal to serve a billion people, the company aims to address the eyewear needs of the 2.5 billion people worldwide who require glasses but do not have access to them.

Global expansion is a cornerstone of Lenskart’s strategy. The company has already established a presence in Southeast Asia and Japan, regions with notably high myopia rates. The company also eyes further expansion into European markets, starting with Paris, contingent on their capacity to manage and scale operations effectively. This international growth strategy is complemented by Lenskart’s operational excellence, epitomized by the world's largest eyewear manufacturing plant capable of next-day delivery.

Inspired by Amazon's self-sustaining ecosystem, Lenskart aims to create a culture that continuously solves problems and drives growth. Emphasizing customer obsession and maintaining a high Net Promoter Score (NPS), Lenskart focuses on delivering superior customer experiences and solving logistical challenges.

Lenskart's future plans are ambitious, combining global reach, advanced technology, and operational excellence to create a sustainable, impactful business. The integration of AI and AR technologies, such as predictive modeling for store revenue and virtual try-ons, enhances customer engagement and operational efficiency. Moreover, Lenskart is exploring generative AI for vision connection through mobile devices, potentially revolutionizing customer interactions with their products and services.

In summary, Lenskart is poised to significantly impact the global eyewear market by expanding its reach by leveraging cutting-edge technologies. The company’s strategic acquisitions, such as Owndays, and its commitment to long-term impact over short-term financial gains like an IPO, reflect its dedication to sustainable growth and social impact. With a clear vision for the future, Lenskart continues to adapt, evolve, and expand, setting new standards in the eyewear industry and beyond.