What went wrong with Lenskart in the Last 2 Years?
Today, one-third of the people in India require glasses. Only approximately a quarter of persons with vision problems have been diagnosed as needing glasses to wear them. The number of people who wear glasses as a fashion accessory is astounding when we add up the totals. Let’s see the situation of Lenskart.
These clients are interested in owning several pairs of eyeglasses to match a variety of attire. Over 1.5 million (15 lac) pairs of glasses are purchased each day in India. Mom-and-pop stores predominate in the extremely fragmented industry. Since 2010, when Lenskart was founded, the eyewear industry has changed significantly.
A chain of optical stores selling prescription eyewear with a focus on BLU glasses, prescription power glasses, frames, and goggles, Lenskart is situated in Faridabad. Additionally, Lenskart concentrates on traditional brick-and-mortar retailers. By December 2021, it has already been able to create more than 80 real retail locations throughout India.
Every month, the company’s Delhi manufacturing plant produces more than 300,000 glasses. Nearly 20% of the frames produced by Lenskart are made in a plant in Zhengzhou, China. The business, which is hailed as the biggest eyewear brand in India and is also known as a unicorn prescription eyewear business, joined the exclusive group of Indian unicorns back in December 2019.
What is Lenskart and How Does It Work?
Leading e-commerce firm Lenskart operates an online optical store with a wide selection of classic and contemporary eyeglasses, lenses, and other accessories at reasonable costs. The buyers of these glasses can easily order them online and have them delivered with a variety of varying discounts.
Lenskart has both an online and physical distribution strategy, which sets it apart from many other competitors. At their distinctively designed retail store or online at lenskart.com, customers can make purchases. Lenskart is transforming the eyeglasses market with the first-of-its-kind “Home eye checkup.” In Lenskart, glasses that are exact to three decimal places are delivered by specialised robots.
With free home delivery and a 14-day replacement warranty, Lenskart provides more than 5000 different eyewear models. The business produces many types of eyewear, including reading glasses, contact lenses, and sunglasses.
Market Focused on by Lenskart
In India, the eyeglasses market reported revenues of $4,427 million in 2021. Spectacle lenses have held the top spot in the market with a market volume of $1,985 mn.
When the concept of the operation is fresh and supported by knowledgeable investors like Softbank, Alpha Wave, and Ratan Tata, entering one such market can be profitable.
With the mission of giving “Vision to India,” Lenskart was founded. To that end, they most recently created Lenskart Lite, a low-cost franchise model targeted at upcountry regions, particularly tier 3 and 4 markets. A Rs 20 lakh investment is required to use the strategy, which is geared toward microbusiness owners.
About Rs 4-6 lacks in revenue generated by the format each month. With an investment requirement of Rs 35 lakh and anticipated monthly earnings of Rs 8–10 lakh, they currently have a conventional Lenskart franchise model for the tier-2 regions.
Before raising $12.5 million from the Ravi Modi Family Trust on August 8, 2022, Lenskart had previously raised $28.2 million on June 9, 2022. The renowned eyewear start-up has allocated 4,79,037 Series I CCPS for consideration for $12.5 Mn (INR 99.9 Cr). This round of capital is included in the earlier Series I round, through which Lenskart has already secured funding totalling about $166 million.
On April 11, 2022, Alpha Wave Incubation launched a $100 million fundraising round for Lenskart (earlier known as Falcon Edge). The same (Series I) financing, which was led by Epiq Capital, received an additional $25 million on April 27, 2022.
By issuing 910,412 Series I preference shares at an issue price of Rs 2085.52 per share, at a valuation of $4.32 billion, the unicorn eyeglasses retail chain and eCommerce startup raised Rs 190.05 cr from Epiq in the second tranche of the Series I round.
On June 9, 2022, the Peyush Bansal-led business announced a capital round of just over $28.2 million from Avendus Future Leaders Fund II, which was less than the size of the funding round Lenskart previously disclosed. To consider the $28.2 million in investment, Lenskart has allocated 1,053,882 Series I CCPS. This funding may, however, also be a part of a larger round that will be distributed in instalments.
On July 19, 2021, Temasek and Alpha Wave Global led a prior $220 million fundraising round for Lenskart. Before that, the business experienced two previous critical rounds: the Secondary Market round, in which it raised $95 million; and the Series G investment round.
By August 8, 2022, Lenskart had gone through over 13 rounds of investment and had amassed a total of $939.7 mn. The Lenskart team set out to create a fantastic technological firm despite having issues from the start. Even with a strong internal tech team, scaling infrastructure was never simple, but when you develop as quickly as Lenskart has, the obstacles tend to mount up faster than anticipated.
As a growing online retailer with roughly 5 million visits each month, the technological team encountered several challenges. Here is a list of a few of them. Lenskart was searching for a turnkey solution that could host their development and quality assurance workloads while also allowing them to optimise their infrastructure spending and be more agile with their requirements.
Additionally, the business was looking for a co-location facility in the Delhi NCR area because its internal applications and ERP were set up on its own IT infrastructure. Because the e-commerce company’s Dev, QA, and Production were housed in Singapore, there were additional latency concerns with accessing the servers.
The Lenskart development team was interested in deploying their QA and Dev workloads in India. Being a tech-savvy corporation, they have mostly focused on open-source technology and the Cloud. To reduce the cost of licences, the Lenskart team planned to host their enterprise infrastructure on an open stack environment.
Although the Lenskart team was using spot instances to reduce expenses, they frequently ran into availability problems. All of the production workloads are managed by an internal DevOps team at Lenskart. The team was searching for a fully automated solution that yet had capabilities like third-party integration with programmes like Chef, Terraform, Jenkins, etc.
Revenue and Growth for Lenskart
Less than a 1% rise was seen in the operating revenues of Lenskart, which increased from Rs 900.2 crore in FY20 to Rs 905.3 crore in FY21.
Breakdown of Lenskart’s Revenue
The main source of revenue for the brand—which accounted for 94.5% of total revenue—is the sale of Lenskart products through brick-and-mortar stores, online applications, and websites. This revenue stream was generally stable, rising from Rs 851.2 crore in FY20 to Rs 855.7 crore in FY21.
The company’s subscription fees, which increased by over 11% from Rs 37.2 crore in FY20 to Rs 41.24 crore during FY21, contributed an additional 4.6% of its operational revenue. By offering supplementary services in FY21, such as eye exams and other things, Lenskart generated an additional Rs 8.4 crore.
In FY21, Lenskart’s operational revenues were Rs 905.3 crore, up less than 1% from Rs 900.2 crore in FY20. Notably, Lenskart Solutions only had two locations in Singapore in FY2019, but it currently anticipates dominating the industry and generating over $30 million (INR 217 crore) in revenue.
However, from Rs 963.14 crore in FY20 to Rs 998.80 crore in FY21, Lenskart’s expenses increased by about 3.7%, with the major cost centre for the same in FY21 being the raw materials and spare parts utilised in the production of eyewear goods.
By measuring revenue at the unit level, Lenskart spent Rs 1.1 in FY21 while earning Rs 1 in revenue. In terms of profit and loss, Lenskart saw an increase of 4.6X in profits, which currently totalled Rs 28.92 crore in FY21, up from what was reportedly Rs 6.32 crore in the prior fiscal year.
Some of Lenskart’s most significant growth achievements include:
• Being one of the top 3 optical businesses in India;
- Serving 10 million customers;
- Reaching out to more than 100,000 customers each month;
- Being spread out across 235 cities in India;
- Witnessing a growth of more than 200% in the last two years;
- boasting of having five times as many eyeglasses styles as any retailer in India, or over 5000.
Neso Brands, a Lenskart subsidiary
To strengthen DTC businesses and assist them in becoming brands of the future, Neso Brands, a division of Lenskart, was established in Singapore in 2022. Neso Brands, the D2C business of Lenskart, was registered and was awaiting funding.
According to information released on May 16, 2022, Neso Brands raised $100 million in one of the biggest seed rounds ever. Neso Brands seeks to engage with consumer eyewear brands, invest in them, and support their growth by utilising synergies across the Lenskart Group, with the support of major investors such as Alpha Wave, Temasek, Softbank, and others.
Bjorn Bergstrom has been named the new CEO of Neso Brands, which was also announced along with the fundraising. Previously, Bergstrom served as NA-KD, a Swedish clothing company, as its Chief Growth Officer as well as its Interim Chief Product and Technology Officer.
Despite an increase in income, Lenskart’s FY22 results were a loss.
Regulatory records from the business intelligence platform Tofler were used by ET Tech to report that the company’s consolidated operating revenue for the 2022 fiscal year was Rs 1,502 crore. This shows a comeback from the consequences of the Covid-19 epidemic and represents a 66% rise in operating revenue compared to the 2021 fiscal year.
During the 2022 fiscal year, Lenskart concentrated on growing internationally, particularly in Southeast Asia. According to people with direct knowledge of the situation, the business’ transition from profits to losses is mostly the result of significant and necessary investments. Additionally, the company is growing in India, where there are currently more than 1,100 locations.
In addition to making investments in opening new stores, the company increased its personnel, which resulted in a 74% increase in material acquisition costs and a 53% increase in staff costs. To increase income, Lenskart wants to add 400 more stores in the 2023 fiscal year, mostly in foreign markets.
Omnichannel eyeglasses retailer Lenskart has mostly escaped the pandemic untouched. Although revenue growth slowed, the unicorn ensured profitability increased over FY2020. Let’s examine the firm’s performance in 2021.
Lenskart’s operating revenues in FY21 remained constant at Rs 905.3 crore, representing less than 1% growth above Rs 900.2 crore achieved in FY20 during the turbulent fiscal.
The company’s primary revenue vertical, accounting for 94.5% of revenues, is the sale of goods through various retail channels, including brick-and-mortar stores and online marketplaces. According to its annual financial accounts submitted to RoC, sales were essentially stable during FY21 at Rs 855.7 crore compared to Rs 851.2 crore in FY20.
To sell finished goods on its platform, Lenskart also makes purchases. In FY21, these purchases fell by 24% to Rs 68.6 crore from Rs 90.3 crore in FY20. From its Chinese joint venture Bao Feng Framekart Limited, almost 88% of these transactions were made.
According to Lenskart, there are over 700 franchise stores. The company’s second-largest expense, accounting for 21.7% of yearly costs, is the commission paid to these vendors and online marketplace fees. In FY21, these payouts increased slightly by 6.4% to Rs 216.73 crore from Rs 203.74 crore.
Employee benefit payments stayed the same at Rs 176 crore or 17.6% of the yearly expenses incurred in FY21. Additionally, roughly Rs 4 crore in share-based payments were included in these payouts.
Compared to FY20, when spending on advertising and promotion was Rs 111.1 crore, it increased by around 23% to Rs 136.52 crore in FY21.
Just 3.7% more than the Rs 963.1 crore in FY20, the Rs 22.2 crore in freight and travel charges brought the total expenditures for FY21 to Rs 998.8 crore. For every rupee of operating revenue generated by Lesnkart in FY21, the company spent Rs 1.1.
Despite having flat revenue in FY21, the company increased yearly profits by almost 4.6X to Rs 28.92 crore in the fiscal year as opposed to Rs 6.32 crore booked in FY20. This is due to the company’s non-operating income growing by 83.5% during the most recent fiscal year.
While the business’s activities in India continued to be successful, Lenskart’s foray into the Singaporean market has not yet yielded results, and the endeavour cost the company Rs 23.5 crore there in FY21.
The Peyush Bansal-led company spent Rs 110.4 crore on plant and machinery to increase its production capacity, despite the COVID limits preventing any development on an operational scale.
A return to normalcy would undoubtedly bring about speedier growth for the company’s creator, Peyush Bansal, who during his time as a judge on Shark Tank India showed viewers a founder who was focused on his business and technological breakthroughs, in that order.
Challenges Faced by Lenskart
Getting customers to switch from traditional shopping to the online store was the most challenging task Lenskart had to complete. It was important for the company to dispel people’s misconceptions about eyewear and gain their trust by demonstrating that they provide high-quality products at lower costs than their brick-and-mortar rivals.
The desktop platforms, mobile apps, and retail stores for Lenskart all functioned beautifully. However, compared to their other websites, the mobile website had the lowest conversion rate of visits to buyers. Since they lacked the resources to revamp the website fully, the client leveraged that touchpoint to encourage customers to download their mobile apps as a temporary fix.
Future Plans for Lenskart
By creating a low-cost franchise model, Lenskart India’s “Vision to India” vision seeks to reach the broadest possible audience. They can increase their presence in Tier 2 cities and introduce the framework in Tier 3 and 4 cities by using the Lenskart Lite approach.
Additionally, it introduced disposable regular contact lenses. With the help of their Aqualens product, Lenskart seeks to offer straightforward and inexpensive eyewear alternatives. For the daily masses who desire both trends and costs, it would be very inexpensive at just Rs. 40 each day.
The company anticipates opening more than 500 storefronts in the next two years with the primary goal of reducing the gap between picked and unselected lenses. By the end of the following five years, it hopes to have 2,000 outlets operational.
edited and proofread by nikita sharma