This is a market where sales channels are fragmented and undifferentiated.
This market was just waiting for someone new and good to come into the game. This is a broken system.
The obvious innovation is to take the sales channel online, which brings down the cost of the product and increases selection. Virtually every consumer product has seen challengers do that, from DVD rentals (Netflix) to toilet paper (Amazon Subscribe & Save). The other crucial problem is that the product design is dated and stale, which allows designer brands to take a fat margin simply for not being horrible. So the second innovation is that you need to vertically integrate the supply chain and sell your own product through your new online sales channel.
But with these two basic problems addressed, where do retailers still naturally have an advantage over an online store?
1) They let you try on glasses
2) They have salespeople who, theoretically, can help you
3) They could (but don't) sell toward a specific style and build a brand geared toward that type of customer taste, the way clothing stores specialize by age, gender, and lifestyle (for example, Ann Taylor vs. Urban Outfitters)
An online eyeglass store that has something better than the "CVS brand" product AND can compete with retailers on the three fronts above will naturally blow competition out of the water.
Warby Parker prices undercut the competition by 5x. Furthermore, it chose a transparent and simple pricing system that cuts down on indecision.
Product and Brand: It uses in-house designs and built its own manufacturing supply chain, so doesn't depend on existing products. It created a collection that is trendy, with a look that is urban, a little hipster, and meant to appeal to the under-40 crowd.
It's created a product that is, to its target audience, far and away superior to what's already out there.
Trying on the Product: They'll ship you up to 5 frames to try on at home and send back to them when you've decided. 2-day shipping, free both ways. If you live near a showroom, you can book an appointment to visit in person. There's also an addicting "virtual try-on" feature that automatically fits glasses to a picture of you from your webcam or computer:
Customer Service: Warby Parker is one the many tech start-ups who recognize the importance of the Zappos customer service model. Their Yelp reviews show that their customer service is consistently available, helpful, knowledgeable, and nice.
Their website tools, coupled with a strong customer service team, make their support better than many optical stores.
Warby Parker understood the business opportunity thoroughly, and is executing its business model with flair. The company was founded only a year ago, and is now being valued at +$100 MM.
My analysis of their success makes it clear why I think they deserve to be VC darlings. They found a big consumer-facing industry with high prices and poor products where, because of fashion and style, the product will always resist being commoditized. This is a classic disruptive technology that will quickly be moving up-market. The question now is, how will Warby Parker ward off the competition?
Update: There is a great discussion about this post at Hacker News