The two largest venture-backed players tackling Brazil’s multibillion dollar eyewear industry have merged in an effort to take a piece from traditional retailers.
The late April merger of, Lema21, an innovative private label startup, and eÓtica, an ecommerce site for prescription eyewear and contacts, is proof that Brazil’s investors are taking a long view toward startup development and not just interested in stamping out their competition.
Lema21 made news last year when they raised a $1.6mm seed round to build the “Warby Parker” of Brazil. Started by co-founders Naomi Arruda, an LVMH veteran, and Jonathan Assayag, a former management consultant and product developer, with their own capital — Lema21 has been selling private label, direct-to-consumer frames to Brazilians since 2013, and has raised $4.2mm to date from VCs, angels and advisors.
While Lema21 frames competes with designer brands, and are produced in the same Chinese factories as some of their pricier counterparts, they sell at a cheaper price point (about $100).
Like Warby, an innovative purchase experience, with a virtual try-on tool and a home trial that ships you four different frames to try on at home, has made them a brand darling from aspiring Brazilian hipsters to the catwalks of São Paulo. And their Buy One Give One policy, where Lema21 donates the cost of a simple pair of prescription glasses to local NGOs for every one they sell, hasn’t hurt either.
Meanwhile, eÓtica’s busines, selling prescription glasses, sunglasses and contacts from big brands like Ray-Ban, Oakley, and Carreira, on a basic website, is decidedly less sexy.
Founded by Eduardo Baek and Bruno Ballardie in 2011, eÓtica was the first player to sell prescription glasses online in Brazil, and had to navigate regulatory hurdles dating back to 1940 to do so legally. They’ve taken an undisclosed amount of funding over two rounds from Latin American powerhouse investors Kaszek Ventures and eBricks, and have been growing at a clip of 103% per year.
“We had a strategy of just bringing the existing assortment from fashion brands online, but we also knew that in the mid-to-long-term, it would be crucial for us to have very strong private labels,” eÓtica chief executive Ballardie explained on a Skype call from São Paulo. “Competition would start to come from all sides, everyone would start selling Ray-Bans online, and we saw it would be a tough fight.”
The company had begun developing a private label brand within eÓtica, which was “kind of working”, according to Ballardie, but had also been in talks with Lema21 over the past two years.
“We’ve always had admiration for what eÓtica was doing,” said Lema21’s Assayag. “As we started seeing the success of each company individually, the deal kind of came around.”
Two other factors also played a role in the merger negotiations between the two companies.
“First, the Brazilian economy has been going through a rough time. Individually, we both felt that it was very important to be extremely efficient with our capital,” Assayag said. “We looked across our different businesses and capital and saw significant synergies: the operations and technology pieces take similar resources. And as we looked to the future and our growth, we felt that eÓtica had built a very strong channel online, and saw a huge opportunity for us to leverage that channel to show off our value proposition across Brazil.”
eÓtica’s Ballardie now serves as CEO of the merged entity, and sits on the board with co-founder Eduardo Baek, Hernan Kazah from Kaszek Ventures and Pedro Sirotsky Melzer from eBricks. Baek is running operations and finance; Assayag is heading strategy; and Arruda is in charge of branding and product development, including the development of two private label brands for eÓtica.
We looked across our different businesses and capital and saw significant synergies: the operations and technology pieces take similar resources. Jonathan Assayag
Both companies will retain their brands and respective websites, but will benefit from back office and operational streamlining (neither company is profitable individually). The merged eÓtica/Lema21 entity expects to grow revenue by 40% in 2015 and cross 110,000 items sold.
eÓtica will integrate the home try-on program and buying process features Lema21 has developed, and will benefit from adding a strong private label to the fold. “We are kind of complementing each other with skills we didn’t have,” Ballardie said.
Case in point? Advertising. By partnering with Brazilian designer brands to create pop-up stores and popping up at fashion shows, Lema21 has found success in the social and PR realms, says Arruda. “We’re more about inbound interest, compared to Lema21, which is generating desire for a new brand,” says Ballardie.
With an estimated 26,000 optical shops across the country, dominated by three major brick and mortar chains with franchise models, eyewear is a $26 billion business in Latin America’s largest economy. And Ballardie estimates only 0.5% of the eyewear market is online.
However, as Brazilians rapid smartphone adoption shows, there’s an opportunity to increase that number, and Ballardie sees the franchised model of the big offline players as a barrier for them to move online.
Moreover, existing e-commerce platforms like Netshoes are already selling sunglasses in their product mix, but can’t offer the custom buying experience Lema21 and eÓtica offer as dedicated eyewear players — nor can they sell prescription products.
In fact, Netshoes is the company that’s helped eÓtica the most, since they’ve been pushing people to buy online for the last decade, Ballardie said.
“If they start to advertise that you can buy eyewear online, that it’s a good way to buy eyewear, that it’s easier and faster than going to the mall, and it works and it’s a good value proposition, we think that’s positive for us too,” he said.
Moving forward Ballardie has his eye on mobile. With smartphone sales exploding in Brazil, and a population that is significantly more tethered to their devices than their counterparts in the US or the rest of the BRIC countries, Ballardie is anticipating an entire demographic will come online via mobile, and skip the desktop experience altogether.
“30% of our traffic at eÓtica is mobile, and maybe 15-20% of our revenue, but I think that’s going to change dramatically in the next few years,” he says.