Is Allbirds doing something wrong or something right?

Discussion
Photos: Instagram/@allbirds
Feb 25, 2022

Allbirds was able to report substantial sales growth, but that was not enough to earn the admiration of Wall Street for the fourth quarter of 2021.

The company experienced a drop in share price after its most recent earnings report, despite a 23 percent sales increase during its fourth quarter, according to CNBC. Expenses incurred over the quarter attached to physical retail store openings and increased corporate headcount counted against the direct-to-consumer brand’s overall revenue growth.

Allbirds also experienced difficulties faced by many businesses in the COVID-19 era — supply chain logistics problems and temporary staffing shortages. The company’s revenue prediction for Q1 2022 missed analyst expectations, though it expects the situation to improve in subsequent quarters in 2022. The stock was trading around $8 on Wednesday, down from its $21.21 IPO in November.

While the once online-only shoe brand’s physical store strategy seems to be counting against it in the eyes of investors, it has proved to be a profitable endeavor.

Allbirds doubled its physical store sales in 2021, growing 112 percent to $52 million, according to a report from Footwear News. The 13 stores that Allbirds opened in 2021 contributed 43 percent of its total physical retail dollar growth that year. In-store sales were the biggest contributor to growth for Allbirds in the last quarter.

Physical stores are not the only way that the brand has been expanding recently.

Joey Zwillinger, cofounder and CEO of Allbirds, said on the company’s earnings call this week that it is pursuing new third-party wholesale relationships. It is making the move in light of the fact that the brand has only 11 percent brand awareness in the U.S.

Allbirds also recently announced a partnership with re-commerce company Trove on a shoe trade-in platform called ReRun Recommerce, according to garment trade publication Fibre 2 Fashion. The program, which launched at stores in Los Angeles, Chicago and New York City, allows customers to trade in worn Allbirds shoes for $20 store credit. The platform will then enable the marked down resale of the gently-worn shoes.

The brand is expanding its product lines, as well. At the end of 2021, Allbirds announced it would be releasing new lines of performance and lifestyle products.

DISCUSSION QUESTIONS: Where do you see the right balance for Allbirds when it comes to its consumer-direct business and wholesale relationships? Will the company be helped or hurt by expanding its wholesale relationships?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Making it online and making it in a physical store are two different things. I’m not sure their lessons from the digital space will translate."
"Extending into brick and mortar is part of a unified commerce vision, but it should be vertical specialty channels, not wholesale."
"This article made me visit the ReRun marketplace to see it for myself. Caveat: I’ve been a fan of the brand since it debuted..."

Join the Discussion!

9 Comments on "Is Allbirds doing something wrong or something right?"


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Mark Ryski
BrainTrust

It’s one thing to launch a brand and have some success; it’s another thing to make money at it. Allbirds has done a brilliant job of branding and creating a following, but now it needs to scale the business and make money. Expanding their wholesale relationships will help reach new customers and bolster sales, but how it will ultimately impact the brand is hard to say. The more ubiquitous a brand becomes, the less exclusive it feels.

Jeff Sward
BrainTrust

Allbirds has developed a great product and supported it with terrific marketing. But the article does not mention the inventory increase relative to the sales increase. Inventories were up 80 percent year-over-year versus sales being up 30 percent year-over-year. It’s one thing to position inventory for growth. It’s another to have that level of inventory and miss a sales projection. That’s the kind of miss that gets investors’ attention. So I don’t think it’s the physical store strategy that’s dragging the stock price. It’s the mismanagement of the inventory relative to that store strategy that has the red flags waving. And it will now take a couple of quarters to see if they can get things back in balance.

Liza Amlani
BrainTrust

Allbirds is doing the right thing. They are scaling with caution, learning what is working and what is not, and remaining aligned with their own sustainability and circularity values.

Gene Detroyer
BrainTrust

A 23 percent sales increase is totally irrelevant if it negatively affects the bottom line. The top line is not the bottom line. Operating retail stores is expensive.

For Allbirds, which does not boast critical mass, the wholesale alternative is the much wiser route, particularly if the brand name is meaningful.

Liz Crawford
BrainTrust

Making it online and making it in a physical store are two different things. I’m not sure their lessons from the digital space will translate.

Mohamed Amer, PhD
BrainTrust

Allbirds is working through a high inventory build, as Jeff Sward noted, while facing a difficult stock market anticipating retail comp headwinds going into the second quarter and Fed rate tightening. The Allbirds story should play out better in the second half of the year, but I remain cautious about its foray into the problematic lifestyle apparel segment.

Jenn McMillen
BrainTrust

This article made me visit the ReRun marketplace to see it for myself. Caveat: I’ve been a fan of the brand since it debuted, so no surprise that I ended up purchasing a pair of shoes. I got to choose between Excellent ($79) or Very Good ($69) options. Typical retail is around $125-$145, so it’s a nice discount. The only issue for me is you don’t get to see the actual pair you’re getting. It’s a stock photo, so it’s a bit of a crapshoot, but if you’re a deal hunter and the original price point is too high a bar, this is a nice option.

Lucille DeHart
BrainTrust

I am not a fan of brands expanding into wholesale as a means to grow. What makes digitally native brands successful is the early engagement and complete control and ownership of the end-to-end experience. Extending into brick and mortar is part of a unified commerce vision, but it should be vertical specialty channels, not wholesale. Department stores and traditional retailers have not done a great job protecting and nurturing brands–they are in it for the destination traffic and new customer acquisition. Other than initial topline revenue growth, there is little in it long-term for brands. I could see seasonal pop up shop-in-shops — like what Target has done — otherwise I would advise they stay away from this channel. It will add logistical expense and complexity.

Craig Sundstrom
Guest

Perhaps the decline is linked to something that didn’t seem to make it into Matt’s story, (though it did make it into the links … actually it’s the first link): widening losses.

I know, I know: revenue is key and actually having more of it coming in than you’re paying out is a trivial detail, but old fashioned folks like me still have a weakness for the idea; we must be overrepresented on the Street.

wpDiscuz
Braintrust
"Making it online and making it in a physical store are two different things. I’m not sure their lessons from the digital space will translate."
"Extending into brick and mortar is part of a unified commerce vision, but it should be vertical specialty channels, not wholesale."
"This article made me visit the ReRun marketplace to see it for myself. Caveat: I’ve been a fan of the brand since it debuted..."

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