Money-Losing Allbirds Plans To Win With Stores

Ever since Allbirds danced into the D2C universe in 2016, it's dazzled consumers with its cozy wool sneakers -- and inspired plenty of copycats.

Now that it's preparing to go public, competitors are getting a closer look at how it's achieved that success, revealing that the company is still a significant money loser.

That's not likely to change any time soon. "We have incurred significant net losses since inception," Allbirds warns potential investors in its filing with the Securities & Exchange Commission, "and anticipate that we will continue to incur losses for the foreseeable future."

Some reports have put the company's value at $1.7 billion. Its filing says first-half revenue advanced 26.7% to $117.5 million, while losses more than doubled to $21.1 million.

The company plans to close the profit gap not with D2C sales but with brick-and-mortar retail. It says its stores are highly profitable, generating about $4.3 million in average unit volume in their first 12 months in 2019. There are 30 currently open, and Allbirds says it may potentially open hundreds of new ones.

It also laid out the omnichannel boost that comes from leveraging both physical and digital. As an example, the Boston Back Bay physical store reached payback as a standalone unit in just eight months. The location built brand awareness, sparking a 15% rise in traffic to its website in the Boston market three months after the store opened. The number of new customers jumped 83%, and it experienced a 77% increase in sales, compared to a comparable control market.

The company is well aware it’s vulnerable to the many competitors soft-shoeing their way into Allbirds' sustainability niche. "We operate in a highly competitive market; the size and resources of some of our competitors may allow them to compete more effectively than we can, which could result in a loss of our market share and a decrease in our net revenue and profitability," it says.

Raising brand awareness through revamped marketing was also key. Allbirds says its recent forays into TV advertising pushed brand awareness from 8.4% in the fourth quarter of 2020 to 10.9% in the first quarter of 2021, "affirming the success of our marketing strategy."

Sustainability continues to be the brand's primary appeal. It estimates its carbon footprint is 30% less than for a standard pair of sneakers. And it envisions more industry collaboration as it continues to grow.

Specifically, the company cites its relationship with Adidas, resulting in the world's lowest-carbon-footprint running shoe earlier this year, as an example.

In addition to Adidas, big brands like Nike and Vans are also focusing more on sustainable products, as are dozens of smaller brands, such as Rothy's.

Allbirds says it intends to maintain its leadership in the category by challenging copycats, offering a broader range of apparel, building community and expanding advertising.

"A broader marketing strategy enables us to showcase our beautiful products and mission to a larger audience," it says. "We anticipate this will result in expanding our consumer reach to a wider population, showcasing a broader array of products, and taking consumers through the entire brand journey."

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