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0:20

In the 2010s, direct-to-consumer companies

0:22

were sprouting up everywhere, promising

0:24

to remove the middleman and deliver innovative

0:27

new products right to your doorstep with

0:29

one-click shopping. By 2021,

0:31

the stock market saw more than 1,000

0:34

IPOs hit the trading floor, with

0:36

a portion of these belonging to

0:38

DTC companies like Warby Parker, Poshmark,

0:40

Rent the Runway, and

0:43

the star of today's episode, Allbirds.

0:46

The sustainable shoe brand had a fast

0:48

and meteoric rise, but it wasn't

0:50

long before investor demands and the

0:52

punishing trend cycle started to hit

0:54

the company hard. When

0:56

Allbirds went public in November of 2021, their

0:59

iconic wool runner was a hit, and the

1:01

company was valued at nearly $4.1 billion

1:04

on the first day of trading. But

1:08

behind the scenes, this Silicon Valley darling

1:10

was starting to crumble. They

1:12

had to contend with pressure for growth from investors,

1:14

who'd shelled out more than $250 million in venture

1:16

capital funding. Their

1:20

stock began to slide, and by

1:22

March 2024, both

1:24

of their co-founders had stepped down

1:26

as co-CEOs, leaving the company

1:28

at a crossroads. As

1:31

investors size up what's next for Allbirds and

1:33

the DTC movement as a whole, we're

1:36

lacing up our sneakers and walking through

1:38

the company's past to understand where

1:40

they lost their footing and

1:42

what it means for the future of the DTC

1:44

brands we've come to love. Stick

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3:23

From Wondery, I'm David Brown and

3:25

this is All Fords, the rise

3:28

and fall of direct Dickinson. In

3:51

2014, Allbirds co-founder Tim

3:54

Brown, no relation, had

3:56

a vision to improve the

3:58

planet starting with a shoe. What

4:00

if you set out on a crazy journey to make a shoe out

4:02

of wool? And in doing so,

4:05

found a way to make footwear that was more comfortable than wool? Everything.

4:10

In this Allbirds promotional video from

4:12

2016, Tim strolls through the New

4:14

Zealand countryside, surrounded by rolling green

4:17

hills and plenty of fluffy, woolly

4:19

sheep, the source for his

4:21

vision. Why wool? Because it's

4:23

the world's most miraculous fiber. Inspired by these

4:25

guys, we found a way to turn one

4:28

of the world's most amazing renewable resources into

4:30

a wickable, breathable, comfort experience that's like being

4:32

upgraded to first class. Tim

4:35

didn't come from a retail background. He

4:37

was a soccer player and one of New

4:39

Zealand's best, competing in the World Cup and

4:41

wowing audiences on the national stage. So

4:50

much of his life was spent running around

4:52

the field in clunky cleats made of plastic

4:54

and other synthetic materials. He started

4:56

wondering if there wasn't a better

4:59

way to design a sneaker that used

5:01

materials from the natural world. Here

5:03

he is giving a talk for a New Zealand business

5:05

organization in 2019. It

5:07

became about natural materials when I

5:09

visited my first footwear factory that

5:12

I found on the internet in the

5:14

off season. I realized that the the

5:16

for industry is this incredibly old-fashioned category

5:18

that defaults to making things out of

5:20

synthetics and leathers. And it was an

5:22

opportunity to make shoes out of

5:24

natural materials. And possibly this was an insight that

5:26

had been overlooked. And

5:29

I think that sparked a lot of idea

5:31

for him about, you know, could we make

5:33

this in a way with less plastic? Could

5:35

we use different fabrics? What would be more

5:38

comfortable? That's Ann Guillen,

5:40

a reporter who covers retail for

5:42

the independent tech publication, The Information.

5:45

Ann says that after that factory visit,

5:48

Tim started to learn about the versatility

5:50

of wool, figuring out how to spin

5:52

it into a sleek, simplified sneaker with

5:55

no obnoxious logos. I

5:57

think the original pitch was it's this

5:59

really comfortable, really minimalist shoe that you can

6:02

wear in a lot of different situations. You

6:04

know, you can wear it to work, you

6:06

can wear it on the weekend, you could

6:08

even wear it on a hike or something.

6:11

It's made out of merino wool, which

6:13

is supposed to be this very

6:15

comfortable fabric. To help

6:18

bring the idea to life, Tim

6:20

connected with Joey's Willinger, an engineer

6:22

from San Francisco with experience in

6:24

the venture capital and biotech worlds.

6:27

Tim and Joey's wives had been friends since college

6:29

and introduced the two men. Joey

6:32

also had a passion for sustainable

6:34

product design, but felt

6:36

there was room for improvement. He

6:38

talked about that in an interview in 2019. Sustainability

6:42

also feels like there's attention, either it's

6:44

more expensive, it's lower quality, it's not

6:47

as good. We fundamentally

6:49

believe that that is attention that shouldn't

6:51

exist, and that's a paradigm in consumers'

6:53

minds that's just been embedded because of

6:55

the way people have done. We actually

6:58

fundamentally believe that using

7:00

plastic from petroleum is

7:03

just stupid. With

7:07

Tim's vision, Joey's engineering skills from his

7:09

time in biotech, and a whole lot

7:11

of wool, the two men

7:13

began developing a prototype for what they thought

7:16

would be a game-changing sneaker. They

7:18

called it the Wool Runner. We

7:20

dispensed with flashy logos, unnecessary detailing, and

7:22

a focus on synthetics to create something

7:24

we think the footwear industry has been

7:26

crying out for. Once

7:33

the prototype was finished, Guillen explains it

7:35

was time to find funding. They originally

7:37

launched it on Kickstarter, which is very

7:40

early 2010s, I feel like. But

7:44

they launched it on Kickstarter, got tons

7:46

of interest there, and then they were

7:48

able to shop it

7:50

around to a bunch of different

7:52

investment firms and get the company going

7:55

that way. The Kickstarter

7:57

was a massive success. In

8:00

just five days, Allbirds raised almost $120,000, which was

8:02

$90,000 over their goal. A

8:06

donation could get you a pair of the

8:09

prototype wool runners and the opportunity to unofficially

8:11

name one of New Zealand's 31 million

8:13

sheep. Names

8:15

included Obama and Woolma.

8:19

Tim and Joey's timing couldn't have been better. Allbirds

8:23

was formed in the midst of a direct-to-consumer boom

8:25

that dominated in the 2010s. Another

8:28

known as DTC, direct-to-consumer businesses saw

8:30

an opportunity for creating bigger margins

8:32

by cutting out the middleman and

8:34

using the internet and social media

8:36

to sell customers via online platforms.

8:40

A big part of the DTC

8:42

boom was telling a compelling story

8:44

that grabbed consumers' interest. Brands

8:46

were out to convince buyers that their product was

8:48

forging a new path that was better than the

8:50

old way of doing things. And

8:53

Tim Brown sold that story. There

8:55

was a revolution going on at the moment,

8:58

certainly in the States and I think in

9:00

New Zealand as well, where old established categories

9:02

are being disrupted by this new

9:05

type of way of doing business.

9:07

We know deeply

9:09

what we're about and we're able to connect with

9:12

our consumers through our business model and tell

9:14

that story better than anyone else. So the purity

9:16

of that connection is central to

9:18

the business model that we've set up to

9:20

support our product. Brown

9:23

says venture capitalists were also hooked. Not

9:26

just Allbirds, but Everlane, Warby Parker,

9:28

they had kind of become the

9:30

hot new brands and they really

9:32

were generating a lot of buzz

9:35

online and on social media. So

9:37

all of these brands were growing really

9:40

quickly and investors were willing to put

9:42

hundreds of millions of dollars in

9:44

investment into these brands. By

9:47

the time Allbirds was ready to launch, they had

9:49

received $255 million in venture capital

9:53

funding. For context, Everlane,

9:55

a direct-to-consumer clothing brand founded in

9:58

2011, raised about million

10:00

in funding. The Allbirds investment

10:02

was massive, especially for a company

10:04

that had no proof of concept.

10:07

But Ann says investors weren't worried.

10:10

I think the wisdom from investors was, well,

10:12

if you can keep attracting new customers

10:14

and you can keep making sales, you

10:17

can figure out the profitability piece

10:19

later. When

10:21

Allbirds officially launched in March of 2016, they

10:24

quickly caught on. Time Magazine called

10:26

the Wool Runner the world's most

10:28

comfortable shoe. And if you

10:30

didn't agree, you had 30 days to return

10:32

them. No questions asked. They

10:34

also got a boost from the co-founder of

10:37

Google and top executives at Twitter who were

10:39

sporting the sneaks. You walked

10:41

into an office in San Francisco or

10:43

in New York, at a certain point in the 2010s

10:46

you would see a lot of Allbirds. It

10:48

started out as this very

10:50

techie, very male shopper. People

10:54

were wearing them outside of Silicon

10:56

Valley too. Celebrities like Ashton Kutcher,

10:58

Mila Kunis, Jennifer Garner and Sarah

11:00

Jessica Parker were all seen in

11:02

their Allbirds. Even President Barack

11:04

Obama was photographed at a basketball game

11:06

in Wool Runners. The

11:08

company garnered more visibility and goodwill at

11:10

the height of the COVID-19 pandemic in

11:13

2020 by giving out a free pair of shoes to

11:15

healthcare workers. They distributed a total of

11:17

50,000 pairs of those

11:20

Wool Runners. They also began

11:22

including carbon footprint labels on their products

11:25

and dropped their first running shoe. Mile

11:29

after mile after mile,

11:32

the tree dasher keeps

11:34

your feet going while

11:37

reducing your carbon footprint.

11:40

Allbirds. In

11:43

CEO Tim Brown's eyes, by 2020 Allbirds

11:47

was poised to become the next

11:49

Nike or Lulu Lemon. And

11:52

even though the company wasn't profitable,

11:54

they were growing extremely quickly, riding

11:57

the direct-to-consumer wave straight to an

11:59

IPO. That was a really

12:01

great day for them, but the

12:03

problem was then in the aftermath of

12:05

that things didn't go so well for

12:07

the brand. When we

12:09

come back, what happened when

12:11

all birds luck started to

12:13

run out? Stick around.

12:33

Welcome back to Business Wars. Let's go

12:35

back in time to November 3rd, 2021. It's Allbirds

12:37

IPO. Well,

12:43

this is cool. Who

12:47

would have thought we'd be here after just five

12:49

years, but we're just getting started. This

12:52

is a journey to create a hundred year old

12:54

brand that shakes up the industry and we're

12:58

just getting underway. It's

13:00

co-founder Tim Brown speaking at the Nasdaq

13:02

stock market Bell ceremony. Cheers

13:05

rang out throughout Tim's speech from his

13:07

enthusiastic team. There

13:12

was so much hype around Allbirds

13:14

IPO. Elizabeth

13:16

Seagren is senior staff writer at Fast

13:18

Company, who's been writing about Allbirds since

13:20

its founding. You know, it was considered

13:23

a huge success that a sustainable brand

13:25

that had created an innovative new product

13:27

was on the public market. Allbirds

13:31

IPO came at a time when

13:33

direct to consumer brands were experiencing

13:35

a surge in popularity following the

13:37

pandemic lockdowns of 2020. Anne

13:41

Guillen of the information explains. It

13:43

really was kind of the perfect time for

13:45

a lot of these companies to go public.

13:48

You know, a lot of people were still stuck

13:51

at home. They're buying a

13:53

lot of things online, you know,

13:55

to not only entertain themselves,

13:57

but a lot of people have extra

13:59

interest. income that they're looking to

14:01

spend. So e-commerce is really booming in

14:03

2021. And so a lot of these

14:08

companies like Alberts and

14:10

the other direct-to-consumer companies, they've been

14:12

around for about a decade, give

14:14

or take at this point. And

14:17

all of their venture capital investors on

14:19

their cap table are

14:22

waiting to cash out. Interest

14:24

rates are low. The IPO market

14:27

is booming. But

14:29

there was a small

14:31

problem. While they're growing sales,

14:33

their expenses have grown right

14:35

alongside that. Alberts

14:38

was opening more brick and mortar

14:41

stores, increasing employee headcount and dropping

14:43

new products. The company was

14:45

on a spending spree. We'll figure out

14:47

how to be profitable later on. We'll

14:49

just flip the switch. That

14:51

proves to be a little bit more

14:54

challenging, particularly now you're a public company

14:56

and you have investors and

14:58

analysts looking at your financial

15:01

results every quarter. When

15:03

asked about profitability on CNBC,

15:06

Alberts co-founder and co-CEO

15:08

Joey Zwilinger remained optimistic.

15:11

As I said, we're quite young in the life yet.

15:13

A couple years before the pandemic,

15:15

we were already very close to and on

15:17

the path to break even. So this is

15:20

something well within our sights. And we

15:23

see a very clear and short

15:25

term path else we wouldn't become in public.

15:29

Despite the confidence from Zwilinger, fast

15:31

companies Elizabeth Seagren noticed a shift

15:34

emerging within the company once they

15:36

went public. That was

15:38

a really great day for them. But

15:40

the problem was then after that, things

15:43

began to take a turn. The

15:45

brand stock price began spiraling

15:48

downwards. I think consumers

15:50

just sort of lost interest in

15:52

Alberts and so their revenues seem

15:55

to decline. There were lots of

15:57

complaints about the quality of the product.

15:59

People were were discovering that

16:01

it didn't take long for

16:03

holes to emerge in their

16:05

sneakers. The brand also

16:07

began producing clothing, but many of

16:10

the clothes had lots of quality

16:12

control issues. There was one

16:14

set of leggings where they were sheer

16:16

and so people could see right through them.

16:19

And so there were a lot

16:21

of problems that emerged in the

16:23

aftermath of that IPO that has

16:26

contributed to Allbirds decline. Another

16:29

misfire for Allbirds, those brick and

16:31

mortar stores. They followed

16:33

the path of other direct-to-consumer brands like

16:35

Warby Parker that started online but expanded

16:38

to include in-person shopping. It

16:40

was a way to increase visibility

16:42

and to draw in new customers

16:44

who could touch and feel the

16:46

products in person and ideally convert

16:48

those interactions into sales. Allbirds

16:51

opened its first store in 2017

16:53

and it was right next to

16:55

its San Francisco headquarters. I actually

16:57

remember visiting that store as it

16:59

was opening and it

17:02

was this really sleek, minimalist

17:04

store that reflected the aesthetic

17:06

of the sneaker. But with

17:09

more and more stores opening every year,

17:12

Elizabeth says this represented another push

17:14

for growth that wasn't

17:16

resulting in profits. With

17:18

all of the funding that they had received,

17:20

they began opening stores in quick succession. And

17:23

it was important for them to be opening these

17:25

stores because it was a way for them

17:27

to introduce the brand to

17:30

new consumers. At a

17:32

time when social media advertising was so

17:34

expensive, the brick and mortar store operated

17:36

kind of like an enormous billboard

17:39

on a high-traffic street that

17:41

would introduce people to the brand. But

17:44

the problem is that as more

17:46

and more stores came back after

17:48

the pandemic and began opening, it

17:51

was hard to get people's attention

17:53

through a brick and mortar store

17:55

unless the store was spectacular in some

17:57

way. And while Allbirds' stores

17:59

were, they were lovely. I

18:02

mean, you could try on the shoes there. I

18:04

don't think that they caught people's attention the

18:06

way that they really needed to

18:08

for that to succeed as a way

18:11

to win over new customers. In

18:14

2022, the company also started

18:16

wholesaling with retailers like Nordstrom's,

18:18

Dick's Sporting Goods and REI,

18:21

something that Tim Brown had pledged to avoid

18:23

just a few years earlier in that 2019

18:26

talk he gave to a

18:28

New Zealand business group. It is

18:30

about an online presence. It's

18:33

about a skewing wholesale. It's

18:36

about a deep relationship with

18:38

the consumer. No one getting in

18:40

between that. So the purity of that connection is

18:43

central to the business model that we've set

18:45

up to support our product. By

18:48

2023, two years after its IPO, it

18:52

was clear that their approach wasn't working.

18:55

Their stock price had fallen from around $24 a share

18:58

when they launched to around 80

19:00

cents. Allbirds

19:02

was in desperate need of a way to

19:05

reframe the narrative. So in

19:07

November of that same year, they decided

19:09

to relaunch their first and most

19:11

iconic product, the Wool Runner. The

19:14

relaunch of the Wool Runner was supposed to be kind

19:17

of like, okay, we've heard your

19:19

feedback over the years about the Wool Runner.

19:22

We've addressed some of the quality

19:24

issues, the comfort issues. You

19:26

know, we're gonna address the issue with your

19:28

toes poking through the front. And

19:31

so this was supposed to be kind of

19:33

the first step towards the

19:35

new Allbirds or, you know,

19:37

getting Allbirds back on the right track.

19:40

What if you set out on a crazy journey to make a shoe

19:42

out of wool? And in doing so, found

19:44

a way to make footwear that was the most comfortable in

19:46

the world. And what

19:48

if you worked out a way to make it even more comfortable? Introducing

19:52

the all new Wool Runner 2. Quite

19:55

simply, the world's even more most

19:57

comfortably than a shoe. And

20:02

while the shoes launched on time, Ann

20:04

explains that things behind the scenes were bumpy.

20:07

Because they were working on

20:10

such a short timeline, when Albert's

20:12

corporate employees first received pairs of

20:14

the shoes prior to the launch,

20:17

they noticed that there was an issue

20:19

with the sock liner, which is the

20:22

fabric inside of the shoe, and

20:24

that it didn't fit properly. Shoes

20:27

were already being manufactured at their

20:29

factory in Vietnam and being shipped

20:32

to their fulfillment center in the

20:34

United States, where they'll then be

20:36

shipped to customers that order them.

20:39

And so that led to kind

20:41

of a scramble behind the scenes

20:43

to correct the fit issue, remake

20:45

the sock liners for tens of

20:48

thousands of pairs of shoes, and

20:50

get them switched out, you

20:52

know, even for some shoes that had

20:54

already left the factory and were already

20:56

in transit. I

20:59

think for a lot of employees, that

21:01

was just reflective of, okay, this is

21:03

supposed to be kind of our first step

21:06

in the right direction. And

21:08

even with this, we're still having a

21:10

lot of challenges. And so

21:12

I think that that contributed to a

21:15

lot of the frustration behind

21:17

the scenes. Allbirds

21:19

was never shy about their desire to become

21:21

a legacy brand like Nike. It

21:24

was a major part of their pitch to investors and a

21:26

long term goal for the business. But

21:28

Liz says they were overly optimistic about

21:30

just how long that would take. Allbirds

21:34

was trying to achieve Nike's

21:36

dominance in a very abbreviated

21:38

amount of time. They were hoping to become, you

21:41

know, as big as Nike in maybe

21:43

a decade. And we have

21:46

to remember that Nike is decades old,

21:48

right? It's 60 years old. And

21:51

in its first couple of decades, it

21:53

grew at a slow and steady pace.

21:55

It was focused on product development, creating

21:58

really high quality, high-quality products. performing

22:00

sneakers. It was spending a

22:02

lot of time thinking about its marketing

22:05

strategy. It took time to come up

22:07

with the just do it slogan

22:09

that we're all familiar with. It

22:12

was partnering with athletes and

22:15

creating all of these different franchises that

22:17

we are so familiar with today. Nike

22:19

did not become Nike in 10 years. It

22:22

took half a century for Nike to become Nike. And

22:25

so it was, I think, an

22:27

unreasonable thing for a brand like

22:29

Alberts to believe that it could achieve

22:31

that kind of scale in such

22:33

a short amount of time. Oftentimes,

22:37

companies boast about the level of investment they

22:39

get. But there are

22:41

times when a sizable investment works

22:44

against a company. That's

22:46

what happened with Alberts, says Elizabeth. At

22:49

the time, there was so much money from

22:51

VC companies that was pouring into any startup

22:53

that had a good idea. And I think

22:55

it was very hard for founders at the

22:57

time to say no to that. But

23:00

actually, all of this VC capital

23:02

comes with so many strings attached.

23:05

And it prompted a lot of

23:07

these companies to focus on growth

23:10

over profitability. I think

23:12

that they just sort of collapsed under

23:14

the pressure of all the investment

23:16

that they had received. Coming

23:20

up, Alberts announces leadership shakeups

23:22

and a turnaround plan it hopes

23:25

will save the company. But

23:27

whether they can deliver on that promise is

23:30

still to be seen. That's

23:32

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rocketmoney.com/Wundery. Welcome

25:54

back to Business Wars. In

25:56

March 2023, all birds revealed a trans-

26:00

transformation plan it hoped would turn the

26:02

company around. Here's Anne

26:04

Guillen from The Information. They actually

26:07

brought in a new chief transformation

26:09

officer. They had recently brought in

26:11

several new design executives and they

26:14

had kind of said, okay,

26:16

you know, our sales have stopped

26:18

growing. They're actually shrinking at this

26:20

point. We're still not making any

26:22

money. We need to kind of

26:24

figure out what can we do to reset?

26:27

What can we do to get people shopping

26:30

at Allbirds again? They

26:32

decided they needed to figure out how

26:35

their core customer base had evolved and

26:37

focus on designing products that would serve

26:39

them. They hired a

26:41

consulting firm to find an answer to that

26:44

question and learned something

26:46

surprising about who was buying the

26:48

shoes. One of their

26:50

core customer groups was actually

26:52

women. And so their customer

26:54

base has kind of shifted from this, you

26:58

know, tech bro working at

27:00

his San Francisco startup to now, you

27:02

know, maybe more like a soccer mom.

27:05

The question then became what kind of

27:08

shoe would appeal to this female

27:10

customer base? To shed

27:12

the tech bro image, Allbirds realized

27:14

its design had to change, says

27:16

Anne. We're not gonna have kind

27:18

of this sleek monochrome wool

27:21

runner anymore. We're gonna have

27:23

something that's maybe pink or, you know,

27:26

blue or kind of a brighter color

27:29

that would resonate with a female shopper as

27:31

opposed to this is a shoe that can

27:33

be bought and worn by

27:35

anyone. But as Anne

27:37

notes, shoe design is hardly an overnight

27:39

process. It can take

27:41

years. And meanwhile, investors had to

27:44

wait patiently for the debut of

27:46

the new product that Allbirds promised

27:48

would better captivate the female consumer

27:50

base. And well, investors

27:53

patience started to wear thin. From

27:56

the time you're sitting around

27:58

thinking about an initial design. to

28:00

when you have the shoes on your feet, that

28:02

can be as long as two years. And

28:05

that's a long time. If

28:08

you think about it, that's eight quarterly

28:10

earnings calls that Alberds has

28:12

to sit around and tell

28:14

their investors, we promise new designs are

28:16

coming, but it takes time. To

28:21

appease investors, the company announced

28:23

some major leadership shakeups. The

28:25

first big one was in May, 2023. Tim

28:29

Brown, Alberds co-founder, was stepping down

28:31

from his role as co-CEO to

28:33

serve as the company's chief innovation

28:36

officer. I think some

28:38

of what was behind that leadership shakeup

28:40

and kind of some of the strategy

28:42

changes late last year, I think

28:45

was coming from a desire

28:47

for a little bit more

28:50

immediate change. And

28:52

it's great that we have these new designs

28:54

that are coming two years from now that

28:56

will cater to our core customer, but

28:59

I think there was just a desire for

29:01

some more immediate change

29:03

that could get the company

29:05

back to growing sales. And

29:08

then just under a year later, there

29:10

was another big announcement. Co-founder

29:13

and CEO, Joey Zwillinger, was stepping down

29:15

and taking a seat on the board

29:17

of directors. As replacement,

29:20

Chief Operations Officer Joe Vernaccio,

29:23

who had been taking a more significant role in

29:25

product design over the past few years, and

29:28

says employees fully expect to see

29:30

even more changes at Alberds this

29:32

year. Roughly a year

29:34

later, having another leadership change,

29:37

I think that within the

29:39

company, people are seeing that

29:41

as, you know, maybe kind of

29:43

another major shift in strategy

29:45

in less than a

29:48

year. I think

29:50

that a lot of employees are left feeling like

29:53

this is a company that once

29:55

really knew what it was

29:57

about and what it stood for and who

29:59

its shoppers were. were, and now all

30:02

of that is a little bit less certain.

30:05

And so I think a lot of employees

30:07

are left feeling sort of confused. Fast

30:11

companies Elizabeth Seagren says the

30:13

struggle that DTC companies and their

30:15

investors faced stemmed from a

30:18

false hope that retail startups could

30:20

be just as lucrative as tech

30:22

startups. So when you

30:24

think about brands like

30:26

Facebook and Google that

30:28

thrived, took a lot

30:30

of investor money and then it grew

30:33

very quickly. Even the AI

30:35

companies that are emerging now, all

30:37

of these companies are these kind

30:39

of north stars for

30:41

founders, right? They're thinking about how

30:43

they too can come up with something

30:46

really wonderful and

30:48

disruptive and grow really, really quickly and

30:50

make a lot of money. And

30:52

in fact, that doesn't seem to work very

30:55

well when you're trying to create a physical

30:57

product. We know that there

30:59

are many other brands that took a

31:01

lot of money from investors in the

31:04

direct to consumer world and

31:06

really struggled to grow at the

31:08

pace of a tech company. Elizabeth

31:10

says that if the company were to get

31:12

a do-over, they should start

31:14

with much less VC funding. What

31:17

they could have done is really

31:19

held true to their values

31:22

and focused on sustainable design

31:24

and just had a smaller

31:27

base of consumers. They could

31:29

have grown at a slower

31:31

pace, really reached consumers who

31:34

were passionate about the design of

31:36

their shoes and about the sustainability

31:38

that went into the shoes. And

31:41

if they had grown at a slower pace and

31:44

taken time to really focus

31:46

on product development and building

31:48

these relationships with customers who

31:50

could then keep coming back

31:53

year after year whenever they needed a new product

31:55

from them, I think

31:57

that they could have done very, very well. It

32:02

wasn't just the pressures to grow at

32:04

an unparalleled pace that hurt Alberts. Changes

32:07

in the pricing of digital ads affected DTC

32:09

companies across the board, says Ann. I

32:12

think if you go back to, you know,

32:14

2015, 2016, 2017, digital ad prices were really cheap

32:20

and a lot of these brands like

32:23

Alberts were able to just put up

32:25

ads on Facebook and Instagram and, you

32:27

know, other websites and really just go

32:30

after who they thought their target customers

32:32

were and just kind of blast them

32:34

with ads until they gave in and

32:37

made a purchase. And

32:39

now, I mean, I think ads are a lot

32:41

more expensive. And so I think a

32:43

lot of brands have had to get a

32:45

lot more creative with how they market themselves.

32:48

Now, a lot more brands are really

32:51

trying to brand build and go back

32:53

to a much more traditional model where

32:55

you see a Nike ad, you know

32:57

what that brand represents, you know what

33:00

it stands for, you know, they're a

33:02

brand that's really closely tied to athletes,

33:04

they're a brand that's really closely tied

33:06

to performance. You think of

33:08

Alberts, you ask someone, what do you think of

33:11

when you think of Alberts? I can pretty much

33:13

guarantee you they would say, oh, the wool runner.

33:15

And they wouldn't really have

33:17

anything else to say. So I

33:19

think they really, they just couldn't

33:22

really ever articulate what the

33:25

story behind the brand was supposed to

33:27

be. And

33:29

says there's a challenging road ahead for

33:31

Alberts. Not only do

33:34

they have to become profitable, but

33:36

they're also looking to kind of

33:38

restart sales growth. Those

33:40

are two challenging tasks. The

33:44

market cap of the company is

33:46

worth less than the cash that

33:48

they have on their balance sheet,

33:51

which, you know, indicates that investors

33:53

on Wall Street don't really think

33:55

that the company has any

33:58

real value. So,

34:01

could all birds go private? When

34:04

asked this question in November 2023, Joey's

34:07

Willinger said it wasn't off the table.

34:09

If along that journey, the

34:13

public markets don't see the value that

34:15

we're creating, and there's a big

34:17

gap between the value that we are

34:19

creating and what the enterprise value is

34:21

of the company, then I think it's prudent

34:24

to consider all options. In

34:26

that same interview, Joey also hinted

34:29

at being open to an acquisition.

34:31

We've had a number of companies in

34:34

the footwear space and in the kind of

34:37

ecosystem of apparel and footwear more

34:39

broadly come to us and ask

34:41

us if we are interested in

34:43

selling. It's nothing I'm ideologically opposed

34:46

to, same for Tim. Ann

34:49

explains there's another path that's

34:51

emerged. A growing trend

34:53

that I've written about for

34:55

a couple of different brands

34:57

is they will sell to

34:59

a wholesale company or a

35:01

licensing firm where the

35:04

buyer will basically just buy

35:07

kind of the brand assets. So

35:10

all of the branding, all of

35:12

the designs, everything that makes the

35:14

brand what it is, what customers

35:16

know, and then they'll kind of

35:18

take that brand and translate it on

35:20

to their operations that

35:22

they already have running. So they're

35:25

manufacturing for a couple of different

35:27

brands, so that allows them to

35:30

have a better deal with the

35:32

manufacturing partners that they use. The

35:35

Allbirds brand is one that people

35:37

know. It's one

35:39

that certainly a lot of people still like

35:41

and still want to buy products from. So

35:44

I think there could be an opportunity if a

35:46

buyer was able to come in and maybe just

35:50

buy the brand, that could be

35:52

one outcome that they could see. Ultimately,

35:56

another fatal force Allbirds faces and

35:59

one that's not going away, is

36:01

consumers' insatiable thirst for the next

36:04

IT product and for an exciting

36:06

new brand story to embrace. Ann

36:09

says it's a cycle that legacy brands are

36:11

better able to weather. Allbirds

36:13

invested a lot in bringing

36:15

design leaders and other employees

36:18

from these big shoe companies

36:20

like Nike, Adidas. And

36:22

I think one of the big lessons and

36:24

what really gets ingrained in a

36:26

lot of those employees who

36:28

work at those companies is trends

36:31

come and go. There are going to be

36:33

years where we're trendy, we're the hot brand,

36:35

we have what people can't get enough of,

36:37

and there are years where we're not going

36:40

to be trendy. Our

36:42

shoppers are going to be shopping with another brand,

36:44

but I think they have the

36:46

benefit of they've grown to this

36:48

incredible size where they can kind

36:50

of weather the ups and downs

36:52

a little bit. And so

36:54

I think Allbirds was just less able

36:57

to kind of ride the ups and

36:59

downs of the trend

37:01

cycle. Elizabeth, on

37:03

the other hand, is more

37:05

bullish on Allbirds' future. I

37:08

really hope that Allbirds is not

37:10

a fad, and I actually

37:12

believe that Allbirds can come

37:14

back. I think that

37:16

what really set Allbirds apart was its

37:19

focus on sustainability. And as somebody who

37:21

writes about sustainability every day, I really

37:23

do think that they were doing a

37:25

lot of things right, and

37:28

they just fell victim to needing

37:30

to grow really quickly because of all of

37:32

the money that they had taken on. My

37:35

hope is that the things that made

37:37

them stand out in the first place, all of this

37:40

focus on sustainability, all of this

37:42

material innovation, that if they can come

37:44

back to that, they can

37:46

still be a disruptive company that is

37:49

with us 10, 20, 30 years from now. business,

38:00

and you're struggling. You read

38:02

that experts say business models based on

38:04

brands that sell almost exclusively online are

38:06

in a downturn. It's all over the

38:08

financial press. Online only is like

38:11

a death sentence. The words of

38:13

the experts echo in your ears. If

38:16

you're an online only retailer who's struggling,

38:19

well, what would you do? What's

38:21

your impulse? If

38:24

you're on a sinking ship and looking for

38:26

a lifeline, you tend to grab what's

38:28

out there, in this

38:30

case you expand into brick and mortar even

38:32

to the point where it hurts. All

38:35

birds, like Rent the Runway, Thread Up,

38:37

Warby Parker, Casper, and so many others

38:40

were hyped as the new era of

38:42

retail. Their advertising made some of these

38:44

brands almost household names. Then

38:47

you look around and you see

38:49

names like these struggling, restructuring, declaring

38:52

bankruptcy or going under completely. Again,

38:55

what would you do? Make

38:57

no mistake. Mistakes were made in

38:59

the run-up and heyday of the

39:02

direct-to-consumer model. It promised disruption, eliminating

39:04

the middleman, offering upscale goods at

39:06

cheaper prices to consumers with money

39:08

to spend. At the

39:10

height of the direct-to-consumer bubble, one of the

39:13

most popular and highly recommended books on business

39:15

was Blitz Scaling, its subtitle,

39:18

A Lightning Fast Path to

39:20

Building Massively Valuable Companies. It

39:23

all resonated with a fake it till you

39:25

make it ethos of many a Silicon Valley

39:28

startup during those pre-pandemic days when

39:30

money was cheap and venture capitalists

39:32

were willing to gamble on massive

39:34

payoffs. A CNBC report estimated

39:36

that between 2012 and 2021, venture

39:40

capital exploded from $60 billion

39:42

to more than 10 times that, with 30%

39:45

going into retail and more

39:47

than $5 billion to direct-to-consumer

39:49

companies. But when

39:52

interest rates rose, along with inflation

39:54

and those pandemic-era checks dried up,

39:56

those consumer purse strings began to

39:58

tighten. and so did the

40:00

willingness of venture capitalists to roll the

40:03

dice. And many

40:05

of those companies that styled themselves as disruptors

40:07

had no blueprint to follow,

40:10

no blitz fix, no legal

40:12

or ethical way to fake

40:14

the numbers. All

40:16

of which is to say, it's easy

40:18

to wag a finger as we look

40:20

in the rear-view mirror to claim that

40:22

if only or offer the critique of

40:24

woulda, coulda, but didnna, and

40:26

it is much harder to remember that

40:29

when you're a part of a frenzy

40:31

of success, the notion of dialing it

40:33

down or hitting the reset button always

40:35

seems too distant, too remote, the antithesis

40:37

of everything you've been fighting to build.

40:41

Business thrives on a culture of

40:43

steep ambition and tends to wither

40:46

without it. So again,

40:48

what would you do? Who's

40:51

ready to write the business book on

40:53

blitz downsizing? Or more

40:55

to the point, to buy

40:57

it? Coming

41:05

up on Business Wars, two iconic

41:07

American vehicles, the Jeep and the

41:09

Bronco, face off. But when

41:11

it looks like the Jeep has won, a

41:14

secret group plots to revive the

41:16

Bronco. From

41:18

Wondery, this is Business Wars. I'm your

41:20

host, David Brown. A big thank you

41:22

to retail reporter at the Information, Ann

41:25

Guillen, and Fast Company senior staff writer,

41:27

Elizabeth Seagren, for their insights in this

41:29

episode. Karen Lowe is our senior

41:31

producer and editor, written and produced by Emily

41:33

Frost and Kelly Kyle, sound design by

41:35

Kyle Randall. Our senior managing

41:38

producer is Ryan Lohr and our managing producer

41:40

is Matt Gant. Our senior

41:42

producer is Dave Schilling. Our executive producers

41:44

are Jenny Lower Beckman and Marshall Louis.

41:47

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