Allbirds’ Strategy, 5 Reasons Behind its Fast Growth
If you went back in time to a decade or so ago and someone told you that they want to make a pair of sneakers out of the same wool your grandma uses to make your Christmas sweaters you would have thought, that’s a terrible idea. But that’s exactly what Allbirds did when it launched its Wool Runner sneaker in 2016. It turns out that shoes made out of wool are a great idea, so great that Allbirds sold a million sneakers within its first two years in business.
If you are curious about how this digitally native brand has captured the attention of competitors like Nike and even Amazon then consider these five key factors to its success.
1. Do the opposite of what everyone else is doing. An environmentally friendly sneaker sounds like something on trend now but Tim Brown, Allbirds’ co-founder and co-CEO came up with the idea for a wool sneaker a decade ago when most people were less aware of how our consumption habits impact the environment.
Brown was inspired to create a shoe using wool because of the more than 30 million sheep that inhabit his home country of New Zealand. He also knew that wool is a great material because it is sustainable, made of natural instead of synthetic material. It also has properties that keep your feet smelling fresh. “We often wondered if the natural, anti-bacterial, anti-odour properties of wool were the answer to our smelly shoes and it led to the question: ‘why had wool never been used to make the upper of a shoe before,’” wrote the brand in its 2014 Kickstarter campaign.
Those initial insights eventually turned into a $200,000 grant from the New Zealand Wool industry which was then used to create a patented wool material. As described in the brand’s Kickstarter campaign: “over the past two years, with the help of a grant from the New Zealand wool industry funding organisation WIRL, and with help of the clever people at world-leading textile institute AgResearch, we engineered our own. The result is a unique, patent pending, world-first fabric, designed specifically to have the strength and structure to make a shoe upper, with the comfort and abrasion resistance to be worn without socks.”
Allbirds’ woolen sneakers also had a smaller carbon footprint than the sneakers that were on the market when the brand first launched. Sustainability wasn’t en vogue at the time but still the founders focused on creating a shoe that has “natural, renewable and biodegradable benefits” because it is made from wool.
It is much easier to create a “me-too” product but then comes the challenge of standing out in a crowded market with competitors that have deeper pockets and more customer loyalty. If it’s cliché to say to focus on a niche market it’s for a reason. Allbirds did not start out trying to be Nike but instead focused on creating something unique. “I’ve tried to make us the opposite of Nike almost,” said Brown.
2. Let focus and simplicity lead the way. People often underestimate the difficultly of launching a new brand. When starting out there is an almost gravitational pull towards launching as much as possible as fast as possible. But a fledgling company can quickly become overwhelmed with the dizzying array of decisions needed to get one product out the door much less a dozen.
When Allbirds launched in 2016 it launched with one model, the Wool Runner sneaker. It did what many often find difficult to do. It focused on one thing and placed all of its bets on a single hero product. Is that a risky strategy? It can be if your hero product isn’t very good. But for many direct to consumer brands including Away and Casper who successfully launched their businesses with a similar one product launch strategy it can pay dividends. It means that an upstart can have a singular focus on one thing. It also simplifies marketing messages and makes it easier for consumers to understand a brand’s value proposition.
Not only was Allbirds intentional in starting small but it also transferred that thinking to design. Allbirds’ footwear is not attention grabbing, it will not make the list of most outrageous footwear of the year. Instead Allbirds’ shoes have a minimalist look which is popular now but was not at the time the brand launched. “I had a very, very simple insight that shoes were over-logoed, over-colored and changed all the time for no reason.” “And, it was very, very difficult to find ‘simple.’ And I set out to solve that,” said Brown.
While a single product launch strategy is a good move in the early days of a brand’s existence eventually it has to move into new lines or categories to grow. Allbirds sells clothing and accessories now. But if Allbirds wants to become a juggernaut like Nike it has to sell more styles and colours. Nike releases more than an estimated 100 new sneakers each year. Casper has run into issues by selling a mattress that consumers like so much they don’t need to buy another one for many years. That promoted Casper to expand into new categories like bedframes and dog beds.
3. Create a great product. It is no accident Allbirds is a success since in 2016 Time magazine called its woolen sneakers: "the world's most comfortable shoe." On the surface it doesn’t seem like there is anything special about Allbirds’ shoes. They are plain yet comfortable whether you are going for a run or walking to Sunday brunch.
But what looks simple is often difficult to create. Allbirds did the work to research and develop a patented material. The Wool Runners are: “a world first” using a woolen fabric with a proprietary design which is: “strong enough to construct the entire shoe upper.”
Source: Allbirds’ Kickstarter campaign
As you can see these shoes are more than meets the eye. That is one of the reasons Allbirds was able to land an article in Time magazine about its Wool Runners the day it launched. For a new brand to get that kind of media exposure on its first day in business is quite the feet. Warby Parker, another digitally native brand, also launched with great press, landing features in Vogue and GQ on the day it launched in 2010 causing its website to crash. It is easy to say that is luck or the work of a great publicist. But the truth is that Allbirds created a great product that has spawned numerous knockoffs including one from Amazon.
While it has never been easier to start a new business it may be harder than ever to standout. Making quality products is one of the best ways to create word of mouth. Allbirds first became popular in Silicon Valley with tech heavy weights like Google co-founder Larry Page wearing its shoes, then from there to celebrities with the shoes gaining popularity because they are so comfortable yet understated enough they can be worn to work.
People are only going to recommend your product to others if they have a good experience using it. This is different than spending a lot of money on digital marketing hoping to capture someone’s attention. Instead it’s about creating something so good your customers want to share it with others. That’s one of the reasons why Peloton has grown so quickly. It created a product so good your best friend couldn’t help but tell you to get a bike for yourself as the results speak for themselves.
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4. Innovate, innovate, innovate! If you thought Allbirds was finished innovating after it came out with its breakthrough woollen sneakers you were wrong. In 2020 Allbirds launched its first running shoe called the Tree Dasher. The mesh upper is created from eucalyptus wood pulp and the shoe’s sole is made from sugarcane. “We looked at many different materials, but when we came across eucalyptus we immediately knew we’d found what we were looking for,” said Joey Zwillinger, Allbirds’ co-founder and co-CEO. “Eucalyptus trees require very little water and grow like a weed all over Australia and New Zealand.” “They’re basically carbon-eating machines.”
As Allbirds writes on its website its “tree fiber—TENCEL™ Lyocell—is mainly sourced from wood grown in South Africa. The cultivation relies on natural rainfall, which means there's no need for artificial irrigation and fertilizers. Compared to traditional materials like cotton, it uses 95% less water and cuts our carbon footprint in half.”
It was another first for Allbirds, creating a sneaker from a material that had not been used before for footwear. It speaks to the importance of continuing to keep a culture of innovation long after your initial success. lululemon creates products that seem fairly basic but if you look closely you will learn that it has created many technically innovative and patented products that like Allbirds are comfortable to wear while at the same time wick moisture away.
And for Allbirds innovation is not only about technical attributes but about simplicity. “Sometimes, the assumption with innovation is it’s about adding lots of things — bells and whistles,” said Brown. “And, in the case of what we were asked often in the early days — ‘Why does the world need another shoe?’ — sometimes innovation can be about taking things away. It can be whispering when everyone else is screaming.”
5. Expand carefully. In 2014 after developing the proprietary wool material found in Allbirds’ sneakers, Brown started a small Kickstarter campaign called: “The Wool Runners: No Socks. No Smell.” After four days the campaign raised $120,000 far more than the campaign’s goal of $30,000. The campaign was then closed because Brown ran out of the 1,064 shoes he had available to sell. That was proof of concept for Brown. Two years after the Kickstarter campaign surfaced Allbirds launched online in 2016.
Allbirds then went on to sell one million pairs of shoes within its first two years in business. But even with early success online it realized like many direct to consumer brands including Bonobos and Warby Parker that brick and mortar stores are important and in 2017 Allbirds opened its first store in California. Why open stores when you are having success selling online? Even today, nearly seven years after Allbirds launched online, the vast majority of retail sales in the United States, 85.2% still happen in stores.
If you aren’t in your own brick and mortar stores or on the shelves of someone else’s growth is eventually going to stall. And digital marketing will also only take you so far. Allbirds now has about 40 stores with those stores contributing to 20% of its revenue. Allbirds also has a few wholesale partnerships including one with Nordstrom. “We’ve talked about awareness as a really important indicator for our future growth and being at 11% in the U.S., which is our biggest market of course and highest brand awareness, that’s something we’ve got to work on every day,” said Zwillinger.
Source: Bloomberg
Since Allbirds launched in 2016 it has had a fast growth trajectory. At one point it was valued at over a billion dollars but now it is valued at $463 million. Like many direct to consumer brands with high valuations venture capital has played a key role in the growth of the company. Since its inception Allbirds has raised $250 million.