How a company's sales and growth can be affected by the message it conveys to customers.
Allbirds stock is down 95% since its November 2021 initial public offering. People may say the company launched the wrong products (did you buy one of their puffer jackets?) or tried to grow too quickly. I believe there is a larger reason: you can’t scale a company by leading with an environmental message—which is Allbirds’s pitch. Consumers rank saving the planet as one of their least pressing concerns when making a purchase. The leading factors consumers look for when shopping are price, delivery of key features (for example comfort if it’s a shoe) and availability (i.e. how quickly can one get the item from the merchant).
Sole Survivor
Allbirds bleeds red because it bleeds green. Its environmental ethos is baked into the name: it's named after birds, which were the primary animal in New Zealand before mammals. Its shoes are made of wool, recycled plastic bottles, sugar cane, and castor bean oil. Allbirds touts that its fabric is “Forest Stewardship Council certified eucalyptus fiber” but shoppers will likely notice the price before that mouth full. Pierre Cardin said that people see things in this order: color, shape, and texture. When it comes to products, they see color, pattern, and text: the price. Pierre didn't mention certifications.
Allbirds chose to differentiate itself by showing concern for environmental impact. That often translates to higher-cost goods and materials that may break down more quickly. ON and Hoka didn’t make that mistake. They can use any materials, charge lower prices, sell more, then donate some of the profits to the planet.
Even if shoppers read Allbirds's environmental messaging, how can they value that? How much should they overpay for a shoe that has that? There is no way to equate that designation to a monetary value. Plus, how does that certification make the shoe more comfortable for the buyer on a daily basis? Or, maybe it doesn't. Maybe it makes it less comfortable. We're left to wonder.
Availability
Getting product in front of consumers is key (especially if one has to wear it) and Allbirds did a good on this front: Allbirds has opened 59 in 42 countries.
The issue is: they may have 59 stores selling less than marketable shoes.
Product Differentiation
Allbirds' reliance on the environment to differentiate itself may speak to the larger shoe market: it’s so competitive and so saturated that one has to differentiate itself by using a forest certification that few shoppers notice or value.
‘Tesla for Your Feet’
Some people may perceive Allbirds as Tesla for your feet. The electric car industry has the law and the taxpayer on its side—Allbirds does not. The U.S. taxpayer gives a Tesla buyer a $7,500 rebate with each purchase—and until recently did so with almost no strings attached. Every time you buy a pair of Allbirds, the government does not give you a rebate. (Pro tip: Allbirds should try to get legislation passed that does.) In addition, California and other states are trying to phase out combustion cars. If only Allbirds could get Sacramento to pass a law phasing out plastic-filled Nikes.
Allbirds shoes don’t have any comparable conveniences or savings over Nikes. Tesla owners buy the car to skip stopping at the gas station and save money charging their car at home—things most Fords can’t do. Tesla has a stronger value proposition than Allbirds, which is likely why Tesla's earnings ratio was 80 last year and Allbirds was -2.34.
What Shop Local Can Learn: Tip of the Shoe
We want to avoid the pitfalls that Allbirds encountered. We want to avoid leading with features that consumers don’t value. We want the tip of our spear to be what consumers want: low price, large selection, and quality products. Bonus if we can get the product to the shopper quickly (and preferably for free).
Low Price Is King—If You Wanna Scale
We want our merchants to offer their shoppers the lowest prices. Why? That is what primarily drives sales. To help offer lower prices, we’re launching a new discount feature. We'll allow merchants to show shoppers a new discount modal that allows stores to, for example, offer 10% off if the shopper subscribes to store emails. Our plan is to activate this discount feature by default for merchants and stores can increase the amount (or turn it off).
Currently, 95% of our sales are registry related and just 5% are self-purchases. We have a dearth of self-purchase orders because brands and Amazon are beating our merchants on price (via promotions and discounts). After we launch the new discount modal, I hope our general public self purchases increase to 10% and registry purchases will just make up 90% (!).
Price > Selection
Our retail clients already offer a lot of selection online thanks to our Syncing service. A retailer like Babcocks offers 50k products online. But this selection is neutered when Babcock’s prices are higher than the brand’s or Amazon’s. For example, a brand may offer 10% or 20% off when signing up for their emails. Plus, 70% of tabletop brands, including Vietri, Juliska, and Casafina, offer free shipping. Between Babcocks and these brands' sites, where would you shop? Lower prices trump a larger selection. In a game of rock-paper-scissors, price is a bazooka. It beats rock, paper, and scissors.
Price > Arm's Reach
One may say that our retailers stock the goods locally and are closer to customer’s homes so they can win on the fulfillment. Sadly, many customers are willing to wait to save money. Amazon can deliver most things the same day or next day thereby negating the advantage of being down the street from the shopper. After all, why drive down the street, spend money on gas, and spend time picking up the product when one can have the FedEx truck bring it to your front door. You save time, money, and gas.
Shopping algebra:
Lower price (and quick delivery) > Great selection and a local store’s hometown location.
Save Local > Shop Local
Amazon seeds its site with references to supporting local shops. That’s feel-good marketing that helps allay guilt about the Amazon boxes piling up on the front porch. For every $1 Amazon may spend on shop small messaging it likely spends $100m on ensuring it offers the lowest prices. We won’t grow in any notable way if we lead with the selling point “support local shops.” That’s as important to shoppers as “save the planet.” Like Amazon, we have to lead with competitive prices.
History Is Written by the Winners
Is it better to make $300m and donate $3m to the planet, or make $1b and donate $10m? Let’s just ask: ON and Hoka . At this rate, ON and Hoka are selling multiples of Allbirds. Allbirds’ annual revenue was just under $300m while ON and Hoka both have about $1.3b
Allbirds stock is trading at just over $1. If it goes below $1, it could be delisted. Allbirds grew up on a flimsy electric wire called idealism and is falling to the ground. You can't help the planet when you're buried in it.
My goal in leading Shop Local is ensure we cater to customers’ wishes and avoid the idealism that hamstrung Allbirds. We’re keeping our feet on the ground—in a pair of ONs.