Save Zombie-Birds w/ Wholesale

TLDR;

- A LBAB Guest Post!

- Saving Allbirds from Zombie Status (and probably bankruptcy)

LBAB Community: Guest Post

👋 Jeremy here! Dropping a quick note, as we have a bit of a change of programming.

We have a special guest post today!

Jason Greenwood (the B2B eCom 🐐) is dropping the B2B eCom/Wholesale playbook on how we can and scale Allbirds to $1B.

After my original post we’ve been chatting on Linkedin and he’s got killer insights into how to leverage your eCom channels to build a meaningful wholesale biz.

Allbirds is the posterchild of the DTC or Die Mania. And we can see how that’s turning out for them.

If you have a spicy take or an interesting play you want to share, hit that reply button with “PLAY” and let’s get you featured in the newsletter, too!

Let’s Examine This Biz

Founded in 2015, Allbirds is a storied DTC brand. They make comfortable, eco-friendly sneakers as well as casual footwear, and clothing for men and women.

Allbirds sells via their DTC site and ~60 of their own DTC retail stores globally, though they halted new store openings in March due to the costs involved.

As of early 2022, Digital still made up the vast majority of the company’s business, at 80%.

They also have limited wholesale distribution through retailers since May of 2022 and sell in “bulk” to qualifying customers.

However, they have deep disdain and utter disrespect for wholesale coming from the top:

“We don’t need these retailers to build our business,” CEO Joey Zwillinger said last year.

Allbirds was lauded early on for its eco-credentials and DTC business model when many DTC brands were able to raise VC funds easily and almost to infinity.

Predictably, Allbirds went public in Nov of 2021 at the peak of DTC frothiness. Great timing.

Now, it’s trading at $0.92/share with a $139m market cap. Down -95% since its $41B cap at the 2021 IPO.

With no end in sight to the bleeding for this ailing business, I’m joining Jeremy’s PE firm and we’re going to acquire Allbirds for <$150m.

So what’s a former DTC-darling-turned-DTC-catastrophe to do?

TLDR Analysis: Things are not good in Birdland.

Net Loss is exploding: SG&A is increasing while Gross Margins are shrinking. The 2 trends you never want to see. With a 3% YoY increase in marketing budget, it’s no surprise Sales only increased 7%.

Without outside capital, they’ll run out of cash within 2 years without further outside investment or debt/equity deals.

Let’s Fix This Biz

Here’s our 3-step plan to fix this biz through proper channel management.

1) Build wholesale momentum with reduced MOQ.

Allbirds needs to rapidly learn about the $86B/yr US footwear market, the world's largest. On a per capita basis, and in total, it’s BY FAR the largest in the world.

Despite their CEO’s statement to the contrary, it’s clear that Allbirds cannot substantially grow on its own in the US without the help of MANY more retail partners. It’s simply too costly to continue to grow primarily via DTC, especially for a brand that’s rapidly running out of money.

Allbirds is tapping out their Marketing resources and learning how hard it is to build their own retail stores. It’s time to grow up and tap into the biggest players in the space to move product.

Takeaway:  Grow Profitably through Wholesale's scale.

2) Secure 1 national Footwear Specialist chain every 6 mos

They miscalculated the importance of US specialty footwear retailers. They don’t sell through any dedicated footwear chains today.

My first pick is Foot Locker, since the bulk of their shoes are sneakers.

Adding a national US Casual footwear chain within the next 6 mos is crucial to determine if they can really sell their non-sneaker products.

These retail brands offer a highly specialized, value-added service that Allbirds needs to help justify their premium product and price-point.

While it’s courageous to try to build premium completely owned retail experiences, reinventing the wheel isn’t the best use of capital for a biz at $300m in sales.

Takeaway: National Retail Chains unlock next level scale.

3) Establish a dedicated, B2B wholesale website ASAP

Large retail partners that are named accounts with Account Managers/reps often order via EDI (i.e., automated ERP to ERP).

This will NOT work for smaller retail stores and chains. Allbirds must rapidly scale through smaller stores without taking on the overhead of field sales reps. They can do this via eCommerce and a dedicated B2B storefront.

To minimize costs, they should use a B2B-ready platform like BigCommerce because their DTC site is built on Shopify, and it would take too much customization to create a new Shopify B2B storefront.

In the first 12 mos, they must master B2B eCom in the US.

• Lock in ops and processes.

• Then add regions/countries where they have strong logistics but weak sales.

Then, leverage the investments they’ve already made in brick-and-mortar real estate as well as their global inventory levels.

Allbirds must pursue smaller retail stores and chains for wholesale opportunities, but these smaller players do not warrant a named account/sales rep approach.

This is where B2B eCommerce can pick up the slack, and they can use B2B eCommerce as a wholesale customer acquisition and replenishment ordering channel.

Their current DTC site makes it clear that wholesale customers are not a priority, and this is a monumental missed opportunity.

Time to develop that dedicated site for B2B eCommerce.

This could be achieved (including integrations with an ERP, PIM, and any other operational systems required) in under a year and would likely cost less than $500k to deliver.

With a true MVP approach, the project could probably be delivered in under 6 mos, for $300k. From there, Allbirds could leverage tiered, bulk account management strategies (vs named accounts with reps) to pursue and onboard smaller wholesale accounts at scale, helping ensure the broadest distribution possible.

(This strategy is how Stanley Black & Decker entered India, which I talk about with Dean McElwee from Black & Decker in an episode of THE ECOMMERCE EDGE.)

Remember, Allbirds themselves said that as of Feb 2022, they only had an 11% name recognition/brand awareness rate in the US.

They need to rapidly leverage deep market/channel penetration to survive. They simply cannot do it via a DTC + “selective wholesale” model.

Takeaway: B2B eCommerce support Mom & Pops → Mega Retailers.

Final Thought

Allbirds speaks confidently about their path to profitability, but at this point, that path is at best murky. If nothing changes, they will be bankrupt in under 2 years.

Their story does NOT have to end this way.

Allbirds speaks with a level of confidence/arrogance befitting the market realities of 2020-2021, not 2023. In 2023, investors require real profitability, not revenue at all costs.

Allbirds has a golden opportunity to become the eco-friendly, upmarket alternative to brands like Nike & Adidas, if they can get out of their own way and execute.

A large part of a successful turnaround WILL require a cohesive wholesale strategy that drives both revenue and profitability, at scale.

I wonder what is taking them so long to come to this realization.

🧠 The Takeaways

Retail, just like PE, isn’t the DTC bogeyman. They’re essential players in how real brands grow.

1. Wholesale orders juice MOQs. Leverage those economies of scale.

2. 1 Named Account will change your biz. Who’s your ideal store?

3. Retail, like any account, requires focus. Dominate one market and strategy. Then move onto others.