Once a brand that soared as the de rigueur footwear for the Silicon Valley set, Allbirds has fallen out of the sky. The shoemaker, best known for its eco-friendly wool sneakers favored by tech bros, said this week it is selling itself for a mere $39 million, or roughly 1% of its peak market capitalization of $4 billion only five years ago—the victim of major strategic missteps in trying to sustain its once meteoric growth.
Joe Vernachio, the chief executive brought in two years ago to save Allbirds, said that American Exchange Group, a brand management company, will buy all of the company’s assets, pending shareholder approval later this year. The CEO said in a statement that the deal “sets up the brand to thrive in the years ahead.”
That will be a tall order for a brand that was the symbol of last decade’s venture capital boom. Last summer, cofounder Tim Brown conceded as much. “The time we had to evolve and grow that story was compressed in such an intense way,” he told Fortune. “With the rapid success that came our way, we lost some of our DNA.”
The Allbirds collapse offers some crucial lessons for CEOs and investors on how not to manage a brand’s rapid growth or make hasty mistakes:
Don’t mistake good publicity for mass-market success. At its peak, in 2022, Allbirds had sales of $297.8 million—a fraction of what brands like On, Hoka, and Brooks bring in. For all the hype, it remained just a niche product popular within a tiny, well-heeled, slice of the U.S. sneaker market. Much of Allbirds’ early success “was driven by Silicon Valley hype, more than deep popularity with consumers in the American hinterland,” said Neil Saunders, managing director at GlobalData.
A fashion trend doesn’t always translate to enduring brand value. In Allbirds’ case, the company believed its growth would last forever, not quite understanding that its distinctive shoes were in fact a fad. Allbirds spent lavishly on ad campaigns aimed at pushing new iterations of its signature wool shoes and touting sneakers made of materials like eucalyptus-tree-fiber pulp.
Don’t try to reinvent the wheel. Allbirds embraced the “direct to consumer” era, during which investors poured billions into companies that were so hot, they thought they could supplant incumbents by bypassing retailers. Allbirds proceeded as if it were emerging as a national brand and built too many store locations around the country. By late 2023, Allbirds had 45 U.S. stores; now, it is down to two outlet stores. And then it took too long to line up wholesale partnerships such as the one it eventually landed with Nordstrom.
Stick to what you know. Meanwhile, imitators of Allbirds’ natural-fiber shoes proliferated, and to stay ahead Allbirds began to throw proverbial spaghetti at the wall as it launched into product categories that left its consumers puzzled: leggings made of merino wool that proved to be partially see-through when wet; performance-oriented running shoes; and even puffer jackets—all while its core shoe offering was starting to seem passé to consumers.
Keep customers’ priorities at the top of the agenda. The eco-friendly aesthetic was an appealing brand story at first, but the company belatedly realized that analysts were right in saying that Allbirds’ marketing was too focused on sustainability virtues and not enough on the appeal of its shoes.
By the time Allbirds tried to course-correct, its moment in the zeitgeist had come and gone. It was dropped by Silicon Valley consumers and never adopted by the rest of America’s sneaker market. Now it falls to a brand company to try to breathe new life into Allbirds.
