allbirds-business-model

Allbirds Business Model In A Nutshell

  • Allbirds is a New Zealand-American footwear and apparel company founded in 2016 by Tim Brown and Joey Zwillinger. Former soccer player Brown got the idea for the company after noting that sports footwear was over-engineered and needlessly flashy.
  • Allbirds makes money through the digital sales of its footwear. Unlike many other brands, the company sells its shoes direct to consumer (DTC).
  • Allbirds operating costs tend to be higher because the company uses high-quality materials that align with its environmental values. To offset this cost and maximize profitability, the company uses innovative distribution and production methods.

Origin Story

Allbirds is a New Zealand-American footwear and apparel company founded in 2016 by Tim Brown and Joey Zwillinger.

The idea for the company came from Brown, a retired pro soccer player who had worn many footwear brands throughout his career and had not been completely satisfied with any of them.

In a later interview, Brown noted that “footwear had become overdesigned, over-logoed, overly bright – and you’re overwhelmed by the amount of choice.

Brown then set out to make a simple sneaker made from wool, abundant in his homeland of New Zealand. After a two-year partnership with a research firm, the first pair of Allbirds sneakers was developed.

In 2014, the release of the range was funded through a Kickstarter campaign which raised approximately $119,000.

During the next two years, Brown worked with Zwillinger to refine the shoe further.

The brand was officially launched in March 2016, with the pair investing heavily in marketing to espouse the sustainability, quality, and comfort of wool footwear. Two years after the launch, the millionth pair of Allbirds shoes were sold.

In addition to casual sneakers, the company now sells other footwear including running shoes, socks, and flip flops. The company also recently released a line of activewear consisting of biker shorts, moisture-wicking t-shirts, and high-waisted leggings.

Allbirds filed for a Nasdaq IPO on August 31, 2021, with the company valued at around $1.7 billion.

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Image Source: Allbirds Prospectus

Allbirds revenue generation

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The Allbirds Product Catalog (Image Source: Allbirds Prospectus)

Allbirds makes money through digital sales, with estimates suggesting this source accounts for nearly 90% of total revenue.

To maximize profit margins and minimize costs, Brown and Zwillinger opted to sell direct to consumer (DTC).

Many footwear brands choose the wholesale model instead, where shoes are sold to a retailer who must then sell them to consumers for a profit

By removing the middle man, Allbirds can sell its shoes at a higher price.

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Image Source: Allbirds Prospectus

Sustainability

The DTC model is important to the success of Allbirds as a company that preaches environmental stewardship. This is because high-quality, sustainable products tend to be costlier to produce.

To offset the cost of sourcing high-quality wool, the company uses innovative production and distribution methods.

This is perhaps best exemplified in the choice of raw materials. While most footwear brands use countless materials for hundreds of shoe styles, Allbirds uses just four materials for every pair of shoes it manufactures.

This enables the company to focus on products and features the customer actually wants. Relatively few raw materials also allows the company to purchase quantities in bulk and receive discounts.

If nothing else, the success of Allbirds has demonstrated that it is possible to build a business that is both financially viable and environmentally friendly.

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