Crocs is different though - they optimized to survive but then started killing it when they started doing partnerships and collaboration. They took a first initial fad of a shoe because of how dumb it was and made looking "unorthodox" cool and then made it more cool by the various collaborations it launched.
On the other hand, I like how you're looking at BIRD as a special situation. I could see there being a takeout but I think heavy hitting investors to twist their arm. I think eventually they'll get hit again with broader downturn, do a very dilutive equity raise to keep the strategy going under the guise of a turnaround. Fail. And then be bought out.
The boxes is what screwed them, among other things you mentioned. Should have just gone wholesale.
absolutely a lot of differences. I think if you squint, you can say the parallel is that investors really assumed Crocs were a fad in 2009 (or in 2015, for that matter) and yet the company pulled some strings and found a way to find some staying power.
But also, you would have said the exact same thing about Crocs in 2009 that you would about Allbirds in 2023: why are they opening all of these stores? Just sell this crappy rubber shoes at Target or wherever and be done with it. Yet that strategy worked - for a while. They were actually too aggressive with the store strategy. The peak was 600-plus stores (plus kiosks if I remember correctly), now they're at 340.
I mean, one plus is that the two of the three heavy-hitting investors are the co-CEOs.
That said, yeah, I think dilution and a sale down the line (and maybe too late) is the most likely outcome. Think how the co-founders see this. The shoes are instant hits - within, what, three years they're one of the hottest things in the Valley. They're in the WSJ five years after being founded.
Then, well, there was a pandemic, and a buying boom, and then a bust, and there's tech layoffs, and Elon Musk bought Twitter, and, you know, look, we've just got to execute better, cut some costs, pull back from a few models where we took a big swing and it failed. For them to really change course, that thesis *has to be disproven*, not simply not work. And to your point, by the time it gets disproven (assuming it does - the market certainly believes it will), the boxes mean they're in a pretty dire financial situation.
Yeah, we'd love to - it's an interesting story. We'll figure out a way to get that posted pretty soon, either as part of next week's Research Notes or as a standalone post. Thanks for the idea!
Great piece Vince. I was wondering how Crocs achieved the level of growth from low 2009. As you stated, for birds the same path may not work. As things changed drastically on the e-commerce space. I am curious. What is the most likely path to profit for birds?
Paul makes some points above, but I think the broad view is basically that the product was much better than investors believed in 2009. The macro environment cooperated, the store expansion strategy worked, and the stock soared.
It then kind of tanked for a few years before really rebounding before the pandemic - they seem to have really found the balance of distribution, online sales have definitely helped.
For Allbirds, in practice the most likely path to profit is that they're actually much more right than the market realizes (which was the case for Crocs in 2009-2010), that the revenue pressure is a result of broader forces (people buying too much stuff in 2021, etc.) and some assortment misses, and that the store expansion strategy works. (In theory, I think the quickest path is simply shrinking, being DTC/wholesale and going that route. Can't see them doing that soon.)
Why BIRD is terrifying is that such an outcome seems unlikely. Why it's interesting is because that outcome means just massive upside from here - I mean, you're talking 500% or more.
Crocs is different though - they optimized to survive but then started killing it when they started doing partnerships and collaboration. They took a first initial fad of a shoe because of how dumb it was and made looking "unorthodox" cool and then made it more cool by the various collaborations it launched.
On the other hand, I like how you're looking at BIRD as a special situation. I could see there being a takeout but I think heavy hitting investors to twist their arm. I think eventually they'll get hit again with broader downturn, do a very dilutive equity raise to keep the strategy going under the guise of a turnaround. Fail. And then be bought out.
The boxes is what screwed them, among other things you mentioned. Should have just gone wholesale.
absolutely a lot of differences. I think if you squint, you can say the parallel is that investors really assumed Crocs were a fad in 2009 (or in 2015, for that matter) and yet the company pulled some strings and found a way to find some staying power.
But also, you would have said the exact same thing about Crocs in 2009 that you would about Allbirds in 2023: why are they opening all of these stores? Just sell this crappy rubber shoes at Target or wherever and be done with it. Yet that strategy worked - for a while. They were actually too aggressive with the store strategy. The peak was 600-plus stores (plus kiosks if I remember correctly), now they're at 340.
I mean, one plus is that the two of the three heavy-hitting investors are the co-CEOs.
That said, yeah, I think dilution and a sale down the line (and maybe too late) is the most likely outcome. Think how the co-founders see this. The shoes are instant hits - within, what, three years they're one of the hottest things in the Valley. They're in the WSJ five years after being founded.
Then, well, there was a pandemic, and a buying boom, and then a bust, and there's tech layoffs, and Elon Musk bought Twitter, and, you know, look, we've just got to execute better, cut some costs, pull back from a few models where we took a big swing and it failed. For them to really change course, that thesis *has to be disproven*, not simply not work. And to your point, by the time it gets disproven (assuming it does - the market certainly believes it will), the boxes mean they're in a pretty dire financial situation.
The Allbirds net zero shoe is here https://www.voguebusiness.com/sustainability/allbirds-says-its-net-zero-carbon-shoe-is-here
I subscribed for Allbirds articles, can you write another article on Allbirds as a follow up? Thanks!
Yeah, we'd love to - it's an interesting story. We'll figure out a way to get that posted pretty soon, either as part of next week's Research Notes or as a standalone post. Thanks for the idea!
Great article. I’m curious what is the reason more in-store sales would boost gross margin?
Seems counterintuitive to me.
yeah, that's a dumb error on my part - thinking through it the wrong way
Great piece Vince. I was wondering how Crocs achieved the level of growth from low 2009. As you stated, for birds the same path may not work. As things changed drastically on the e-commerce space. I am curious. What is the most likely path to profit for birds?
Paul makes some points above, but I think the broad view is basically that the product was much better than investors believed in 2009. The macro environment cooperated, the store expansion strategy worked, and the stock soared.
It then kind of tanked for a few years before really rebounding before the pandemic - they seem to have really found the balance of distribution, online sales have definitely helped.
For Allbirds, in practice the most likely path to profit is that they're actually much more right than the market realizes (which was the case for Crocs in 2009-2010), that the revenue pressure is a result of broader forces (people buying too much stuff in 2021, etc.) and some assortment misses, and that the store expansion strategy works. (In theory, I think the quickest path is simply shrinking, being DTC/wholesale and going that route. Can't see them doing that soon.)
Why BIRD is terrifying is that such an outcome seems unlikely. Why it's interesting is because that outcome means just massive upside from here - I mean, you're talking 500% or more.
Interesting article, thanks!