Allbirds is announcing an updated version of its debut shoe today, part of a strategy to turn the company profitable by going back to its core franchise.
The Wool Runner 2, priced at $110, is an updated design of the eco-friendly, merino-wool shoe that put Allbirds on the map back in March 2016. The new version comes with at least 15 changes meant to improve comfort and fit, like an additional heel seam, more foot cushion, and a new lacing appearance. The brand is also introducing half sizes in a bid for customers looking for better fit.
Co-founder and chief innovation officer Tim Brown told Modern Retail that the design is the result of a year and a half of conversations, multiple prototypes and exhaustive testing to improve the fit, function and design of the shoe. The brand has grown significantly since its launch, he said, with input from its staff expert designers and new technologies that it could incorporate into a new version.
“This is a milestone for us, and I think a significantly improved product,” Brown said. “It was a little bit of a function of realizing that, ‘Hey, we created this thing, we’ve made a series of improvements, but we haven’t stepped back and looked it with everything we know.'”
Strategically, reintroducing the core style is one of four key elements of Allbird’s turnaround plan. After going public in November 2021, sales declined, and it ended 2022 with an adjusted EBITDA loss of $60 million. Though it made bids to go after new customers with differentiated products like running shoes, the company is now scaling back those efforts and focusing in how it can improve on its hero product.
Allbirds was part of a wave of DTC brands that went public in 2021, a moment that saw a rise in consumer spending during the stimulus-driven days of the coronavirus pandemic. While some brands in that cohort, like Warby Parker, continue to post profits, others like Peloton and StitchFix report losses following their much-anticipated IPOs. In going public, Allbirds focused on its goals to manufacture footwear with fewer emissions, and expand physical stores as a way to require customers. It opened more than 20 locations in 2022, and hit a peak of 58 stores. But as the company hit challenges heading into 2023, it opted to slow the pace of new openings.
Brown said Allbirds has been “an underdog story” from the beginning, having launched on Kickstarter. But even with the financial pressures, Brown said the company retains its North Star of making footwear with natural materials and generating less waste than competitors.
“If we fulfill the potential that I know this brand has to shift the category and be a 100-year brand, it won’t be the last time that we lose a little focus and bring some products to market that didn’t work out the way we wanted,” he said. “There’s an opportunity to refocus on your customer, on this idea of natural [materials] and comfort and just do that really really well.”
At its last earnings call in August, the brand reported a 9.8% drop in revenue compared to the prior year alongside losses of $28.9 million. When it first debuted on the public markets, Allbirds stock price was around $25; the price per share has been less than $2.50 for the last year, dipping below $1 this past month. Co-founder and co-CEO Joey Zwillinger teased the Q4 re-introduction of the Wool Runner 2 and said subsequent updates to the core franchise will come in 2024. He also said the brand would work on “eliminating the long tail of product outside the core franchise,” like sunsetting the first generation of the Tree Flyer, a running shoe.
In addition to returning to core styles, other pillars of Allbirds transformation include optimizing U.S. distribution and turning out profitability in its brick and mortar stores, broadening its international strategy with distribution deals in markets like Canada and South Korea, and improving overall gross margins. The goal is to have a positive adjusted EBITDA by 2025.
Jessica Ramírez, senior research analyst with Jane Hali & Associates, said Allbirds has always been something of a niche brand that — despite its buzzy tagline as “the world’s most comfortable shoe” — couldn’t gain traction with the mass market. Instead, brands like Hoka, On Running and Nike have introduced new or relaunched styles that appeal to shoppers looking for functional, comfortable footwear. But rather than courting that mass appeal. Allbirds was more akin to Toms in being an easy-to-wear shoe that had an ethical mission at its core, she said.
“Performance is key in footwear right now,” she said. “With all the sneaker brands that are out there, they’re not a top performance, or not necessarily the best seller across the board.”
But Allbirds is betting that a re-introduction of its signature style could help win back prior customers, and engage new ones. The launch will be online and in all stores. In addition to social and email marketing, the launch is being promoted with a wry TV ad spot featuring the tagline “Life is uncomfortable. Your shoes shouldn’t be.”
In addition to design tweaks that aim to give the shoe a better fit and make it more durable, Brown said that the new Wool Runner 2 has a 14% lower carbon footprint than its predecessor. That was achieved through change to the transportation and packaging process, as well as the materials used to create the shoe.
“Like anything else, there’ san opportunity in these moments of challenge,” he said. “I think this is the beginning of getting back to the things that are great about this brand, and this product, and hopefully people will feel that.”