It’s not easy being a pioneer. That’s certainly true of the first generation of direct-to-consumer (DTC) brands that hit the market in the 2010s, promising to revolutionize retail.
This week, Joey Zwillinger, founder and CEO of the sustainable sneaker startup Allbirds, announced he was stepping down and would be replaced by the COO, Joe Vernachio. The company, whose sales and stock price have been in decline, will also shutter 10 to 15 of its 60 brick-and-mortar stores in an effort to help right things.
Outdoor Voices, the buzzy activewear startup, also announced store closings: All 16 of its stores will close this Sunday.
In some ways, these struggles aren’t all that surprising. For years, Allbirds and Outdoor Voices have tried to become profitable; so have many of their peer DTC brands, including Away, Casper, and Brandless. But the extent of the decline for these two brands is notable, partly because their founders and investors had such great ambitions for their companies.
In 2015, when I spoke to Outdoor Voices president, Andrew Parietti, he talked about wanting to become the next Lululemon. When I met with Allbirds founders in 2018, they told me their goal was to become a more sustainable alternative to Nike or Adidas. Venture capitalists believed in their potential. Outdoor Voices landed $69 million, and Allbirds snagged $225 million to try and turn these dreams into reality. But neither brand has been able to turn a profit. (Allbirds and Outdoor Voices did not immediately return our request for comment.)
As I’ve argued before, this infusion of capital may actually have contributed to the troubles for these startups, compelling them to focus on growth at all costs. But as the two companies figure out how to right the ship, it’s clear that being laser-focused on customer acquisition—through brick-and-mortar stores or digital marketing—is not always a winning strategy.
“These brands were trailblazers,” says Juan Pellerano-Rendón, chief marketing officer of Swap, an e-commerce logistics company that works with up-and-coming DTC startups, including Hill House Home, Drake’s, Nadine Merabi, and Percival. “They revealed where the potholes are. Today’s startups are trying to avoid them.”
It’s worth noting that Nike and Lululemon took decades to achieve their market dominance. And in their early years, they weren’t exclusively focused on growth. Instead, they invested heavily in brand and product. Nike, for instance, developed memorable ads and athlete partnerships that eventually made it one of the best-known brands on the planet. Lululemon, for its part, has always been known for its obsession with developing high quality, comfortable textiles, perfectly suited for yoga.
The founders of Allbirds and Outdoor Voices understood the value of brand and product too. Allbirds began as an experiment in material innovation, as its R&D teams developed sneakers made from wool with soles made from sugar. More recently, their pace of product development has slowed. Last year, it announced a zero-carbon sneaker, but it hasn’t launched many other buzz-worthy sneakers to grab consumers’ attention.
Outdoor Voices stood out for creating a brand for people who wanted a more relaxed, casual approach to sport. Its motto, “Doing Things,”was a deliberate contrast to Nike’s “Just Do It.” This spoke to a community of millennials, but its efforts to create content and excitement around this lifestyle have stalled. It once had a digital magazine, called The Recreationalist, that celebrated the joys of noncompetitive activities, but that’s no longer in existence.
As time went on, Allbirds and Outdoor Voices have had to pour a lot of resources into acquiring customers. As the cost of digital advertising went up, they began opening physical stores. But these venues weren’t just about generating sales, they also served as billboards in prominent locations that exposed new consumers to these brands.
While these measures have increased top-line growth, they haven’t paved the way for profitability. They may have attracted consumers to try their products, but a recipe for loyal, long-term customers they’ve not been. And now that the brands are financially struggling, Allbirds and Outdoor Voices are changing course by closing stores.
Newer DTC startups are in a different position than their predecessors, says Pellerano-Rendón. The brands he works with don’t have the same access to capital and must grow more slowly, focusing on creating differentiated product and immersive brands. “Allbirds and Outdoor Voices are a product of a particular moment in history,” he says. “VC money was abundant. Today’s brands don’t have access to cheap money, but that might be a blessing in disguise because they’re focusing on slow, steady, long-term growth.”
Still, it’s not too late for Allbirds and Outdoor Voices. They need to return to their roots and focus on what made them catch our attention in the first place: sustainable design and creative community-building.
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