When the Shoe Doesn't Fit: Allbirds' Segmentation Missteps


Allene Yue

Most people attributed the fall of Allbirds to poor quality, but the truth is, the source of their problems was more than just the material of the shoe. Allbirds, originally a sustainable sneaker company, had not only failed to pay attention to the underlying needs and values of their ICP, but had also lost its way by attempting to expand the brand to irrelevant segments. Much like what we described for Nike, trying to enter new markets too quickly fogged up Allbirds’ core brand image and diminished overall perceived quality. But even this is too short a summary of what truly happened to Allbirds — so let’s break it all down.

A Running Start

Not to say that climate change is no longer a cause for concern, but there was a time when the sustainability movement had just reached a peak. The detrimental effects of global warming were becoming clearer with wildfires, hurricanes, and droughts raging across the world. Fast fashion was beginning to be more heavily criticized for its unsustainable practices, and as a result, consumers were turning to more ethical brands to fill their wardrobes.

Many new and existing companies saw this rise in the sustainability movement as an opportunity to do good for the world while still generating ample profit on the side. In 2016, Joey Zwillinger and Tim Brown founded Allbirds with this exact goal in mind. With the popularity of eco-friendly apparel being at an all time high, the two co-founders managed to raise $120,000 for their product idea of completely sustainable footwear, entirely through crowdfunding, and all within a week.

With this, Allbirds launched their first shoe: The Wool Runner. Created wholly from merino wool, sugarcane, and recycled plastic, the Wool Runner intrigued many — it was not like anything seen before. And since most companies were so determined to join in on this environmental movement, Allbirds had no issues finding both customers to sell to and brands to partner with. In fact, at Allbirds’ first pop-up, partnered with Shake Shack, the line for their unique shoes wrapped around the building. Just 5 years later, the market valued the brand at $4 billion.

Allbirds’ Slip-Ups

Like any brand, Allbirds was eager to expand - and fast. Attempting to break into the running shoe industry, they launched sneakers including the Tree Dasher and the Tree Flyer. Not only was this shoe over 50% more expensive than the Wool Runner, but the material of the shoe was simply not suited for extensive running and movement. Because of the hefty price, sales of their running sneakers were way lower than expected, and customers who did make purchases complained that the shoes would run down within a year.

Hoping to expand their product line even more, Allbirds tried to move into the clothing category. Upon releasing a workout clothing line made entirely out of merino wool, however, Allbirds did not achieve the results they were hoping for. The gear was way too warm and stuffy, leaving customers drenched in sweat at the end of an intense workout and immensely dissatisfied. Similar issues arose with other types of apparel they released, from dresses and leggings to puffers. The materials used simply wouldn’t last, the products were insanely expensive, and their apparel had low fashion appeal in general. Many of these articles of clothing were either discontinued, discounted, or liquidated, losing the company over $10 million.

In addition to expanding their product line, Allbirds also began working to extend their products to new customer segments — particularly younger consumers. No matter how many designers they partnered with or how many vibrant designs they created, they were far from hitting the numbers they thought they could sell.

Source of Their Slump

Looking at what happened to Allbirds, it’s a bit clearer where the problem lies with eco-friendly apparel. But these issues they faced are all ones Allbirds could’ve avoided if they had stuck to their core. Their first shoe was a success because for their target segment of 30-40 year old’s looking for a casual shoe to wear, quality and appearance matter much less, and the price-point is still reasonable.

However, much like Nike, Allbirds tried jumping into new product categories and customer segments without doing enough customer research beforehand. At the end of the day, athletes prioritize quality and comfort above all. Younger consumers prioritize price and trendiness. It’s true that consumers as a whole may be more aware of the importance of sustainability than before. But, this only means that in the brand consideration stage of the customer journey, a company like Allbirds is more likely to be included in the initial consideration set. When consumers finally need to make a purchase decision, their dominant preferences for cheaper, trendier, and more comfortable apparel triumph over all else.

Many critics believe that the key reason Allbirds took a fall was because their products simply weren’t up to par. However, we’re here to tell you that the real root of their problems lies in their segmentation strategy.

Saving Allbirds with Segmentation

What brands often do is rush into expansion in order to generate more revenue at a quicker pace. In actuality, the best way to efficiently increase revenue is to hone in on a few segments and products that make the most sense for your company. Expand your product line too rapidly, and you dilute your brand perception. Broaden your target market too much, and you disappoint your core customers. And after looking to BCG for help, Allbirds realized these were their exact issues.

The thing is, not only could’ve Allbirds realized much earlier that the solution to their problem was to return to their original product and target market, but they could’ve also prevented all this from the beginning with a little bit of data analytics. Nearly 90% of Allbirds’ sales come from their online channels, which means they have tons of customer data readily available. By sifting through this data, it probably would have been more obvious that targeting younger consumers would not be worth their investment of time and resources, no matter how many product variations they pushed out to try to appeal to them.

They could’ve also used their data to identify specific buyer personas that they could target or engage in ways most effective for each profile. Doing this would’ve been a more productive method of optimizing revenue than changing up the entire product, brand, or overall target market. However, it’s understandable that getting ahold of these findings can be difficult and intimidating without a data team (which can be remarkably expensive).

So, why not automate this process? Cotera does exactly this for you. Rather than letting your ecommerce data sit there idly, let Cotera generate game-changing insights about your customers within just a few hours of installation. We segment your customers so you can better understand them, and we identify your best and worst segments so you have an easier time personalizing customer experience. Use these insights to either prevent making slip-ups with your segmentation strategies down the line or to enhance your current approach. Success does not emerge from just your product itself - more than anything, it’s dependent on your customers.

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