Shoe retailer Allbirds is the latest digital-native company planning to close most of its stores after its foray into brick-and-mortar selling faltered.
The San Francisco-based company, whose sustainable footwear was once a go-to for Silicon Valley tech whizzes, on Wednesday said it was shutting all its full-price stores in the United States by the end of February. It plans to keep two outlet stores open in the states as well as two full-price stores in London — in King's Road and Marylebone — "preserving key brand touchpoints while prioritizing capital-efficient growth," the company said in a statement.
It had already been downsizing its physical footprint. From a peak of 45 domestic stores in 2023, Allbirds had 21 total U.S. stores as of Sept. 30 last year.
The retailer said its store closings will improve its profitability by focusing resources "toward its e-commerce platform, wholesale partnerships and international distributorships, all of which offer greater reach, flexibility and operating leverage."
Allbirds is one of a number of digital-native companies, most notably e-commerce giant Amazon, that tried their hand at selling merchandise in physical stores as well as online. Eyewear retailer Warby Parker, shirt seller Untuckit, singer-entrepreneur Rihanna's lingerie company Savage X Fenty and Kim Kardashian's Skims clothing line also opened brick-and-mortar locations. Amazon, in fact, launched a variety of different categories of stores, with limited success.
Following Amazon's footprints
In a best-case scenario, brick-and-mortar retail outposts act as promotional billboards and even help drive online sales, according to Warby Parker and even traditional retailers such as Macy's. But that's a best-case scenario.
Just on Tuesday, Amazon announced it was closing all its Amazon Fresh supermarkets and its Amazon Go convenience marts, roughly 70 locations, saying it had not found an economic model that worked for those initiatives. In March 2022, the company pulled the plug on 68 stores representing three chains, namely its Amazon 4-star, Amazon Pop Up and Amazon Books locations in the United States and Great Britain. And last September, it said it was closing all its Amazon Fresh stores in the United Kingdom.
Allbirds described closing the stores as "a capital-light endeavor," and it plans to discuss the anticipated savings and related cash charges during its fourth-quarter earnings conference call in March.
"This is an important step for Allbirds, as we drive toward profitable growth under our turnaround strategy," Joe Vernachio, the retailer's CEO, said in a statement. "We have been opportunistically reducing our brick-and-mortar portfolio over the past two years. By exiting these remaining unprofitable doors, we are taking actions to reduce costs and support the long-term health of the business."
With its roots in New Zealand, Allbirds launched in 2016 with a single shoe, its popular and iconic Wool Runner. The company touted its use of sustainable materials and fabrics to make its footwear, like its sugarcane-based midsole technology, SweetFoam, and textiles made with tree fibers and merino wool.
Tough to support stores
The store closures come as no surprise, according to Neil Saunders, a retail analyst and managing director at analytics firm GlobalData.
"Bluntly, Allbirds is not a strong enough brand, nor does it have a wide enough offer, to support so many stand-alone stores," Saunders said in an email to CoStar News. "Running stores is expensive and to make them work financially you need to drive volume — either directly through the stores or via their contribution to other channels. Allbirds failed to do that, so stores ended up costing them money which is reflected in their weak financials."
In the third quarter, Allbirds' net revenue dropped 23.3% to $33 million compared with $43 million in the prior-year period. It posted a net loss of $20.3 million compared with $21.2 million for the third quarter of 2024.
"For Allbirds specifically, physical did not work," Saunders said in a post on LinkedIn. "Not because stores per se are broken, but because the Allbirds model is. Allbirds is a niche brand with weak differentiation, a limited assortment, and low purchase frequency. Those things are huge barriers to making store economics work. But these are Allbirds problems, not general retail problems."
Allbirds did not immediately respond to an email from CoStar News seeking a comment on Saunders' remarks.
As of last week, before news of the planned Amazon and Allbirds closings, there had 733 U.S. store closing and 1,201 openings announced to date, according to Coresight Research. It is projecting that there will be roughly 5,500 U.S. store openings and 7,900 store closings this year overall. That would be roughly 4% more store debuts and 4% less store closings than 2025.
"In wider retail, physical has not lost its shine at all," Saunders said on LinkedIn. "If anything it has become more important as a driver of discovery, loyalty, and brand meaning. For brands where the economics work, stores are still a very important component of success."