When sustainability becomes a selling point Allbirds’ origin story started in the late 2010s. Founded by Tim Brown, a former professional footballer, and Joey Zwillinger, a biotech engineer, the company was known for its comfort, minimalism and environmental consciousness. Its breakout product, the Wool Runner, was a $95 sneaker made from merino wool, marketed as both eco-friendly and effortlessly stylish. Shortly after its launch, the brand gained popularity across the US. Its shoes appeared on the feet of tech executives, urban professionals, and even former US President Barack Obama. The brand went public in November 2021 and raised $301 million in its debut, making it one of the most prominent direct-to-consumer (DTC) success stories at the time. The cracks unveiled  Yet even at the height of its popularity, there were signs that the foundation was less stable than it appeared. Regulatory filings at the time of the IPO revealed Allbirds had never turned a profit and did not expect to do so in the foreseeable future. The business model, built on premium pricing, heavy marketing and rapid expansion, depended on continued growth. And that growth, however, began to falter. The company’s net losses widened from $46.7 million in 2021 to a peak of $152.5 million in 2023, while revenues began to decline after an initial post-IPO bump. By last year, revenues had fallen to $152.5 million, nearly half their 2022 peak. Losses reached $23.3 million during the third quarter of last year.  “The turbulent flight of Allbirds is one for the case study books,” Saunders said. “It’s a tale of a company that was built on an obsession with sustainability, rather than an obsession with what customers actually wanted. It’s a tale of a firm that believed its own hype that it was significant enough to open a string of expensive, high-profile stores.” Product missteps and strategic drift One of the most critical miscalculations was the expansion of the product. Flush with early success, Allbirds sought to evolve from a single-product brand into a full lifestyle label. All anchored in its sustainability ethos. But many of these products failed to resonate. Performance complaints emerged around its running shoes, with customers questioning durability. Apparel experiments proved even more problematic: wool-based workout gear that retained heat, leggings that were reportedly see-through, and a broader assortment that struggled to justify its premium positioning. At the same time, Allbirds doubled down on physical retail. After launching as a digitally native brand, it began opening stores in 2017, expanding into high-profile locations that carried high overhead costs. As sales growth slowed, these fixed costs became increasingly difficult to sustain. The company eventually closed all full-price US stores by early this year.  “If Allbirds hadn’t chased growth at any cost, if it had rounded out its sustainability credentials with other attributes like style, and if it had pursued expansion via wholesale, it may have succeeded,” Saunders said. “It didn’t do those things and, as a result, it never had a clear path to profit and entered a perpetual spiral of revenue decline.” Competition heats up  While Allbirds was grappling with internal challenges, the competitive landscape was evolving rapidly. Legacy giants such as Nike, Adidas and Puma began integrating sustainability into their own product lines, leveraging their scale and marketing muscle to normalise eco-friendly materials. Meanwhile, a new wave of challenger brands like On and Hoka captured consumer attention with a different proposition: performance-first innovation paired with distinctive design. In this environment, sustainability alone was no longer a differentiator. Brutal valuation and broader lesson Once a market darling, Allbirds is now being dismantled, with proceeds expected to be distributed to shareholders following the company’s dissolution. “The sale to American Exchange Group represents an inauspicious end. But, at this stage, it is the most sensible way forward,” Saunders said. The past decade saw a proliferation of DTC companies built on compelling narratives such as sustainability, transparency and community. Many achieved rapid early growth, fueled by venture capital and low customer acquisition costs on digital platforms. But as those costs rose and competition intensified, the limitations of narrative-driven differentiation became apparent. None of this means that sustainability is no longer relevant. But consumers now expect sustainable practices as a baseline. Allbirds may have been ahead of its time and yet, paradoxically, not ready for it.  In the end, Allbirds’ journey, as Saunders observed, is “one for the case study books.” Further reading: Can ‘too niche’ Allbirds mount a comeback after poor Q3 results?