Allbirds CEO: Why Sustainability Leads to Profitability

0:00This was an amazing place to do it. We're in nature here. It's an incredibly beautiful place. It's an epicenter for innovation. And we were two outsiders from an industry wanting to do things really different.

0:21I'm Benjamin Gottlieb and you are listening to Shopify on Location, coming to you live from our offices in San Francisco. If there was a uniform for this city's workforce, you can bet that a pair of Allbirds would be part of the ensemble. After all, the company's signature sneakers align with San Francisco's values, performance, versatility, and perhaps most important of all, sustainability. For co-founder Joey Zwillinge, leaning into this trifecta has made Allbirds a go-to all-purpose shoe worldwide. With stories of success most founders could only dream of. starting out with only one type of shoe, selling a million pairs in just two years, and then becoming one of the first brands on Shopify to IPO.

1:06What a treat, Joey. Thank you so much for doing this. Thanks for having me, Ben. Great to be here. Yeah, it's great to have you. And, you know, we're doing this series on location, and the series is all about brands that are shaped by place. I think your company, Allbirds, very much is shaped by place, but a marriage of two places, right? New Zealand and San Francisco. Why the two? And tell me a little about this marriage. That's right. Yeah. And that's a good way to summarize it. You know, my co-founder, Tim Brown, he's a native New Zealander, a Kiwi. And he spent more than a decade playing professional soccer before we joined up and started Allbirds together.

1:43He has a design background. And I think as he started to think about retirement, he fell back on that design ethos. And, you know, he's one of the most intuitive, consumer, creative people that you'll ever meet. And he had these insights really early on. And I think when he retired, he had the energy and the time to start really looking down this path. He was focused on shoes because he was sponsored by a bunch of the big sportswear companies. He's a soccer player. A soccer player. And rose to be the vice captain of the New Zealand national soccer team, played in the World Cup in 2010. Pretty amazing career.

2:18And he had always felt like the industry under-delivered in terms of what he wanted from just his own personal life. And he believed was a broader consumer population that shared that view. After retiring from soccer down in New Zealand, he actually ended up moving to London. And throughout his journey there, I was actually in San Francisco for most of that time and was working at a biotechnology company that was engineering microalgae to produce alternatives to petroleum. So whether it was fuel for planes, aviation fuel, or ships for the Navy, we were doing stuff like that. We also made chemicals.

2:55So I ran the chemicals group and was making alternatives to petrochemicals, and these were zero carbon alternatives. So really no dent on the earth from a climate change perspective, at least. while still offering something super high performance. And that epicenter of innovation is really here in San Francisco. And biotech is, this is the Mecca for biotech, just down by the airport down south of the city. And that was not just biotech, but just the idea of an innovation economy in general. There's nowhere like it in the world other than here. And so I happened to be able to convince Tim to fly out from London to this area to talk about doing Allbirds together in a serious form.

3:41This is back in 2015. And we walked around the hills in Marin for two and a half days and really verbally came up with the exact business plan that we're still marching down today. And how were your feet during that two and a half day trek? They were uncomfortable because I wasn't wearing Allbirds at that time. And I cooked them a lamb stew because I thought it was a good joke that he was from New Zealand and making wool shoes. And we ended up... It's pretty on the nose, by the way. Yeah, exactly. A little bit. That's my humor. So we ended up thinking that this was an amazing place to do it. We're in nature here.

4:18It's an incredibly beautiful place. It's an epicenter for innovation. And we were two outsiders from an industry wanting to do things really different. And I had experience trying to sell into our industry, who we now compete with, and having thrown up bricks, really, to use a basketball analogy. And the reality was that brands were paying lip service to sustainability. And it was a lot of greenwashing because these brands, the legacy brands in our space, really understand that consumers want to connect their values with their purchase decisions. So they do the minimum viable marketing to get over that threshold that they can make believability with these consumers, but they're not backing up with actions.

4:57And that was where Tim and I thought we could come together and systematically offer products off the back of natural material innovation in a way that was incredibly compelling and differentiated for consumers. And what better place to do that from than San Francisco, the home of all this innovation? Well, let's talk a little bit more about that because I think it's a great segue into my next question about your background. I mean, you just laid it out. Engineering background, biotech at a biotech firm, working chemicals. and you wouldn't necessarily associate that expertise with shoes, but actually with what you and your co-founder are doing, it's a perfect marriage.

5:37I mean, how do you think your experience before Allbirds not just shaped the company, but colors what you're doing today? Well, I mean, purpose is at the core of who Allbirds is and we are striving to combat climate change with every action that we do, But we've never believed that people will buy products because they're sustainable. We've always believed that you need to have great products, and consumers want great products. We've come to learn that truly great products are also sustainable. But what I saw from my background was that materials, not only do they contribute the most to the impact of a consumer product and its impact on the environment, the materials that you source and how you manufacture them, but they also deliver the most value to the consumer.

6:23So you can create an incredibly differentiated feeling or performance attributes or an aesthetic based on the materials you select. And our competitors just don't look under the same rocks we do. We constrain our R &D process to be both better for the consumer from a performance perspective, but also better for the earth. And that alignment of our purpose and our profit ambitions make the business set up for great success along both dimensions. And so my background in material science has lent itself to a number of what I would consider quite breakthrough innovations that we've brought into the sneaker market and have made things from incredibly high cushioned bottom units or soles of the shoe made from sugar cane to the textiles on the top of the shoe from natural oils formed into an alternative to leather made from just plants.

7:22And a huge number of other innovations that we've brought to the marketplace that couple Tim's design ethos with my material science background to really make one plus one equals three and make some magic happen to make an incredibly comfortable and high performance product in a shoe. And we're going to get to some of those innovations a little bit more later in this interview. I'm chatting with Joey Zwillinger. He is the co-founder of Allbirds. But back to your point, Joey, about San Francisco. Correct me if I'm wrong, but San Francisco and just the ethos of the city, sustainability is at its core, right?

8:00This is something that's on the mind of locals and not just San Francisco, but the Bay Area in general. Do you think that this company could exist anywhere else? You know, it's an interesting question. I think when you look at who we sell to, I would say that while people in this area may really naturally gravitate to the natural environment and be focused on environmental protection and conservation, you know, our customer is everywhere. We are not like a San Francisco company. Our biggest markets in New York were fairly spread across the country geographically in terms of the U.S. population.

8:43And so it's not a local thing. And I think environmentalism becomes politicized when you talk about policy around this. But the idea that people want to be in nature and want to protect the earth for future generations is something that spans across everybody's values. It's not reserved just to the Bay Area. Absolutely not. So on the one hand, I think it could exist absolutely anywhere. On the other hand, the fact that we're kind of outsiders from this industry, there's not a lot of shoe companies in the Bay Area, and that we took expertise and drew talent that was inspired by our mission but came with skills from outside our industry really allowed us to do things quite a bit differently.

9:23And we took a lot of really different approaches than what the industry had focused on historically from all aspects of our business, not just the material side, but also, you know, manufacturing and certainly the go-to-market in terms of how we reach consumers. You've been alluding to this a little bit throughout the interview, this idea of how business used to be done in the shoe industry. And I think when many of us think of the legacy of clothing companies, shoe companies, it's a legacy of waste, perhaps of pollution, human mistreatments. I mean, the list goes on, and I'm sure those things are top of mind.

10:01And this company really is idea-driven, right? When you buy a pair of your shoes, you're also buying a value set. How do you make sense of the two? How do you make sense of where the industry used to be and where it is today with your company? Yeah. You know, 95 plus percent of the shoe industry makes their products out of plastic and leather from cows. And we didn't want to do either of those. And so we constrain the business to not to minimize the use of those products and avoid them at all costs when we can. And so we've tried to do that within a framework that still allows us to make money and be a viable and durable business that's for a long-term enterprise.

10:45And if we can't make a big sustainable business from a financial perspective, we're not going to achieve our mission on the environmental side either. So we always have to balance those kinds of things. And I wish I could sit here and say, you know, we launched now about seven years ago. It was March 1st on 2016 with two Shopify websites in New Zealand and the U.S. that we started the business with. And I wish I could sit here and say everything's changed. But the reality is we haven't changed. And that idea of what Allbirds can be, a no-compromise offering that offers incredible value to people who buy and wear our shoes and doesn't make a dent on the earth, that is still driving us every single day.

11:31and we're putting out newness on a monthly basis, that is incredible what we're doing. And we're taking a lot of accountability and transparency around that idea for how we show up for consumers. Unfortunately, the rest of the industry is doing the exact same stuff they always have. And so we see ourself as something quite different and quite hopefully refreshing for consumers when they really cut through what I would say is largely BS in terms of the marketing around this concept. of sustainability from our industry, it is very rare that there's authentic leadership. And that void creates such an interesting opportunity for a brand to be created and to be nurtured and to become something that's important globally for what I believe is not just our generation's challenge, but the next multiple number of generations.

12:23The existential threat to our species is climate change. And we are offering a beacon of hope for how you can have everything that you want from a consumption perspective, but not leave such a dent on the earth. And if we can achieve that, I think that's an idea that that deserves to be something significant and have a brand that people really love. In other words, having a business and protecting our planet is not antithetical, right? You can have, you can have both. You know, one of the ways that you've been so successful, and you don't need me to tell you this, but for our listeners is that you started out 100 % DTC, direct to consumer, people buying directly from you.

13:04Now, you've been able to build a relationship that way that's really personal, selling a message, selling shoes. Why do you think that was successful for your brand? And for folks that are listening that are looking to emulate what you did, how would you recommend they go about tackling this DTC problem? So Tim and I, just for context, came together in 2015 to formally start this, and we launched, as I said, on March 1st of 2016. If we'd have done that 10 years earlier in 2005, we wouldn't have been able to do that. Why is that? I think the technology was not accessible. So the seamless commerce offering that we were able to do by using tools like Shopify to power our commerce solution, what made it incredibly efficient and productive for us to be able to do that with just a very small handful of people coming together around the table.

13:59And then there was also a marketing ecosystem where there was an effective channel for us to reach people around email marketing, around good digital activation for our PR campaigns that we did early on. And social media was at its peak in terms of your ability to reach people. Some of those have changed now in interesting ways. And I would say that D2C, what we'd always imagined, even though we started in an environment that was really a great opportunity for that go-to-market, the opportunity still exists today. What we would believe back then, I share this from our Series A deck when we raised money in 2016 to help fuel the growth of the business that we wanted to invest in.

14:45We talked about the idea that we would start with a D2C approach, and that included first digital and then brick-and-mortar stores. And as we expanded to that channel of brick and mortar, we could start to reach a different population that wouldn't have otherwise found out about us from just our digital platform. And if we wanted them to find out about us, some of them still might have friction because there's a fit issue with shoes. You want to make sure to get it right. Some people don't love the return process. For example, my parents would never buy shoes on the internet, for example, right?

15:16Exactly. And then throughout that journey, we believe that we could start to systematically unlock these innovations that we were working on around, you know, first we had merino wool, then our sole made out of sugar, then our tree fibers to make us a breezy summer offering with our line of tree-based shoes and so on. And as we did that, we could manifest really interesting products for consumers and have a breadth of assortment that could then both fill our stores, but also then open up the opportunity for us to access the wholesale marketplace in a really compelling and segmented way so that we met consumers shopping in different partners, partner retailers with a different assortment curated by us and in partnership with these retailers.

16:00And so we wanted to layer that in and reach that final ubiquitous group of consumers so that we could expand our awareness and reach a whole new set of consumers. And so that's just now the stage of the journey that we're on. And COVID slowed that down by, I'll call it a year and a half or so, but we're marching down that path that we envisioned when we started the business. And fortunately, we were able to authentically connect with our consumer with this D2C approach early on. And that connection allowed us to learn so much about what they like, what they didn't like. We do tons of insights work.

16:38And because we have such a direct access and a fast read from our consumer, we can really learn a lot. And now we can parlay that into education for our partner retailers as we go into the wholesale marketplace. And so it's a pretty exciting next chapter for us in that evolution. And again, thanks to technology that was accessible to us in 2015, we were able to do this really efficiently. And I love the partnership that we have with Shopify. And as we've expanded our channel mix and our geographies, Shopify has been able to keep up with us and sometimes be a little ahead of us, sometimes be a little behind us in our product roadmaps, but always working together as great partners to be able to bring the best commerce experience to our consumers so that we earn every day that amazing net promoter score, however you want to measure it, but that loyalty from consumers on how they feel about the experience of shopping with us and the product that they receive.

17:34the product they receive, their experience with you, and of course, how you've been able to use some of the tools that we have on Shopify to make this a reality. I'm chatting with Joey Zwillinger, co-founder of Allbirds. And by the way, I hope you are enjoying our conversation right now. If you haven't already, please subscribe to Shopify Masters wherever you get your podcasts. And if you can, let us know what you think by leaving a review. Thanks so much. Joey, your first retail store, we've been talking about retail a lot. And I think for many online brands or online first brands, they're thinking about this now as our world reopens, we're changing, we're entering this new normal.

18:10Your first retail store is actually at the bottom of your headquarters in SF, right? Why did you decide to open your store there? We just wanted to learn.

18:26So, I mean, one of the things that we did early on, and we still do to some degree, is we ask new employees to work a shift in the store and interact with consumers. And the amount that you learn about your product and your consumer when you're working at the tip of the spear, so to speak, is instrumental in what shapes the then onboarding process for a new employee and onwards. You also get to understand how the technology works. So you have to actually go into the point of sales technology solution and make a return or process an order. And like, is the chip reader working? How does the inventory flow?

19:04How does all that back office connect? And it is really expansive in terms of the impact it has on a new employee. So that was one aspect. It was about training. And the second is just learning and just being next to the consumer so that we can always pop in, see how things are, check in, see how the assortment looks up on the wall. And so, you know, we love that store. It's gone through a lot of change throughout the course of particularly in the last three years as San Francisco has changed quite significantly in terms of where people are working. But it's never been short on insight and learning for us.

19:37And that's still at the heart of what we do. I'm glad you brought up San Francisco and the changes the last couple of years. We were talking about that a little bit as you walked in before we sat down for this interview. And I'm curious what you've seen change in your city over the last few years and what that makes you think about what's next for San Francisco. Well, this is the tech epicenter of the world. And the technology industry has adopted this work from home mentality quite a bit more significantly than other industries. And so, you know, with that comes a shortfall and people coming to work.

20:13And this is a city that's built around people coming into town and coming into work in an office place. And that's changed really significantly. So I think there'll be a short-term period of time here in the city where there's some change and the landlords are going to be under pressure because people aren't coming to work as much. What gives me a lot of optimism is that it opens up this opportunity to revitalize some aspects of culture that may have been lost. And when there's so much of the workforce that comes in a concentrated industry, you just get a lack of diversity in terms of way of thinking.

20:49And the cost of living is obviously quite high here. So my hope is that some of the short-term pain that we'll likely see as some of these leases come due and people don't renew their leases for office space because they don't need it anymore since their employees aren't working five days a week in the office like everyone used to. I think there's a really interesting long-term opportunity. And I hope that the city really puts its mind towards a wonderful future state. I think if we, as a city and as a group of people who really take ownership over what it's like to be living in this area, if we focus the effort on cleaning up some of the issues we have around people that are less fortunate, that find themselves on the street, and we do a good job of attacking both the mental health issues around that, the drug use issues, and just the housing and affordability issues for some of those people, So that coupled with a focus on revitalizing the culture and bringing that renaissance back into San Francisco and making that a thriving part of the heartthrob that makes this place so wonderful, I think there's a huge opportunity.

21:58And if we put our minds to that as a future state, I think this place can be a rich and diverse place to live. You know, the way that you talk about this city, it's almost poetic. I mean, it sounds like you have a deep love for this place and being here. Am I right? Yeah, I do. I've spent most of my life here. And the fact that there's no place like this where you can drive for literally 10 minutes from the city and be in incredible, untouched nature. That is some of the most beautiful in the world. And then come back into town for amazing cultural events or great art or amazing food and a thriving ecosystem.

22:41All of that happens within a 15-minute drive. And, you know, and then you couple that with the innovation and the entrepreneurship and the ecosystem that surrounds us from not just the people that want to build something that that that changes the world, but also the financing community and everything that's around it. It's it's it's one of the most exciting places you could ever come to wrapped around by this unbelievable nature. So, yeah, it's an amazing place and it has its ups and downs. But I'm a long term optimist for this place. I have to imagine that the idea or the continued idea for your shoes kind of mirrors that relationship, right?

23:18I can jet out for a hike. I can go to Golden Gate Park and cruise around and come back for a meeting. I do see you kind of looking down at my shoes throughout this interview. I am wearing Vans, unfortunately, for this. I should have put my Allbirds on. But that's the idea, right, is that you can wear your shoe in a finance meeting. You can wear it taking a hike. Yeah, and I think one of the insights that really drove the kind of origin of this company is we were looking around and seeing this big change in the way that consumers and people, just people are living and working. And the bleeding together of activities of work and play was happening quite quickly, really driven by the fact that, like, you know, Apple came up with a pretty cool phone that you could do pretty much everything on.

23:59You don't say. And so, yeah, so I mean, that added this versatility into people's lives. And what we were seeing is that the footwear industry was just taking athletic shoes with gigantic logos on the side of your shoe. And people were wearing those in a more casualized environment. And would you go out to dinner for a business meeting with a T-shirt that was emblazoned with a huge company logo? So you're a walking billboard? I don't think so. And yet we were doing this with our shoes.

24:33This idea of blending an incredible comfort experience with an aesthetic that was beautiful and designed to be austere, but in a way that was still beautiful and really unique, was at the kind of the core of that consumer insight with which we wanted to start the company on that insight. I marry that with amazing breakthrough materials to build all those attributes that I think has made us famous with this great group of people who have found out about us so far. Yeah, and you mentioned it. Your minimal branding is a big part of what Allbirds is. And, you know, if you're looking at a shoe for a long time, like, what are those?

25:08There's a good chance it's probably a pair of Allbirds. Joey, all of this that we've been talking about has led to a lot of success. As I mentioned in my introduction, you sold a million pairs of shoes within two years. one pair, one brand of shoe. And from there, you had this incredible IPO. Many business owners would look at that success and think, my God, I want that. But I guess if you were someone talking, picking the ear of someone else or someone's picking your brain, how would you advise them to kind of get on that path to success that you've had? The most interesting thing for me about our business is that we're trying to do something that I wake up every day and feel really positive that I am creating and contributing something to our brethren here, people in general, that I feel like is making a positive contribution.

26:01And we started the business because we thought entrepreneurship was such a dynamic aspect of the private sector that when coupled with like really good policy could make fundamental change in the way that people consume everything. And we could be a beacon where other companies in the footwear space and beyond could see how you could make a consumer product that was more like a tree than it was your typical paradigm of what a product looks like.

26:30You know, today you think of a product as like you're extracting something from the earth, someone's using it, then they're throwing it out. Whereas a tree where it's actually contributing back because of the way it's made and the materials that are sourced to make that product, We envisioned ourselves much more like a tree. And if we can do that and we can bring an incredible group of talent and talented people together, align with that mission. And so, yeah, I find it intellectually challenging to try to, you know, sell more product out of a store on a website and get everything right on that perspective.