(Bloomberg)—Allbirds Inc., the wool shoe startup that’s become a staple of Silicon Valley fashion, is opening its first stores in China, aiming to replicate its viral success in the world’s second-largest economy.
San Francisco-based Allbirds plans to announce this week that it will open a brick-and-mortar store in Shanghai in the coming months. By the end of the year, it plans to have stores in Beijing and Chengdu. It will also be rolling out its goods on Alibaba Group Holding Ltd.’s Tmall online shopping website as well as building its presence on Chinese social media services including WeChat and Weibo.
In 2016, Allbirds launched with a single type of shoe, called Wool Runners, made from sheep’s fleece. It branded itself as an eco-friendly company that makes the “world’s most comfortable shoes,” and the style caught on, selling more than a million pairs in two years. The soft, machine-washable shoes (the company has since added versions made from plant materials) have become part of the standard uniform of California entrepreneurs and investors. It attracted devotees like Google co-founder Larry Page and venture capitalists Ben Horowitz and Mary Meeker—and expanded beyond the tech set as well, with celebrities like former President Barack Obama and Leonardo DiCaprio donning the shoes. DiCaprio is also an investor in the company.
Large Chinese ecommerce companies had approached Allbirds fairly early on about the possibility of selling on their platforms, said co-founder Joey Zwillinger. Zwillinger had been a clean-technology engineer before he started the company with Tim Brown, a former professional soccer player in New Zealand. The overseas interest prompted the pair to examine the market more closely.
“We see pent-up consumer demand in China,” Zwillinger said, noting that customers have been purchasing its shoes with Chinese credit cards, and that tourists from the country frequently visit company stores. He added that the same drivers of Allbirds’ popularity in the U.S. are also present in the Chinese market, including rising concern for the planet and a desire for comfortable footwear amid more casual and mobile work environments. “We’re confident that all the trends we’re seeing in the U.S. are a perfect storm sitting in China.”
Allbirds, No. 996 in the Internet Retailer 2018 Top 1000, is part of a growing class of startups in areas from mattresses to eyeglasses that are selling directly to consumers—mostly online, as well as in a growing number of physical stores. Allbirds recently opened shops in San Francisco, New York and London to showcase its narrow selection of footwear. The startup, which has been profitable since launch, has raised more than $75 million, and has a reported valuation of $1.4 billion.
Thanks to geopolitical tumult, expansion in China carries some risks. Amid the ongoing U.S.-China trade war and China’s broader macroeconomic slowdown, several iconic U.S. brands have given lackluster reports for sales growth in the region, including Apple Inc. and Starbucks Corp. But Allbirds believes the opportunities outweigh the downsides. “The Chinese shoe market will be larger than the U.S. one in a number of years,” Zwillinger said.
So far, Allbirds said it has avoided the recent tariff escalation, though it does a small part of its manufacturing process in China. The company is currently considering moving that part of its process to another country, as part of an effort to minimize its carbon footprint, it said. Even before President Donald Trump’s tariffs, “there was already a shift happening in the textile and apparel and shoe industry from China to countries like Vietnam or Indonesia,” driven by the increasing labor costs in China, said Razat Gaurav, the chief executive officer of Llamasoft Inc., a software company that helps companies make supply chain decisions.
Erick Haskell, Allbirds’ president of international, will spearhead the company’s Chinese expansion. Haskell had most recently led Under Armour Inc.’s (No. 33) China’s business. Prior to that he served as chief operating officer of Adidas AG’s (No. 61) China business. The athletic-wear company generated about $4 billion in sales in the country in 2017.
Though Allbirds is a minuscule player compared to the multibillion-dollar businesses of its athletic footwear rivals, the success of large shoe companies in China may signal the market’s potential. In January, the Adidas CEO said that China helped the company offset the challenges it faced in Europe. Nike Inc. (No. 27) also saw strong growth in the region in spite of the economic concerns. Its revenue from Greater China jumped 25% in the six months ended November, to $2.9 billion.
“Most big brands entered before e-commerce so they’ve built massive infrastructures in China,” Haskell said. “We can enter the market with a healthier blend of e-commerce and retail.”
Alibaba owns and operates Taobao and Tmall, which hold the No. 1 and No. 2 spots on the Internet Retailer 2018 Online Marketplaces.Favorite