FROM THE EDITOR’S DESK
Grand Ambitions: Retail DTC innovators bet on stores From Authentic Brands Group’s blockbuster $2.5 million acquisition of Reebok to Etsy’s $1.6 billion purchase of popular UK fashion resell marketplace Depop, it’s been another busy year for dealmakers in the retail industry — and it’s not over yet. But more than the mergers and acquisitions, it’s the recent rush of IPOs that seem to be generating the most buzz these days. And with good reason. A number of them involve direc t-to-consumer retailers that have enjoyed star status — with many heralded as retail innovators almost since day one — without ever having to reveal many pesky financial details. But their IPO filings have, in effect, pulled back the curtain to reveal, in some cases, some illuminating insights, particularly when it comes to ecommerce and physical retail. Warby Parker — the trendy eyewear brand that has served as a model for the new breed of DTC companies that launch online first and go on to open stores while largely ignoring the wholesale channel — made its public debut in late September. The stock soared the first day, giving Warby Parker a valuation of more than $6 billion. For all its acclaim, Warby Parker has struggled to make a profit, a fact made clear in its IPO filing. It lost $22.9 million in 2018 and $55.9 million in 2020. (It broke even in 2019.) At the same time, its sales have grown, with net revenue rising from $272.9 million in 2018 to $393.7 million in 2020. For the first six months of this year, the company has lost $7.3 million (down from $10 million in the year-ago period), with sales of $270.5 million As Warby Parker looks to the future, it is betting on a traditional retail channel for growth. The company had more than 145
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stores as of the end of June, with plans to open 30 to 35 new outposts by yearend and annually going forward. In an SEC filing, Warby Parker stated that its retail stores are “highly productive,” and serve as “valuable marketing vehicles for introducing new customers to our brand and driving repeat purchases and, in turn, positively impact our sales retention rate.” A similar scenario is playing out at sustainable footwear brand Allbirds, which filed its IPO at the end of August. Founded in 2014 and valued at an estimated $1.7 billion, the company has yet to turn a profit. Allbirds’ net loss totaled $14.5 million in 2019 and rose to $25.9 million in 2020. At the same time, revenue grew from $193.7 million in 2019 to $219.3 million in 2020. For the first six months of 2021, Allbirds reported a loss of $21.1 million and sales of $117.5 million. Founded in 2014, Allbirds opened its first brick-and-mortar store in fall 2017. It has since grown to 31 locations, with plans to accelerate its expansion in the future. “We have just scratched the surface of our store potential, particularly in the United States,” the company stated. “We are in the early phase of a ramp [up]towards hundreds of potential locations in the future, with strong unit economics.” The takeaway from Warby Parker and Allbirds as they look to the next stage of growth is clear: Brick-and-mortar is still the best way to attract new customers and drive return traffic and purchases once the initial web buzz has passed. A website is crucial. But it can only get a brand that has big ambitions so far. Allbirds summed it up best in their filing: “While our store channel already generates strong results on a standalone basis, the real power of our vertical retail strategy is the synergy between the physical and digital sides of our business.”
Marianne Wilson mwilson@chainstoreage.com
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