Allbirds IPO: Future of sustainable brands depends on Generation-Z’s habits

Can a massive waste problem and Gen-Z’s love for sustainability translate into investor returns? We’re about to find out — with the stock market debut of Allbirds, the sustainability apparel brand.

What Gen-Z habits tell us about the future

Consumers are more mindful about sustainability — and Gen-Zs are leading the way.

• 9 out of 10 Gen-Z consumers think companies have a responsibility to address environmental and social issues.
• Gen-Z incomes are expected to surpass millennials’ in 10 years — with a wealth transfer of $78T from baby boomers.

Figuring out Gen-Z spending habits and preferences will be crucial for investors. According to Influential, the top 3 brands mentioned among Gen-Zs are Nike, Adidas and Vans.

Gen-Zs have a preference for e-commerce — and so do investors. In the past year, several e-commerce-first brands went public including Figs (NYSE:FIGS) and Warby Parker (NYSE:WRBY). Allbirds is next to debut on the market this week.

Judge a person by their shoes…

Founded in 2015, Allbirds is an e-commerce-first sustainable apparel brand, known for its popular wool sneakers, minimalist designs and use of sustainable materials. Here are the important numbers:

• Expected $2B+ valuation upon listing.
• $112M in 2020 sales — up 14% from 2019 but heavily impacted by COVID.
• Opened 27+ stores — with plans to open hundreds more.

But it’ll be difficult to make a dent in the hyper-competitive sneaker and activewear market…

• Nike is the $260B dominant gorilla on top.
• Allbird’s sales are concentrated in shoes — as it just launched its collection of activewear in April.

It’s still too early to gauge the success of its activewear line — as it’s up against brands like Lululemon and Under Armour.

Investors: Similarities to Lululemon

Lululemon is one of the most successful brands in recent years, thanks to community building and popularizing the athleisure trend. And similar to Lulu — which rarely offers discounts, Allbirds:

• Never offers discounts — giving it a higher gross profit margin compared to other apparel brands.
• Has a growing loyal ESG (Environmental, Social, Governance) community — although it’s uncertain if the masses will pay for sustainability.

While ESG investing is becoming more important, whether they lead to higher long-term stock returns is another question.

Must-read: The dangers of investing in a company as soon as they go public.