By Natalie ShermanBusiness reporter, New York
Getty ImagesMohammad Ahmad, a 17-year-old from New Jersey, signed up for Smile Direct Club in October, just weeks after the teeth-straightening company filed for bankruptcy.
He was lured, he said, by a deep discount on the company’s invisible braces and assured that the financial problems would not affect the operation.
But Mohamed never received the clear plastic aligners he was promised after the company closed in December, leaving him and thousands of customers like him in the lurch.
“I was basically scammed,” said Mohamed, who is still hoping for a refund of $1,000 (£788) of the money he earns as a teacher.
It was an inglorious end for the Tennessee-based company, which once had a market value of more than $8 billion and had promised to disrupt traditional dentistry with lower-cost, remote care.
The idea convinced more than two million customers. For Mohamed, who already had braces, he just wanted to deal with some mild displacement that occurred after he failed to wear his retainer as instructed.
But almost from its inception, Smile Direct Club has defended itself against critics who raise concerns about its practices.
He has been embroiled in legal battles with business groups representing traditional dentists and orthodontists, who said his remote treatment, often provided after clients mailed impressions of their mouths taken at home, provided inadequate care and accused the company of misleading customers. .
Prominent investors such as Hindenburg Research, which is known for betting against companies, have also expressed concern, accusing Smile Direct Club of “cutting corners” and warning that it “will end up as a case study in why it’s a bad idea to invest in to a company trying to put a complex, risky medical procedure on a low-cost, high-volume assembly line.”
The company denied the claims, deriding them as “the latest in a stream of vague and misleading attempts … to impede legitimate competition.”
But she took the threat to her business seriously, moving aggressively to quash other negative reports.
She threatened legal action against journalists, academics and forced disgruntled clients to sign non-disclosure agreements to get a refund until a government lawsuit forced her to end the practice this year.
The problems eventually caught up with the Smile Direct Club, said Myron Guymon, president of the American Association of Orthodontists.
Nasdaq“Orthodontics seems simple, but it is a complex medical procedure and must begin with an in-person examination and good diagnostic records,” he said.
Smile Direct Club executives did not respond to a request for comment.
In the bankruptcy filing, the company traced its downfall to familiar economic villains: the pandemic and rising prices, which it said had hurt its manufacturing operations, raised costs and squeezed its target customers.
She also cited a $63 million award the court ordered her to pay her would-be rival and former business partner Align Technology over a contract dispute.
But Brandon Couillard, an analyst at Jefferies, said deeper issues were at play, noting that the cost of dealing with reputational issues — not just about quality but also customer service — hurt its growth and forced the loss-making company to spend too much on the advertisement. .
“It’s not hard to Google and find people who had a bad experience,” he said. “As the business matured, people became more aware of the brand and that wasn’t always a positive experience.”
Smile Direct Club’s triumphant listing in 2019 on the Nasdaq, the US stock market index, following a series of explosive sales growth, proved to be the company’s crowning moment.
It raised more than $1 billion and briefly turned its young founders into billionaires.
But sales soon began to fall, falling from more than $750 million in 2019 to $470 million last year. Advertising to win new customers consumed more than half of its revenue. Losses mounted.
In September, when it filed for bankruptcy, the company had just $5 million in cash and nearly $900 million in debt.
“It was pretty clear that consumer interest in the brand had been eroding for some time,” Mr Couillard said.
Getty ImagesInvestors later accused Smile Direct Club of omitting important information about its critics when it sold its stock in 2019, suing it for violating financial laws.
But Sanjula Jain, chief researcher at healthcare analytics and research firm Trilliant Health, said Smile Direct Club’s decline is also a reminder of the limits in the market for remote healthcare, which her team found have fallen almost in every region since the peak of the pandemic.
“Consumer behaviors are not changing the way many in the market and virtual care providers want them to,” he said. “Whether that will change over time remains to be seen.”
University of Pennsylvania professor Anna Wexler, who has studied direct-to-consumer health companies, said she still sees a future in remote or semi-remote orthodontic care, noting that younger generations are particularly frustrated with current health care options and they are looking for models that are more convenient and economical.
Her 2020 study of 470 remote orthodontic clients found that about 6% ended up returning to a traditional doctor for follow-up treatment.
But more than 87% were satisfied with their care, willing to accept imperfections for lower costs.
The study cautioned that Smile Direct Club’s use of non-disclosure agreements may have skewed the responses.
But Professor Wexler said she still expected other companies selling such treatment to embrace her findings.
Instead, Smile Direct Club threatened legal action, accusing its team of inaccurately describing its process and defaming its business.
“I was shocked,” she recalls, noting that her team was careful not to identify companies by name.
The conflict – which has not been previously reported – ended with a letter to the editor.
Professor Wexler said she was not sorry to see the particular business go, given its history of trying to silence its critics.
“Maybe if they hadn’t spent so much money on legal counsel, they would be in a better financial situation,” he said.
