Dive Brief:

• In its third-quarter earnings report released last week, Snap Inc., parent company of the video messaging app Snapchat, revealed a $40 million loss stemming from unsold units of its Spectacles hardware. The $130 camera-equipped sunglasses first rolled out last summer, drawing huge attention and long lines at special vending machines the company set up across the country. 
• That popularity's considerably cooled in the time since, and as a result of that loss, there are hundreds of thousands of unsold units sitting in storage, according to a report in Business Insider. Snap's internal data also found that less than half of Spectacles owners keep using them after the first month, per BI. Snap is now planning to shed some of those units in a specialty shop in East London.
• The shop will be located at Boxpark, a trendy shopping area in Shoreditch, as first reported by The Verge. Along with the Boxpark pop-up store, Spectacles will also be available at four John Lewis retailers in the U.K., as well as Selfridge's and Harrods department stores.

Dive Insight:

CEO Evan Spiegel initially touted the wearable Spectacles with great fanfare, introducing them at the same time that his brand officially changed its name to Snap and attempted to evolve into a more full-fledged "camera company." Following a lot of buzz for the product at launch, where people lined up for hours to get access to those funky vending machines, Spectacles have quickly expanded their availability, being sold on websites like Amazon.com. 

Snap has clearly overestimated the demand for Spectacles, however, and their quick proliferation has appeared to make the appealingly exclusive nature of the product disappear. The massive store of unsold units, combined with the short engagement period Spectacles have with owners, are making them look more and more like a pricey novelty rather than a game-changer for Snap. It's yet another blow to a young company that's been battered by three consecutive quarters of sluggish user growth and ad revenue since going public in March. 

Snap has frequently touted two strengths amid investor criticisms and growing competition from the likes of Facebook: Its eye toward innovation and its strong foothold with a young, engaged user base. Its Q3 earnings report, deemed a disaster by some in the media, pokes some holes in these qualities, given the failure of Spectacles to gain significant traction and disappointing audience figures. Snap is also now significantly overhauling Snapchat's user experience to improve a layout many newcomers find confusing and off-putting. 

These shortcomings have been felt internally at Snap. In September, it laid off a dozen members of the hardware team that worked to develop Spectacles and then cut another 18 staff in October in its recruiting division.