Is toms shoes a nonprofit

Case 4.2 TOMS’ One-for-One Business Model: Is it Sustainable for the Future?

• Web: www.toms.com • Facebook: TOMS • Twitter: @TOMS

Bruce R. Barringer, Oklahoma State University

R. Duane Ireland, Texas A&M University

Introduction

In 2005, Blake Mycoskie, a serial entrepreneur, needed a break. After starting 5 companies in 12 years, he traveled to Argentina looking for some time to relax. He met some expatriates who were doing social work in villages on the outskirts of Buenos Aires and asked if he could tag along. In one village in particular, he noticed that most of the children didn’t have shoes. He stopped a few of the kids to look at their feet and saw cuts, abrasions, and infections. He knew the villagers were poor and couldn’t afford to buy their children shoes and wondered what he could do to help. He also knew there was an inexpensive shoe in Argentina called the alpargata. What would be the best way to provide poor Argentinean children alpargata shoes?

Mycoskie thought about starting a charity but felt the charity model wouldn’t work. He envisioned himself asking his family and friends for contributions, and knew they would contribute once, or twice, or maybe even several times. But it would be hard to continue to ask. What he needed was an approach that would sustain itself by selling a product that people needed to buy anyway. The approach Mycoskie came up with he later dubbed “one-for-one.” He would create a for-profit business to sell alpargata shoes, and for every pair sold he’d donate a pair to a child in need.

Mycoskie returned to the United States and set up shop in Santa Monica, California. He started TOMS with no shoe industry experience. The company was originally called Shoes for Tomorrow but was quickly shortened to TOMS. To get started, Mycoskie went from one retail store to another with his unique business idea. A few Los Angeles boutiques agreed to sell the shoes. His first break came when the Los Angeles Times ran an article about his business. To Mycoskie’s surprise, the article spurred $88,000 in orders in a single weekend.

Fast forward to today. TOMS is now an international brand. Its one-for-one model has been expanded to include shoes, eyewear, coffee, and bags. As of early 2017, TOMS had given away 60 million pairs of shoes in 75 countries, had helped restore sight for 400,000 people in 13 countries, and has helped provide over 335,000 weeks of safe water in 6 countries. The one-to-one model has been tweaked some, but the intention is the same. TOMS still gives away a pair of shoes for every pair it sells. Eyewear was added in 2011. Rather than donating a pair of glasses for every pair its sells, TOMS donates an equivalent amount of money that is used for sight-saving measures, such as eye surgery, medical treatment, or a new pair of prescription glasses. Coffee was added in 2014, under the “TOMS Roasting Company” brand. For every bag of coffee that’s sold, TOMS Roasting Company works with its Giving Partners to provide 140 liters of safe water (a one-week supply) to a person in need.

In 2015, the TOMS Bag Collection was founded. The Bag Collection includes different types of bags for women, including backpacks, tote bags, travel bags, cross-body bags, and clutches. The mission of the Bag Collection is to help provide training for skilled birth attendants and distribute birth kits containing items that help a woman deliver her baby safely. As of 2016, TOMS has supported safe birth services for over 25,000 mothers. Many of TOMS’ initiatives have ripple effects. For example, by supporting the creation of sustainable water systems, TOMS is able to provide entire communities with access to safe water, which leads to improved health, increased economic productivity, job creation, and access to education.

TOMS’ Business Model

TOMS is known for pioneering the one-to-one business model. As explained in this chapter, a firm’s business model is a plan or recipe for how it creates, captures, and delivers value to its stakeholders. TOMS’ business model is unique in that it combines the goals of a for-profit company with the ambitions of a philanthropic organization. TOMS’ business model template is shown nearby. The following is a brief overview of each of the major sections of the business model template.

Core Strategy

TOMS’ mission is “One-for-One.” The mission is made possible by the way TOMS is structured. TOMS has two parts. TOMS is a for-profit company that manages the overall operations and logistics. Friends of TOMS is a nonprofit organization that assembles volunteers, delivers the shoes, and coordinates the eyewear/sight restoration and coffee/clean water initiatives.