Lessons from the Toms Shoes Business Model

Toms Shoes might be an online retail outlet, but they aren’t a direct retail business. They have adopted the buy one, give one retail business model for their organization. When a customer purchases a pair of shoes, Toms Shoes donates a pair to a child in need. Many other retail outlets are doing the same thing, but Toms Shoes, founded in 2006, was one of the first to pioneer the idea.

Now they are expanding. Donations can include eyeglasses. Customers can directly donate to the philanthropic efforts that Toms Shoes supports. They’ve even started selling coffee in a buy one, give one match for water in areas that do not have it.

Toms Shoes was founded by Blake Mycoskie, who was inspired for many of the ideas that his corporation has introduced through conversations with other entrepreneurs throughout the world. As he says it, the one breakthrough moment he had was while speaking with Rwandan coffee farmers. These folks were growing coffee for the rest of the world to consume, yet they didn’t have water for drinking or cleaning.

Toms Shoes Also Offers a Rewards Program

To compliment the buy one, give one business model, Toms Shoes has a rewards program that is free for anyone to join. Unlike other rewards programs, however, you don’t even need to purchase a product from the company to start earning rewards. Toms Shoes offers reward points for completing some everyday tasks that customers are already doing with most businesses already.

How do program participants earn rewards through Toms Shoes?

• By signing up for email offers about exclusive products and new product lines as they are available.
• Connect with the company’s various social networking feeds, including Facebook, Twitter, and Instagram.
• Attending events that the company sponsors.
• By checking in on social media at a Toms Shoes retail outlet.

Of course shopping at a Toms Shoes is going to provide customers with rewards as well and online shopping provides the same rewards as in-store.

Toms Shoes has also formatted their rewards programs to be in line with their business model. Instead of earning points towards a reward, this program offers a “passport” of sorts that rewards people with stamps.

The rewards are also unique. There are the birthday surprises and the free products being offered like any other rewards program, but there are some philanthropic opportunities for participants as well. Stamps can be turned in for an additional donation to a charity of choice with whom Toms Shoes is affiliated. Meeting Mycoskie is an option and so is going on a charitable trip to observe the charitable work the company does in person.

Could Toms Shoes Be Hurting Those They Want To Help?

There are several critics of the Toms Shoes business model. The primary issue that people have is that the company, in their eyes anyway, is ignoring the root cause of poverty: hunger. What good is a pair of shoes for a child if that child doesn’t get any food to eat?

Some social responsibility advocates have even said that the buy one, give one business model of Toms Shoes does more harm than good. When products are being given out for free, it is believed that the local economy is harmed because local goods aren’t being used or purchased. In fact, to keep the Toms Shoes business model alive, poverty must exist in order for customers to want to purchase items to help those in poverty.

Has Toms Shoes Changed Their Ways?

In the coffee for water exchange, Toms Shoes is doing something different. Instead of investing into shoes that are given away, the company is putting investments into clean water infrastructure. Instead of handing out bottles of water, Toms Shoes and their customers are helping communities around the world have permanent access to clean water.

The buy one, give one business model doesn’t necessarily facilitate growth because products need to be affordable and there can only be a certain amount of partnerships for the enterprise to be effective. By sporting the Toms Shoes brand, retail customers can show off their charitable support without breaking their budget.

Most buy one, give one business models are indeed retail products. Many of them don’t have the maturity yet to sell at the level of Toms Shoes… and the numbers of their giving are pretty incredible. Toms Shoes has given away nearly 20 million pairs of shoes. In 2013, they were estimated to have brought in $210 million in revenues. The Toms Shoes business model is clearly working today, but what about tomorrow?

What Is In the Future For Toms Shoes?

There have been some minor tweaks to the Toms Shoes business model over the past couple of years. This could also indicate that Toms Shoes is looking to grow. Mycoskie himself has said that he’d like to expand into the hotels and hospitality markets with his business, seeing his company becoming an all-in-one type of business that is offering philanthropic opportunities for their customers in virtually every available industry.

What protects the company right now is the fact that the quality of their products is almost secondary to what the philanthropic efforts happen to be. It is not uncommon for customers to say they buy the shoes or coffee because they want to support the charitable work instead of enjoying the shoes or coffee. That doesn’t bother the company now, but it might be a problem in the coming days.

The future for Toms Shoes will also likely continue to incorporate the business model of social responsibility as they are able to build deeper infrastructures. Instead of sourcing materials and products from large distributors, for example, they may look directly to the Rwandan coffee growers to create their own unique products.

What is going to stand in the way of the Toms Shoes business model? Their brand. Think about it. When you think of coffee, does Toms Shoes come to mind first? Or does Starbucks come to mind. Is Toms Shoes the first brand that you think about for shoes? Or is it Nike, Reebok, or even Sketchers? People like certain brands because the brand marketing itself has a certain value to the consumer. They’ll pay more for established brands, even if the quality of the product is less, just because of the brand value.

Toms Shoes just doesn’t have the market force right now in their business model to create that level of brand value. As they continue their philanthropic efforts and expand clean water resources to others, however, the value of being associated with their brand could become higher. It’s going to take some time, but the Toms Shoes business model seems to be on the right track.