The Rise And Fall Of Toms

Summary

TOMS, founded by Blake Mycoskie in 2006, gained popularity with its one-for-one donation model, donating a pair of shoes for every pair sold. By 2013, it had donated 10 million pairs and reached $250 million in sales. However, relying too heavily on its hero product, the slip-on canvas shoe, led to stagnation and increased competition. Despite expanding to sunglasses and coffee, and evolving its giving model, TOMS struggled to grow beyond its original product. In 2019, creditors took over the company, and with a new investment of $35 million, TOMS aims to rebuild, focusing on product variety and brand experience.

Takeaways

• 📝 TOMS was founded by Blake Mycoskie in 2006, inspired by his trip to Argentina and the traditional alpargata shoe, aiming to give back through a one-for-one donation model.
• 💵 By 2013, TOMS reported sales of $250 million annually and had donated ten million pairs of shoes since its launch, resonating with consumers, especially younger ones, who valued corporate social responsibility.
• 💲 The company's iconic canvas shoes became a hero product, synonymous with the brand and driving sales, with a strong marketing strategy that combined style with charity.
• 📱 Despite its success, TOMS faced challenges as its hero product became stale and was easily copied by competitors who offered similar products at lower prices.
• 📵 Skechers, for example, introduced a similar model called 'bobs' and donated two pairs of shoes for every pair sold, challenging TOMS' unique selling proposition.
• 📗 TOMS' donation program was questioned for its effectiveness, leading to an external study in 2010 that prompted the company to adapt its approach to giving, such as rewarding school attendance with shoes.
• 💹 TOMS expanded its giving program to include eyewear and clean water initiatives, but the brand struggled to grow beyond its original product and faced sales challenges.
• 💷 The company's reliance on wholesale initially helped build brand recognition but later posed challenges in controlling business operations, leading to a need for a direct-to-consumer model.
• 💶 In 2019, TOMS faced a $300 million debt due in 2020, and its credit rating suffered, prompting creditors to take over the company from Bain Capital and Blake Mycoskie.
• 📰 Despite the challenges, TOMS announced a new investment of $35 million and a revised giving model in 2019, aiming to be more flexible and sustainable in its donations.
• 💳 TOMS' impact on the business world was significant, as it popularized the concept of social mission in brands, and it continues to evolve its strategies to remain relevant in a competitive market.

Q & A

What was the one-for-one donation model of TOMS shoes?

The one-for-one donation model of TOMS shoes meant that for every pair of shoes purchased, TOMS would donate a pair to a child in need.

Who founded TOMS and why?

Entrepreneur Blake Mycoskie founded TOMS in 2006. He was inspired to start the company after a trip to Argentina where he saw many children without shoes and wanted to give back.

What was the original name of the company before it became TOMS?

The company was originally named Shoes for Tomorrow, then shortened to TOMS.

What was the inspiration behind the design of the original TOMS shoes?

The design of the original TOMS shoes was inspired by the alpargata, a comfortable and affordable everyday shoe for many Argentinians.

How did the popularity of TOMS shoes grow rapidly?

The popularity of TOMS shoes grew rapidly due to its unique one-for-one model, publicity, and endorsements by Hollywood stars.

What is a 'hero product' in marketing terms?

A 'hero product' is an archetype product for a company that is the most successful and what people think of when they think of the company.

How did the one-for-one model of TOMS contribute to its brand recognition?

The one-for-one model was a unique and appealing concept that resonated with consumers, especially those interested in corporate social responsibility, which significantly contributed to TOMS' brand recognition.

What challenges did TOMS face due to its reliance on the hero product?

TOMS faced challenges such as the hero product becoming stale, easy copying by competitors, and consumers questioning the value and effectiveness of the product and donation program.

How did the competition affect TOMS' sales?

Competition affected TOMS' sales by offering similar products at cheaper prices and by also adopting donation models, which diluted the uniqueness of TOMS' approach.

What new initiatives did TOMS undertake beyond shoes?

TOMS expanded into sunglasses, where sales funded treatments like cataract surgery, and into coffee, where sales funded a week's worth of clean water. They also partnered with anti-bullying organizations.

What changes did TOMS make to its business model and giving program?

TOMS pivoted to a more direct-to-consumer model for better control over marketing, inventory, and pricing. They also evolved their giving program to be more flexible and sustainable by donating $1 for every $3 made.

What advice is given for TOMS to rebuild its brand?

The advice given for TOMS to rebuild is to focus less on the corporate social responsibility angle and more on product development, variety, and brand experience.

Outlines

00:00

👟 The Rise and Challenges of TOMS Shoes

TOMS Shoes was founded by entrepreneur Blake Mycoskie in 2006 with a unique one-for-one donation model, which allowed the company to donate a pair of shoes for every pair sold. This model resonated with consumers, especially younger people, and by 2013, TOMS was making $250 million in sales annually and had donated ten million pairs of shoes. The company's iconic canvas shoes became synonymous with its brand and were seen as a hero product. However, the reliance on a single product and the easy replication of the slip-on design by competitors led to a saturation of the market and a questioning of the value proposition of TOMS. Additionally, the company faced challenges in maintaining its charitable impact and differentiation in a crowded market.

05:02

🌐 TOMS' Expansion and Market Struggles

Despite expanding its product line to include sunglasses and coffee, with each sale contributing to various charitable causes, TOMS struggled to grow beyond its original canvas shoe. The company's sales began to falter, and it faced difficulties in controlling its business due to its heavy reliance on wholesale. While competitors like Skechers copied the one-for-one model and offered cheaper alternatives, TOMS also grappled with questions about the effectiveness of its donation program. In 2019, TOMS underwent a change in ownership, with creditors taking over the company. The new owners expressed support for the brand's future growth and invested $35 million. The company was advised to focus on product variety and brand experience to regain its market position and to evolve its giving model to be more flexible and sustainable.

Keywords

💡One for One Donation Model

This refers to a business model where for every product sold, the company donates one item to someone in need. In the context of the video, TOMS Shoes used this model by donating a pair of shoes for every pair sold. This model was integral to TOMS' branding and marketing strategy, appealing to consumers who wanted to support a socially responsible company.

💡Hero Product

A hero product is a signature or flagship item that becomes synonymous with a brand. In the video, TOMS' slip-on canvas shoes are described as the hero product, which were the most successful and recognizable items that people associated with the brand. This product was central to TOMS' identity and early success.

💡Brand Resonance

Brand resonance refers to the emotional connection that consumers form with a brand. The video mentions that TOMS resonated with many, especially younger people, who were looking for brands that were not traditional corporations. This connection was partly due to TOMS' charitable giving model.

💡Corporate Social Responsibility (CSR)

CSR is a self-regulating business philosophy that helps a company be accountable to not only shareholders but also to the society and environment. TOMS was one of the pioneers in the footwear industry to incorporate CSR into its business model, as highlighted in the script, which helped the company stand out and gain consumer trust.

💡Product Stagnation

This term refers to a situation where a product or product line becomes outdated or fails to evolve with changing consumer preferences. The video discusses how TOMS relied too heavily on its original slip-on shoe design, which led to stagnation and increased competition from brands offering similar products at lower prices.

💡Competitive Market

A competitive market is one where there are many sellers offering similar products, making it difficult for any single company to dominate. The script highlights the intense competition in the shoe business, which became a significant challenge for TOMS as it tried to maintain its market position.

💡Direct-to-Consumer (D2C) Model

A D2C model is a business approach where products are sold directly to consumers without a middleman. The video suggests that TOMS initially relied on wholesale, but later faced challenges that could have been mitigated by adopting a D2C model, which offers more control over marketing, inventory, and pricing.

💡Brand Experience

Brand experience encompasses all interactions and emotions a consumer has with a brand. The video implies that TOMS needed to focus on enhancing its brand experience to strengthen consumer affinity, especially in comparison to direct-to-consumer brands that offer a more immersive brand experience.

💡Product Variety

Offering a range of products is crucial for meeting diverse consumer needs and maintaining market relevance. The script suggests that TOMS needed to develop more product varieties, styles, and colors to attract consumers and stay competitive in the market.

💡Sustainable Business

A sustainable business is one that can maintain its operations over the long term without depleting resources or causing undue harm to the environment or society. The video discusses how the intense competition and market changes made it difficult for TOMS to sustain its business model, necessitating a shift towards more sustainable practices.

💡Evolving Business Model

An evolving business model refers to the process of adapting a company's approach to meet changing market conditions. TOMS had to evolve its business model, as discussed in the video, by focusing less on the one-for-one giving model and more on product innovation and brand experience to remain competitive.

Highlights

Tom's one-for-one donation model made buying shoes an act of charity.

By 2013, Tom's had reportedly made $250 million in sales and donated 10 million pairs of shoes.

The company was valued at $625 million in 2014.

Founder Blake Mycoskie started Tom's in 2006 with a desire to give back.

The company was originally named 'Shoes for Tomorrow', then shortened to Tom's.

Mycoskie was inspired by the Argentinian alpargata shoe design.

Hollywood stars wearing Tom's shoes helped grow the brand rapidly.

Tom's slip-on canvas shoes became the brand's hero product.

The one-for-one model was innovative and resonated with consumers.

Competitors copied the slip-on design and sold them cheaper, questioning Tom's value.

Research in 2010 found that Tom's shoe donation program wasn't as significant as thought.

Tom's adapted by giving away shoes as a reward for school attendance.

In 2011, Tom's expanded to include sunglasses, with sales funding cataract surgeries.

Tom's faced challenges growing beyond its hero product.

The company had relied heavily on wholesale, which limited control over its business.

In 2019, Tom's creditors took over the company from Bain Capital.

Tom's is looking to rebuild with a focus on product variety and brand experience.

Tom's has made a lasting impact by making social missions mainstream in business.

In November 2019, Tom's evolved its Giving model to be more flexible and sustainable.

Transcripts

[Music]

chances are he once owned a pair of

these

that's because Tom's had the perfect

product it's one for one donation model

made buying one of its iconic canvas

shoes an act of charity and for a while

that really worked by 2013 Tom's was

reportedly making two hundred and fifty

million dollars in sales a year and had

donated ten million pairs of shoes since

its launch just one year later the

company was valued at six hundred and

twenty five million dollars it was a

brand that resonated with a lot of

especially younger people at the time

that we're looking for brands that were

not sort of traditional corporate kind

of brands entrepreneur Blake Mycoskie

started the company in 2006 because he

wanted to give back yeah

Blake not Tom there was never actually a

Tom behind TOMS shoes the company was

originally named shoes for tomorrow than

tomorrow shoes and then shortened to

Tom's Mycoskie who you might recognize

from season two of The Amazing Race was

inspired to start the shoe company after

a trip to Argentina the story goes that

Mycoskie wanted to help all the kids he

saw without shoes and while he was there

a shoe design caught his eye

the Alper gotta comfortable and

affordable the Albert gotta is an

everyday shoe for many Argentinians a

local shoe maker helped make an updated

version for Tom's and came up with the

buy one get one model soon the shoe was

everywhere it got some publicity and

just grew very rapidly it had a huge

amount of demand at the beginning

Hollywood stars started wearing the

shoes and there's all this buzz around

the shoe and they grew into what it is

today in Tom's slip-on canvas shoes

became synonymous with the brand turning

into what marketing pros call a hero

product

a hero product is a product that is the

archetype will brand right for a company

the ones that it's the most successful

that people think of when you think of

the company so for example like Nike it

could be Air Jordans for Porsche it

might be the 911 it's like how when you

see Hermes you think of the Birkin bag

or associate Heinz with ketchup for Toms

it was the original shoe based on the

alparagata impaired with its charitable

giving model Tom's seemed unstoppable

Tom's branding and marketing was very

effective because it was one of the

first companies that use this buy one

give one kind of philosophy to try to

appeal to not only consumers that like

good-looking shoes but also we're

interested in companies that had some

kind of corporate social responsibility

angle people saw its logo and

immediately thought of its shoes and

it's charity work for kids which could

explain why people were willing to spend

anywhere from forty eight dollars to

seventy eight dollars on a pair of TOMS

canvas shoes but it turns out having a

hero product can backfire

[Music]

the hero product for TOMS shoes is the

OP Regatta variant or model of the shoes

and they relied on that one model too

long the hero product can become stale

at some point if it's not rejuvenated

not to mention Tom slip-on shoe design

was easy to copy so competitors did and

they sold them for much cheaper

Skechers even named its version bobs and

donated two pairs of shoes for every

pair sold all this made consumers

question whether Tom's was even worth

the price so just as quickly as it had

become a staple Tom's became a fad even

though Tom's had expanded its product

line people just couldn't see beyond its

original canvas shoe and while Toms shoe

donation program had been innovative and

interesting when it launched it became

almost mainstream copied by so many

other brands people also started

questioning whether Toms shoe donations

were actually helping anyone Tom's had

contacted an outside research team about

looking into something back in 2010 the

research team found that the program

actually wasn't that significant Tom's

was really quick to to take the results

of the study into consideration so that

they talked to us about giving away the

shoes as a reward for school attendance

so kids actually feel like they earn

them and they they begin to develop more

alternative kinds of shoes that that

would last longer in Tom's continued to

grow its Giving Program to be more

effective in 2011

Tom's expanded its brand to include

sunglasses sales from sunglasses went

directly to people in developing

countries for treatments like cataract

surgery it was a person that's pretty

high prescription glasses I can say I

can attest the fact that that personally

like a lot of people that that this is a

really impactful intervention for for

many people cataract surgery can restore

a life in 2014 Tom started Tom's were

company and said it would donate a

week's worth of clean water for every

bag of coffee it's sold the next year

Tom's teamed up with anti-bullying

organizations with a line of backpacks

but despite all these changes when most

people saw Tom's they only thought of

its original product in program so Tom's

had a hard time growing beyond its hero

product and its sales struggled the

company had a harder time regaining

control over its business because it had

relied so much on wholesale when it

first started out doing this had helped

Tom's build its brand recognition even

faster because its shoes were sold at

big department stores like Macy's and

Bloomingdale's and even at Whole Foods

but a direct-to-consumer model has a lot

of long-term advantages you have more

control over your marketing and

inventory and most importantly over

prices all this can help you control

your profit margins something that's

kind of important when your sales are

starting to slump but instead Tom's

didn't pivot its business model as

quickly or strongly as it should have in

its outlook continue to decline in 2019

Tom's had a 300 million dollar loan due

in 2020 and credit rating agencies

expected it wouldn't be able to pay up

so is this the end for Toms well in late

2019 a group of Tom's creditors

officially took over the company from

Bain Capital and Blake Mycoskie in

exchange for debt relief when Business

Insider reached out to Tom's a

representative said that quote the new

owners support Tom's future growth and

are investing thirty five million

dollars into the company unquote so

Tom's is definitely looking to rebuild

itself but is there a place for it Tom's

biggest obstacle right now is just the

fact that there is so much competition

in the shoe business and some some

brands have in fact gone bankrupt if you

look at a brand brands like Rockport

right which is a well-known brand

take a look at Payless Shoes which is a

retailer there's just a lot of

competition in this market and very

difficult to make a sustainable business

so what should TOMS do I think the

smartest strategy for Toms right now

actually is to focus less on the

corporate social responsibility angle

and focus more on product

I think they developed need to need to

develop more product varieties styles

colors that that consumers want to buy

and I think that's the area they should

focus on another thing Tom's needs to

work on is its brand experience a lot of

successful brands that started as

direct-to-consumer

like Warby Parker like a Casper like

others bonobos for example started only

directed consumer went to retail gave

their customers a chance to again

experience the brand and today brand

experience is extremely important for

consumers to have a strong affinity of

the brand I think Tom's has to do more

of that

but even if Tom's isn't able to recreate

its original success it still made a

lasting impact in the worlds of business

and fashion brands having a social

mission might be commonplace today but

Tom's was the one that made it

mainstream and despite everything Tom's

might still be the best at it I'd say

Tom's is one of the most nimble

organizations that we've that I've

worked with is as a development

economist they they have a whole

department that's devoted to impact

evaluation in November 20 19 times

announced that it would be evolving its

one-for-one Giving model Tom's will now

be donating $1 for every $3 it makes

according to the company this creates a

more flexible and sustainable way of

giving I think Tom's is it is a learning

organization and when it comes to

development and poverty interventions

trust me we're all learning and and and

that's the key so who knows with the

right product Tom's could be the next

big thing again

you