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.