The Rise And Fall Of Toms
Summary
TLDRTOMS, 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
👟 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.
🌐 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.
Mindmap
Keywords
💡One for One Donation Model
💡Hero Product
💡Brand Resonance
💡Corporate Social Responsibility (CSR)
💡Product Stagnation
💡Competitive Market
💡Direct-to-Consumer (D2C) Model
💡Brand Experience
💡Product Variety
💡Sustainable Business
💡Evolving Business Model
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
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