Toms finds one-for-one charitable model doesn’t add up for its business

Discussion
Sources: Facebook/@toms
Apr 13, 2021
Tom Ryan

Toms, the pioneer of the one-for-one charitable model, will no longer donate a pair of shoes to a child for each pair purchased. Instead, it plans to give a third of annual profits to local community-focused organizations.

The change comes amid a major rebrand and product overhaul. In December 2019, creditors took control of the debt-laden company from Bain Capital and founder Blake Mycoskie amid bankruptcy rumors and several years of sales declines.

Founded in 2006, the maker of Alpargata canvas footwear earned wide praise over the years for its one-for-one model that has also been adopted by Warby Parker and Bombas.

Toms said it began exploring the broader philanthropic model when it began working with organizations pledging to end gun violence that culminated in the brands’ $5 million pledge in early 2019 as part of its End Gun Violence Together campaign. By November 2019, Toms announced it was starting to invest $1 of every $3 customers spent with a group of humanitarian organizations to expand the scope of its charitable impact.

Tom’s decision to end one-for-one giving comes as extensive research shows Gen Z are looking for brands supporting a range of social issues. The new impact program will focus on promoting mental health, ending gun violence and increasing access to opportunity.

Amy Smith, Toms’ chief strategy and impact officer, told Fashionista that the new “1/3 of Profits for Grassroots Good” model provides greater flexibility to evolve philanthropic efforts as communities’ needs change. Toms also expects to be able to put more marketing and outreach support behind the grassroots approach. Mr. Smith said the one-for-one model likewise redistributed a third of profits, but the new model should prove more sustainable.

“We had hundreds of shoe giving partners, and that’s too much to manage,” she told Glossy.

Toms’ management recognizes that some older customers will be disappointed by the abandonment of the one-for-one model. Chief marketing officer Ian Stewart told Bloomberg, “We may lose some of them [Millennials], and that’s OK. You sometimes need to lose some to gain some.”

DISCUSSION QUESTIONS: What, if anything, does Toms’ decision to end its one-for-one charity model say about cause marketing at this point in time? Do you think Toms’ customers will see the change as a positive or a negative development?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Contributing one-third of their profits is still huge but to connect better with their customers they have to support causes that resonate with their brand personality as well"
"Big mistake. The one-for-one was easy to understand, easy to market, and easy to relate to."
"Unless Toms discovered some magic that no one else has, it’s not possible to be a competitive for-profit business and give away product that incurs large expenses."

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25 Comments on "Toms finds one-for-one charitable model doesn’t add up for its business"


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Neil Saunders
BrainTrust

The one-for-one model was simple to explain and easy to understand. However it was also complex to manage and limited to the areas where Toms could make an impact. Simply donating a third of profits means Toms is still being more philanthropic than most businesses, but has more flexibility in where to make a difference. The important thing, however, is that Toms picks some clear areas where it wants to help and actively communicates these things to its customers and stakeholders. Donating money is good, but ensuring that people understand the difference it is making is somewhat harder.

Gene Detroyer
BrainTrust

Cause marketing will work and it can very well be the decider between competitive products. However the real question Toms must ask is, “is our product competitive with what is offered in the marketplace?”

If their product is not competitive, a new business model will not help. If the product is not competitive, then the cause is just a gimmick.

Rick Watson
BrainTrust

It’s a more difficult message for consumers. Net negative.

Joe Skorupa
BrainTrust

Toms dumped planeloads of shoes into some of the poorest countries in the world and killed local shoe businesses and shoemakers. This is a good marketing policy? Just because it happens out of sight to most people doesn’t make it right. Charitable donating has to be thought through all the way to the end. The plan doesn’t end at the giving. It is the receiving that counts. Toms new policy holds out real hope for those in need.

Jeff Sward
BrainTrust

Toms one-for-one model always seemed hugely generous, so to hear that it turned out to not be sustainable is no surprise. The new model that gives away one-third of annual profits is also hugely generous. One-third — who else gives away that level of their profits? Toms is to be congratulated for finding a way to continue their charitable model in a sustainable manner.

Shep Hyken
BrainTrust

One-for-One put Toms’ philanthropic efforts on the map. One-third of profits is still HUGE! Maybe even bigger. Toms hasn’t dropped their efforts to give back. They are just changing and finding other ways to make an impact.

Gene Detroyer
BrainTrust

HUGE? Even if one-third of profits is huge, can the customer even conceive of that as well as they can picture the one-for-one? I know I can’t.

Ryan Mathews
BrainTrust

Gene, agree with all your comments on this one. The reason you can’t picture what “one third” looks like is because you are rational. One-for-one is a concrete, transparent, and verifiable metrics. One third of profits? Not so much.

Laura Davis-Taylor
BrainTrust

I think the answer comes down to how they use this new direction to share the stories of the impact that they are making. People like to see tangible outcomes from efforts like these — it’s how they emotionally connect to them. I hope they have a crack leader on this initiative and make Tom’s contribution to the greater good something everyone understands and buys into — literally.

Nikki Baird
BrainTrust
The risk in cause marketing – especially the kind that you have made essential to your brand – is that you come off as whitewashing at best or hypocritical at worst. The challenge operationally with cause marketing is actually reaching to where you want to have the most impact – and it sounds like this is exactly what Toms ran into. One for one was easy to say, hard to do. This more generic giving message is harder to get across but easier to do. I get that sending shoes to the shoeless might not be as much of a priority to those buying the shoes if they believe things like systemic racism or climate change are bigger issues that need more attention. But purely from a branding perspective, Toms now has moved from someone staking out real ground to someone who sounds just like everyone else. It’s more impactful to do the hard thing, and I feel like Toms could’ve put more effort into the shift to keep at least some element of the… Read more »
Lee Peterson
BrainTrust

Marketing always works best in it’s simplest forms: BOGO, 50 percent off, Just Do It, Prime Day, and one-for-one, just to name a few. But “one-third of profits” is a pretty vague, complex statement. What does that mean? Are “profits” what’s left over after the CEO makes an unreasonable salary? Or the money guys get their share? A lot of cynical questions can come to mind.

I would suggest they go back to the drawing board and consider the simple and profound message that worked the first time and try to match its clarity, albeit with a little less “oomph,” in order to keep the doors open.

Gene Detroyer
BrainTrust

Absolutely. The customer can picture the shoe that is contributed. It is very hard to picture some fuzzy number.

Michael La Kier
BrainTrust

Toms was long known for their one-for-one model. Any shift from that – even beneficial – will be met with criticism as we’ve become anchored to the message for so long. So, it’s a change. The platform – or sole/soul – of Toms model was about helping others with clothing, something no one can argue with. As Toms evolves to other issues (and there are a multitude of social issues for brands to engage in) it opens up the brand to criticism based on the causes they engage with.

Gene Detroyer
BrainTrust

Yes, that is what they stood for. I imagine their customers bought because of the one-for-one, not because they made a great product.

Bindu Gupta
BrainTrust

Contributing one-third of their profits is still huge but to connect better with their customers they have to support causes that resonate with their brand personality as well as their customers.

Ken Lonyai
BrainTrust

Unless Toms discovered some magic that no one else has, it’s not possible to be a competitive for-profit business and give away product that incurs large expenses. The marketing cachet would have to be so strong that it could sustain growth enough to overcome the built-in loss leader effect. It wasn’t and the novelty of their giving program became lost in the digital noise.

Their new model is still beneficial to charities, financially sustainable, and can allow diverse giving that can keep their message fresher.

Ryan Mathews
BrainTrust

Toms conscious decision to potentially “fire” its hyper-loyal customer base – those that won’t support the abandonment of the one-for-one model – is, to put it “charitably,” shortsighted. Many commenters here have noted that “one-third of all profits” still sounds generous. And it is, as long as you keep the emphasis on “sounds.” Anyone who has spent any time around PE companies – or a sharp CPA for that matter – knows that “profits” is a more flexible term than first appears. Buyback stock? Less available for the profit pool. Make an acquisition? Ditto. Creative balance sheet manipulation? Hat trick! There are hundreds, maybe thousands of ways to legally “bury” profits, so Tom’s charitable contributions could go down to zero if the company shows no profit. Without those core brand lovers, and with charitable contributions at best a moving target, what’s left? Canvas shoes? Hardly a differentiated offering. So my bet? Toms customers are going to see right through this plan, and they aren’t going to like what they see.

Venky Ramesh
BrainTrust

Toms is a for-profit company. In the earlier model, with every pair of shoes they sold they would donate a pair, whether or not they made profits as a company. With the new model, they ensure the company is first profitable before they start donating.

Joe Skorupa
BrainTrust

Personally, I never liked the one-for-one gimmick. Having traveled to places with groups that have much more flexible giving models I was always upset to hear how planes flying into countries with loads of Toms shoes put every shoe business and shoemaker in the area out of business. So I applaud this move and hope they have learned lessons over the years that will enable their charitable giving to produce the positive results they intend.

Brian Numainville
BrainTrust

This is going to be a challenge. Like it or not, the one-for-one charity model was easy to understand for people who wanted to support the brand (albeit more complicated for the company to manage). Donations of dollars to causes will be more difficult to understand (even if much easier to manage for the company) and opens the door to criticism over causes selected.

Mel Kleiman
BrainTrust

Big mistake. The one-for-one was easy to understand, easy to market, and easy to relate to.

Craig Sundstrom
Guest

Hard to donate money if you don’t have any. I’m not a big fan of profit-donating plans — why not return them to shareholders to decide for themselves where they should go? But whatever one thinks of them, most businesses are too complex for some predetermined formula (and certainly an astronomical share like this) Good intentions are no substitute for good management.

Kathleen Fischer
BrainTrust

It’s a big change for customers to hear and understand and will likely be met with resistance even if it makes more business sense.

Rachelle King
BrainTrust
Cause marketing is only relevant if your cause is socially relevant. It’s not that people don’t appreciate a charitable pair of shoes, but since Tom’s started this one-for-one, what is socially relevant has changed and they have not. While it’s noble to be loyal to a cause, to do so and expect recognition from consumers without checking periodically to see what resonates with them is likely how Tom’s got here. Marketing strategies should be revisited at least once every 3 years, this includes cause marketing. Today, cause marketing is not nearly as easy as it used to be. Consumers look for brands to take a stand for or against something meaningful and relevant. A good rule for relevance today is if it doesn’t make someone on your brand or corporate communications team uncomfortable, you’re probably not pushing hard enough. With this change, Tom’s has a chance to get inside the heads and hearts of consumers in their respective communities. Depending on the community, it might make some uncomfortable but consumers will see them, hear them… Read more »
Kai Clarke
BrainTrust

This is a smart business decision for Toms. Their old model based upon a one for one donation simply didn’t work for business. How many years did they have to lose profits before this decision became reasonable? This should have been done long ago….

wpDiscuz
Braintrust
"Contributing one-third of their profits is still huge but to connect better with their customers they have to support causes that resonate with their brand personality as well"
"Big mistake. The one-for-one was easy to understand, easy to market, and easy to relate to."
"Unless Toms discovered some magic that no one else has, it’s not possible to be a competitive for-profit business and give away product that incurs large expenses."

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