Bad boys are no longer in style, and it looks like being good is the new black. Many companies are now incorporating feel good, do good deeds directly into the culture of their business models. It’s not an afterthought. It’s the core foundation built right into the structure of the business from the get-go. Businesses obviously have been “giving back” for years – that’s not new. But what is new is the trend of making the giving back itself the business model, in some cases superseding the importance of product that is being sold. This is called Social Entrepreneurship.
Deeds that were once left in the hands of the non-profit sector, now have spread their wings and landed in the for-profit arena. Some savvy entrepreneurs are now realizing that harnessing the power of doing good can make for a nice profit, an undeniably positive brand image, a loyal customer base, unlimited PR opportunities, and last but not least, charity.
Companies like Terracycle and GotBooks.com are following this basic model, but one company that seems to be mastering it is Toms Shoes. Toms is a company founded by Blake Mycoskie in 2006. Blake is in the business of making and selling shoes, but ironically, the product that his company produces and sells is secondary to what his company does.
While traveling on a polo vacation in Argentina, he noticed that the impoverished village adjacent to the polo field was filled with children who were all running around barefoot. Because these children did not have shoes, they were not allowed to attend school and they were susceptible to various diseases that could be picked up from the ground. On his way flying back home from his vacation, Blake decided that he would start a company that would make shoes, sell shoes and give one pair away to needy children for every pair sold. He calls it the “One for One Movement.” This is all very good. He is doing a good thing by helping needy children, I will definitely not argue with that. But don’t forget, he is in the business of making money too.
I’ve been in the shoe business, so I have a pretty good sense about the cost of shoes. Toms Shoes retail for $48. Knowing approximately what shoes of this type would cost to manufacture, I would estimate that in a typical retail scenario, these shoes should retail for about 1/2 of what Toms is charging. These are basic shoes, known as alpargatas or espadrilles. They are simply constructed out of inexpensive materials by low cost labor in Argentina, China and Ethiopia. There are other similarly constructed shoes on the market selling for about $20 – $24.
My point is that Toms charges about twice what would be expected for a shoe of this type in order for the consumer to pay for the additional pair that Toms gives away. Toms is technically giving shoes away, but seems to be passing on the cost of giving them away to the consumer, and even making a profit on the giveaway pair as well. The consumer really is the benefactor in this scenario, not Toms. Another way to look at it is that rather than Toms selling one pair and giving one away, the consumer is paying for two pair and getting one, so Toms can give a pair away at no cost to the company, and at a nice profit. Toms has also set up a non-profit wing of the company, not for the manufacturing of the shoes, but for soliciting and managing volunteers to distribute the shoes to the needy. The giveaway shoes are paid for by the consumer and distributed to the needy by volunteers. Toms Shoes is a for-profit business, so it seems to me that the distribution of the shoes should be paid for out of Toms’ pocket, not by the donated time of volunteers.
It’s a marketing thing, really. He’s doing some good, helping people, making a nice profit, and making consumers feel good by knowing they are helping shoeless children, and in turn doing some serious brand building. It is a win-win situation for everyone as long as the consumer doesn’t mind footing the bill for what Toms markets to be their own generosity. Don’t get me wrong, I have no problem with a business making a profit at all, and donating goods or services to the needy is absolutely a good thing, but Toms should acknowledge their consumers more directly as partners in their business model and in their generosity, rather than taking the sole credit for the giving. Blake does refer to himself as the Chief Shoe Giver, but it’s Toms’ consumers who are making the sacrifice out of their wallets, not him.