TOMS Shoes’ business model is called one-for-one. It means that for each pair of shoes sold, the company gives one pair back to kids in developing countries. The one-for-one model allows the company to monetize through consumers’ word of mouth and social campaigns, with a minimum effort in terms of sales and marketing.
TOMS Shoes’ value proposition centers around its “One for One” model, which promises to donate a pair of shoes to a child in need for every pair purchased. For Customers, TOMS offers: – Footwear and Apparel: Stylish and comfortable products. – Social Impact: The opportunity to make a positive impact with each purchase. For Beneficiaries, TOMS provides: – Donated Products: Shoes, sight-saving glasses, and other essentials. – Empowerment: Improved well-being and opportunities for recipients. TOMS Shoes combines style and social responsibility, allowing customers to contribute to a charitable cause with their purchases.
Appeals to socially conscious consumers by offering products that create a positive impact. Provides customers with a sense of purpose and the opportunity to give back through their purchases. Improves the well-being and opportunities of beneficiaries, creating a positive ripple effect. Attracts customers seeking both fashionable products and the chance to make a difference. Fosters a brand image associated with social responsibility.
– Stylish and comfortable footwear and apparel. – The opportunity for customers to contribute to a charitable cause. – Donations of shoes, glasses, and essentials to those in need. – Empowers beneficiaries by improving their well-being and opportunities. – Attracts socially conscious consumers. – Fosters a brand image of social responsibility.
Customer Segments
TOMS Shoes serves multiple customer segments, including: 1. Individual Shoppers: Consumers looking for stylish footwear and apparel. 2. Socially Conscious Consumers: Individuals who prioritize socially responsible brands. 3. Gift Shoppers: Customers seeking meaningful and impactful gifts. TOMS caters to a diverse range of consumers who value both fashion and social impact.
Focuses on diverse customer segments with varying preferences and values. Customizes user experiences based on individual preferences. Provides a platform for various customer types, including individual shoppers, socially conscious consumers, and gift shoppers. Offers a range of products to meet the needs and preferences of different consumer groups.
– Serving diverse customer segments broadens the user base. – Customized experiences cater to individual preferences. – Provides products for various consumer types. – Offers a range of products to meet diverse preferences.
Distribution Strategy
TOMS Shoes’ distribution strategy includes online sales through its website, partnerships with retailers, and a retail presence through TOMS-owned stores. Customers can purchase products directly from the website, through partner retailers, or by visiting TOMS stores. The company leverages both online and offline channels to reach a wide audience.
Utilizes online sales through its website for direct-to-consumer purchases. Collaborates with retailers to expand product availability. Operates TOMS-owned retail stores to provide an immersive shopping experience. Leverages a multi-channel distribution strategy to reach a broad customer base. Offers customers flexibility in how they shop for TOMS products.
– Online sales align with the digital shopping preferences of customers. – Partnerships with retailers expand product accessibility. – TOMS-owned stores offer an immersive and brand-focused shopping experience. – Multi-channel distribution reaches a broad audience. – Provides flexibility in shopping for TOMS products.
Revenue Streams
TOMS Shoes generates revenue through the sale of footwear, apparel, and accessories. Its primary revenue streams include: 1. Product Sales: Revenue generated from selling shoes, eyewear, apparel, and accessories. 2. Collaborations: Revenue from collaborations with other brands and designers. 3. Licensing: Licensing agreements for TOMS-branded products. Product sales are the primary source of revenue.
Relies on product sales as the primary source of income, generating revenue from footwear, eyewear, apparel, and accessories. Earns additional income through collaborations with other brands and designers, expanding product offerings. Utilizes licensing agreements for TOMS-branded products to increase revenue. Prioritizes product sales to sustain operations and maintain the “One for One” model. Offers collaborations and licensing for brand expansion.
– Product sales provide a consistent revenue source. – Collaborations expand the product offering and generate additional income. – Licensing agreements increase brand reach and revenue. – Prioritizes product sales to support the charitable model. – Collaborations and licensing extend the brand presence.
Marketing Strategy
TOMS Shoes’ marketing strategy revolves around storytelling, social media, cause marketing, and partnerships. The company shares stories about its impact, emphasizing the positive change made possible through customer purchases. TOMS actively engages on social media to connect with its audience and amplify its message. Cause marketing campaigns highlight the “One for One” model. Collaborations with influencers and other brands further promote the mission.
Emphasizes storytelling to showcase the positive impact of its “One for One” model. Actively engages with its audience on social media platforms to create a sense of community and purpose. Leverages cause marketing campaigns to highlight the mission and drive awareness. Collaborates with influencers and other brands to expand the reach and promote the mission. Fosters a strong emotional connection between customers and the brand.
– Storytelling creates an emotional connection with customers. – Active social media engagement fosters a sense of community. – Cause marketing campaigns highlight the mission. – Collaborations with influencers and brands amplify the message. – Fosters a strong customer-brand relationship based on shared values.
Organization Structure
TOMS Shoes’ organizational structure includes teams dedicated to product design, marketing, partnerships, retail operations, and social impact. Product design teams focus on creating stylish and comfortable products. Marketing teams handle promotional efforts. Partnerships teams collaborate with influencers and brands. Retail operations teams manage TOMS-owned stores. Social impact teams oversee the “One for One” program. This structure supports product excellence, marketing effectiveness, brand expansion, and social impact efforts.
Employs specialized teams for product design, marketing, partnerships, retail operations, and social impact. Prioritizes product excellence through design teams. Manages promotional efforts effectively through marketing teams. Collaborates with influencers and brands for expanded reach through partnerships teams. Operates TOMS-owned stores through retail operations teams. Oversees the “One for One” program through social impact teams. Ensures product quality, marketing effectiveness, brand expansion, and social impact efforts.
– Specialized teams drive product excellence and innovation. – Marketing efforts are managed effectively. – Collaborates with influencers and brands for expanded reach. – Retail operations provide an immersive brand experience. – Oversees the “One for One” program for social impact efforts. – Ensures product quality, marketing effectiveness, and social responsibility.
Competitive Advantage
TOMS Shoes’ competitive advantage lies in its “One for One” model, brand reputation, emotional connection with customers, and commitment to social impact. “One for One” Model: Distinguishes itself with a unique charitable model that resonates with customers. Brand Reputation: Known for its social responsibility and commitment to positive change. Emotional Connection: Fosters a strong emotional connection between customers and the brand. Social Impact Commitment: Demonstrates a genuine commitment to making a positive impact. TOMS is recognized as a socially responsible brand that stands out in the fashion industry.
Derives a competitive advantage from: – A unique “One for One” model that differentiates the brand. – A strong brand reputation for social responsibility. – A deep emotional connection with customers based on shared values. – A genuine commitment to creating a positive impact. Stands out as a socially conscious brand with a unique charitable mission.
– The “One for One” model resonates with customers. – A strong reputation for social responsibility. – An emotional connection fosters customer loyalty. – A genuine commitment to creating positive change. – Stands out in the fashion industry as a socially responsible brand.
As highlighted on Wikipedia, Toms (stylized as TOMS) is a for-profit company based in Santa Monica, California, that operates the non-profit subsidiary Friends of Toms. The company was founded in 2006 by Blake Mycoskie, an entrepreneur from Arlington, Texas. The company designs and sells shoes based on the Argentine alpargata design as well as eyewear.
How much money does TOMS shoes make?
According to an analysis made by Moody, TOMS Shoes recorded net sales of $379 million for the twelve months ended March 31, 2017.
The value proposition is straight, simple, yet powerful: improve the lives of millions of people around the world while creating a for-profit sustainable business model, based on a fashionable product (shoes in this case) for aware consumers.
Aware Consumers: I want to be cool and feel good!
The simple value proposition attracts aware consumers (those concerned about sustainable causes): for every product purchased, one is given away to a person in need.
That makes the purchase more appealing to consumers that want to look fashionable while making their contribution to developing countries with a simple purchase.
That makes donating simple for everyone.
TOMS Shoes takes care of setting up partnerships around the world with NGOs to allow the distribution of free supplies.
The process for the selection of NGOs is the following:
Establish partnership
Make a match
Customize the order
Deliver and distribute
Pick up the tab
Review and improve
Repeat
The partnership with NGOs is critical to TOMS’ business model success as it allows the company to stay consistent with its mission, making its products appealing to aware consumers.
Aware Affiliates: The army of resellers
Affiliates can apply to the affiliation program directly from the TOMS website.
They support updates, links, and banners for TOMS products, including a full array of products, including limited edition styles. Also, they get promotional links in various sizes and uniquely creative, including web banners, logos, and text links.
One-for-one business model: Hacking Sales & Marketing
In 2016 at TOMS’ charity event, Without Shoes, the company donated 27,435 shoes to children worldwide, as reported by Marketing Week.
From that campaign, more than 3.5 million people were engaged; While over 17 million impressions were generated with the hashtag #WithoutShoes.
Those social media campaigns secured TOMS over 250 media placements.
The revenues for the same period was $8.6 billion.
That makes the sales and marketing cost 10.20% over the net sales ($877 million / $8.6 billion).
Therefore, if we take TOMS’ donation budget to revenues in 2016 at 0.06%.
Then compare that with Nike’s sales and marketing budget in proportion to sales for 2017, which is 10.20%.
Therefore, the latter spends almost 170 times more on the marketing budget (assuming the donations can be considered as the marketing budget for TOMS)!
A little caveat: The numbers above are based on estimates and numbers found on the internet. From how much I fact-checked those numbers, TOMS is not a listed company. Therefore, numbers might turn out to be inaccurate. The main point here is that TOMS with the one-for-one business model, managed to create also financial value and what seems to be sustainable profits over time. Therefore, it proved to be effective from an economic standpoint beyond ethical valuations.
Summary and Conclusions
TOMS Shoes was created by Blake Mycoskie, which came up with the one-for-one business model after traveling in Argentina when he found out kids were so poor that they couldn’t afford shoes. He decided to start a sustainable business model based on the principle of donating a pair of shoes for each pair of shoes sold. This business model has proved effective. In fact, in the last twelve months ended in March 2017, the company recorded $379 million in sales. Also, back in 2014, Bain Capital purchased 50% of the company, placing the valuation at $625 million.
The value proposition involves three key partners: consumers, NGOs, and affiliates. Consumers that want a fashionable pair of shoes at an affordable price; while feeling they’re improving someone else lives are attracted by TOMS’ value proposition. NGOs are selected from time to time to distribute TOMS donations. While affiliates are recruited to help the company distributes its products even further.
The business model has proved quite effective. In fact, the effort for the donations of shoes makes up for the momentum gained in sales. According to the estimates above TOMS Shoes donations effort for 2016, compared to net sales for 2017 was only 0.06%. Compared to Nike’s sales and marketing spending at 10.20% of total sales. That makes TOMS one-for-one way more effective than traditional business models.
Value Proposition:
Social Impact: TOMS’ core value proposition revolves around its commitment to social impact. By purchasing TOMS products, customers contribute to the company’s mission of improving lives and communities around the world through its One for One giving model, which provides shoes, sight-saving surgeries, clean water, and other essentials to people in need.
Quality and Style: TOMS offers a range of footwear, eyewear, and apparel products known for their quality, comfort, and stylish designs. With a focus on simplicity, versatility, and timeless appeal, TOMS products appeal to customers seeking fashionable yet functional items for everyday wear.
Ethical Sourcing and Sustainability: TOMS prioritizes ethical sourcing and sustainable manufacturing practices throughout its supply chain. The company uses eco-friendly materials, implements fair labor standards, and supports local artisans and communities, aligning with the values of environmentally conscious and socially responsible consumers.
Community Engagement: TOMS fosters a sense of community and belonging among its customers, employees, and partners. Through its storytelling, social media engagement, and experiential marketing initiatives, TOMS creates opportunities for connection, collaboration, and shared purpose, building a loyal customer base and brand advocates.
Convenience and Accessibility: TOMS offers a convenient and accessible shopping experience through its online store, retail locations, and global distribution network. With user-friendly websites, mobile apps, and customer support services, TOMS ensures a seamless and hassle-free shopping experience for customers worldwide.
Revenue Streams:
Product Sales: The primary revenue stream for TOMS comes from the sale of footwear, eyewear, apparel, and accessories through its e-commerce platform, retail stores, wholesale partnerships, and other distribution channels. TOMS earns revenue from each product sold to customers at retail prices.
Donations and Philanthropy: While not a traditional revenue stream, TOMS’ philanthropic activities contribute to its brand value and customer loyalty. Through its One for One giving model, TOMS donates a portion of its sales or products to charitable causes, supporting communities in need and making a positive impact on society.
Licensing and Partnerships: TOMS may generate additional revenue through licensing agreements, brand collaborations, and strategic partnerships with other companies, brands, or organizations. By licensing its brand or partnering with like-minded entities, TOMS can expand its reach and diversify its revenue streams.
Retail and Wholesale Operations: TOMS operates retail stores, pop-up shops, and outlet locations in key markets worldwide, generating revenue from direct-to-consumer sales. Additionally, the company sells its products through wholesale partnerships with department stores, specialty retailers, and online marketplaces, reaching a broader customer base and driving sales.
Subscription and Membership Programs: While not a significant revenue stream for TOMS, the company may explore subscription or membership programs offering exclusive perks, discounts, or access to limited-edition products for loyal customers. These programs can enhance customer engagement and retention while providing a recurring revenue stream from subscription fees.
Marketing Strategy:
Storytelling and Brand Narrative: TOMS leverages storytelling and brand narrative to communicate its mission, values, and impact to consumers. Through compelling content, social media campaigns, and experiential marketing initiatives, TOMS shares stories of empowerment, community resilience, and social change, inspiring customers to become part of the movement.
Social Media Engagement: TOMS actively engages with its audience on social media platforms such as Instagram, Facebook, Twitter, and YouTube. The company shares user-generated content, behind-the-scenes footage, product updates, and philanthropic initiatives to foster community engagement, drive brand awareness, and encourage user participation.
Cause Marketing Campaigns: TOMS implements cause marketing campaigns and initiatives to raise awareness about social issues and drive consumer participation. By aligning with relevant causes, organizations, and influencers, TOMS amplifies its message, mobilizes support, and encourages customers to take action through purchases, donations, or advocacy efforts.
Influencer Partnerships: TOMS collaborates with influencers, celebrities, and brand ambassadors to amplify its reach and engagement among target audiences. By partnering with individuals who share its values and mission, TOMS leverages their platforms, credibility, and influence to promote its products, campaigns, and philanthropic initiatives to a wider audience.
Community Events and Activations: TOMS hosts community events, activations, and campaigns to connect with customers offline and foster meaningful interactions. From pop-up shops and charity events to volunteer opportunities and experiential marketing activations, TOMS creates opportunities for face-to-face engagement, relationship-building, and brand advocacy.
Distribution Channels:
E-commerce Platform: TOMS operates an e-commerce platform (www.toms.com) as its primary distribution channel, allowing customers to browse, shop, and purchase products online. The website offers a user-friendly interface, secure payment options, and seamless checkout, providing a convenient and accessible shopping experience for customers worldwide.
Retail Stores: TOMS operates brick-and-mortar retail stores in key markets, including flagship locations, concept stores, and franchise outlets. These retail stores serve as brand showcases, community hubs, and shopping destinations for customers to explore TOMS products, engage with brand ambassadors, and learn about the company’s mission and impact.
Wholesale Partnerships: TOMS sells its products through wholesale partnerships with department stores, specialty retailers, and online marketplaces. By partnering with established retail partners, TOMS expands its reach and distribution network, reaching new customer segments and driving sales through third-party channels.
Pop-Up Shops and Events: TOMS hosts pop-up shops, temporary retail activations, and brand events in various locations, such as festivals, trade shows, and community gatherings. These pop-up shops provide opportunities for customers to experience the brand firsthand, interact with products, and participate in exclusive promotions and activities.
International Expansion: TOMS expands its distribution globally through international shipping, cross-border commerce, and localized websites. By establishing partnerships with distributors, retailers, and logistics providers in different countries and regions, TOMS reaches customers worldwide and adapts its products and marketing efforts to local preferences and cultural nuances.
Key Highlights
Introduction:
TOMS Shoes: For-profit company based in Santa Monica, California, with a one-for-one business model.
Founded in 2006 by Blake Mycoskie, designs and sells shoes and eyewear based on Argentine alpargata design.
One-for-One Business Model:
For each pair of shoes sold, TOMS donates a pair to kids in developing countries.
Monetizes through word of mouth, social campaigns, minimal sales, and marketing effort.
Revenue and Valuation:
Recorded net sales of $379 million for the 12 months ended March 31, 2017.
Private equity firm Bain Capital purchased 50% stake in 2014, valuing company at $625 million.
Key Partners and Value Proposition:
Aware Consumers:
Attracts consumers concerned about sustainability; fashionable purchase with social impact.
NGOs:
Partners with NGOs to distribute donations in over 60 countries.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
2 thoughts on “How Does TOMS Shoes Make Money? The One-For-One Business Model Explained”
Veey great article! Have you read a book how everything is started? It is an amazing story how company with a great story can rise so quickly!
Thank you Gedas! And yes I read the book from Blake Mycoskie. Definitely a must-read!