Reference no: EM132232880

TOMS SHOES – CASE STUDY

Founded in 2006 by BLAKE MYCOSKIE, TOMS Shoes was an American footwear company based in Santa Monica, California. Although TOMS Shoes was a for-profit business, its mission was more like that of a not-for-profit organization. The firm’s reason for existence was to donate to children in need one new pair of shoes for every pair of shoes sold. Blake Mycoskie referred to it as the company’s “One for One” business model. While vacationing in Argentina during 2006, Mycoskie befriended children who had no shoes to protect them during long walks to obtain food and water, as well as attend school. Going barefoot was a common practice in rural farming regions of developing countries, where many subsistence farmers could not afford even a single pair of shoes. Mycoskie learned that going barefoot could lead to some serious health problems. Podoconiosis was one such disease in which feet and legs swelled, formed ulcers, emitted a foul smell, and caused intense pain. It affected millions of people across 10 countries in tropical Africa, Central America, and northern India. For millions, not wearing shoes could deepen the cycle of poverty and ruin lives. Upset that such a simple need was being unmet, Mycoskie founded TOMS Shoes in order to provide them the shoes they needed. “I was so overwhelmed by the spirit of the South American people, especially those who had so little,”1 Mycoskie said. “I was instantly struck with the desire—the responsibility—to do more.”1 The name of his new venture was TOMS Shoes. History Blake Mycoskie started his entrepreneurial career by creating a college laundry service in 1997 when he was a student at Southern Methodist University. In his words, “After we expanded EZ Laundry to four colleges, I sold my share. I moved to Nashville to start an outdoor media company that Clear Channel scooped up three years later.”1 In 2002, Blake and his sister Paige formed a team to compete on the CBS reality show The Amazing Race, coming in second. One of the places that they visited during the filming was Argentina. Fascinated by South America, Blake returned to Argentina in 2006 for a vacation. “On my visit I saw lots of kids with no shoes who were suffering from injuries to their feet. I decided a business would be the most sustainable way to help, so I founded TOMS, which is short for a ‘better tomorrow,’” 1 explained Mycoskie. While in Argentina, Mycoskie had taken to wearing alpargatas—resilient, light-weight, slip-on shoes with a breathable canvas top and soft leather insole traditionally worn by Argentine workers, but worn casually by most people in that country. Mycoskie spent two months meeting with shoe and fabric makers in Argentina. Although he modeled his shoe after the espadrille-like alpargata, he used brighter colors and different materials. “No one looked twice at alpargatas, but I thought they had a really cool style,”1 said Mycoskie. “I’m a fan of Vans, but they can be clunky and sweaty. These aren’t. They fit your foot like a glove but are sturdy enough for a hike, the beach, or the city.”1

Founding his new company that year in Santa Monica, California, the 30-year-old Blake Mycoskie began his third entrepreneurial venture. With a staff of seven full-time employees (including former Trovata clothing line designer John Whitledge), six sales representatives, and eight interns, TOMS Shoes introduced 15 styles of men’s and women’s shoes plus limited edition artist versions in June 2006. The shoes were quickly selected for distribution by stores like American Bag and Fred Segal in Los Angeles and Scoop in New York City. By Fall 2006, the company had sold 10,000 pairs of shoes, averaging US$38 each, online and through 40 retail stores. As promised, Mycoskie returned to Argentina in October 2006 with two dozen volunteers to give away 10,000 pairs of shoes along 2,200 miles of countryside. Mycoskie wryly explained what he learned from this experience. “I always thought that I’d spend the first half of my life making money and the second half giving it away. I never thought I could do both at the same time.”1 The next year, TOMS Shoes gave away 50,000 pairs of shoes in “shoe drops” to children in Argentina plus shoe drops to South Africa. More countries were added to the list over the next three years. Mission Accomplished: Next Steps? When Blake Mycoskie originally proposed his One-for-One business model in 2006, few had much confidence in his ability to succeed. He never generated a business plan or asked for outside support. Mycoskie used the money he had earned from his earlier entrepreneurial ventures to fund the new business. Looking back on those days, Mycoskie stated, “A lot of people thought we were crazy. They never thought we could make a profit.”1 Much to everyone’s surprise, TOMS Shoes had its first profitable year in 2008, only two years after being founded. The company’s sales kept increasing throughout the “great recession” of 2008–2009 and continued being marginally profitable. Mycoskie admitted that the company would have to sell about a million pairs of shoes annually to be really profitable. Nevertheless, TOMS Shoes did not take on any outside investors and did not plan to do so. In September 2010, Blake Mycoskie celebrated TOMS Shoes’ total sales of one million pairs of shoes by returning to Argentina to give away the millionth pair. Looking forward to returning to where it all began, Mycoskie mused: “To reach a milestone like this is really amazing. We have been so busy giving shoes that we don’t even think about the scope of what we’ve created and what we’ve done.”1

QUESTION

1. Prepare an inclusive report stating the lessons can other companies learn from TOMS Shoes corporate strategies over the years.