TOMS SETS OUT TO SELL A LIFESTYLE, NOT JUST SHOES
FOUNDER BLAKE MYCOSKIE HAS SET OUT TO SAVE THE WORLD WITH HIS "ONE-FOR-ONE" TAGLINE. HIS CRITICS SAY THAT GIVING ALONE DOESN’T SOLVE A THING.
Carpe diem.
It's a bit surprising to see that Blake Mycoskie repeatedly invokes such a hoary old self-help slogan. But there it is, in foot-high, wooden letters on an upstairs landing at the Los Angeles headquarters of his shoe and accessories company, Toms. There it is again, in a painting on the wall of his office/man cave. And you'll find him repeating it several times in his book, Start Something That Matters.
If there's anyone who can make a case for seizing the day, it's Mycoskie. He has done it repeatedly and successfully over the past seven years, orchestrating Toms's rise into the top flight of fashion and establishing it as a new kind of business. More than any other brand, Toms has integrated old-fashioned, for-profit entrepreneurship with new-wave, bleeding-heart philanthropy, bonding moneymaking and giving in an unprecedented manner. The company has become so closely identified with giving away a pair of shoes to a poor child for every pair sold--Toms has trademarked the tagline "one for one"--that it's often mistaken for a charity. And it has spawned buy-one-give-one copycats offering everything from dog treats to cups of coffee.
This spring, Toms gave away its 10 millionth pair of shoes. "Within the next 18 to 24 months," Mycoskie says, "we expect we'll have given away 10 million more." It now also sells sunglasses--more than 150,000 pairs in the past two years--and in turn has helped deliver eye care to more than 150,000 people. Toms currently donates shoes in 59 countries and eye care in 13. The figures add up to remarkable growth for a remarkable company, one that has put shoes on the feet of many poor children, made its owner a very rich man, and pioneered a much-admired business model. "I had no idea it would ever get this big," says Mycoskie, a 36-year-old Texan whose laid-back, surfer-dude vibe masks the ambition of an entrepreneur who prefers to talk less about the company he has built than of the movement he is building. "Now that we've grown, it's all about: How do you use these resources to do even more?"
Mycoskie says the one-for-one model could involve much more than your feet and your eyes--he envisions a Toms empire that encompasses all sorts of everyday products. But what many of his critics would like him to talk about instead--and what, during two long interviews with Fast Company, he discussed publicly at length for the first time--are Toms's failings on the giving side and its plans to change its ways. You could sum that up with a different Latin phrase: Mea culpa.
There's an old Dutch proverb that says "Shoemaker, stick to thy last"--an admonition to go with what you know. But what if you never knew much about anything, including how to make shoes?
Mycoskie has never been conventional. The son of an orthopedic surgeon and a cookbook author, he confesses that he never graduated from high school (he didn't fulfill his Spanish requirement) but managed to attend Southern Methodist University anyway; he then dropped out after two years as a philosophy and business major. He started a laundry company, a billboard company, and an online driver-training company before he hit upon Toms, and says that he has never known anything about any of the businesses he has gotten into. "When you don't know the rules, you break them all," he tells me when I meet him in his L.A. office in early April. "It's hard to take big risks when you know the history of an industry and what has worked and what didn't."
For several years he lived on a boat, until he got married last summer and his wife, Heather, forced the issue. And while he loves to read business books--John Mackey'sConscious Capitalism is a recent favorite--he also revels in talking about Plato, Socrates, and Kierkegaard and in reflecting on the existential questions of his purpose in life. "Anytime I see a book like that," he says, "I buy it."
The reading can only have helped. Mycoskie is a brilliant storyteller and a charismatic, masterful marketer--one of his staff says that Toms's secret "is Blake's gut"--and in some ways, the Toms genesis story has been the company's most lucrative product. Mycoskie was traveling in Argentina in 2006, playing polo and drinking wine, when he met a woman who was collecting shoes for the poor. Startled that in the 21st century so many kids still needed shoes, he decided to start a shoe company that would give a pair away for every one it sold. His first product: a variation of the traditional Argentine shoe that he brought home from his trip, the rope-soled, canvas-topped alpargata.
With $5,000 saved from his earlier ventures, Mycoskie set up shop in his Venice apartment. It was chaos. Liza Doppelt, the second person Toms hired, recalls that when she arrived for her interview, "I had to physically move dirty laundry from the armchair I was told to sit on." When Garett Awad showed up for his internship interview a couple of months later, he found boxes and shoes everywhere. "It was totally insane," he says, "and I thought, Yes, this is exactly what I want." (Doppelt is now VP of marketing for eyewear, while Awad heads retail marketing.)
Despite the mess behind the scenes, the combination of a slightly exotic yet still approachable shoe and a do-gooder story proved alchemical, establishing the brand's popularity with tastemakers in fashion, lifestyle, and entertainment. Booth Moore, theLos Angeles Times's fashion critic, was the first to write about Toms, in May 2006. Then the editors at Vogue featured Toms in its October 2006 issue, naming legendary designer Karl Lagerfeld as an early-adopting fan.
The shoes themselves did not always work as well as the story. The first pairs of Toms--the name stands for tomorrow's shoes--were made in Argentina, but Mycoskie quickly realized that producing in China would be more cost-effective. As a supply-chain novice, he didn't send anyone to supervise production there. "If you don't show that you care, they assume you don't care," says Jonathan Jung, Toms's first hire. "Every single pair was defective in some way--glue stains, mismatched shoes, insoles that were too big for that shoe." Mycoskie, Jung, and a crew hired via Craigslist worked crazy-long hours to salvage what they could, cleaning stains, matching pairs, pulling out insoles and recutting them to fit. (Jung is now director of supply-chain planning for Toms.)
Another early Mycoskie mistake nearly cost the company its account with Nordstrom, which today is Toms's biggest retailer. "I was adamant I didn't want the environmental waste of cardboard boxes," he says. "I wanted organic linen bags with drawstrings. It meant less money spent on shipping. It was eco-friendly." It was also salesperson-unfriendly. Finding the right sizes amid the messy piles of linen bags took too long, and the drawstrings were forever entangling. Sales tanked. Toms went back to conventional boxes.
For someone who has quickly built a formidable fashion-and-lifestyle brand, Mycoskie has never been much of a fashion guy. His look could be described as sentimental neo-hippie. He always wears a thatch of bracelets and a tangle of necklaces, accessorized by stories; one faded, pinkish woven-fabric strip around his wrist was a gift from a young boy on the first shoe drop in Argentina, while his string of brown prayer beads comes from an Indian ashram he and Heather visited during their honeymoon.
When we went to lunch one day, he wore a blousy, shiftlike top he had picked up in Nepal, shorts in a Native American print that he thought were Polo Ralph Lauren, and a pair of camouflage-print Toms. With his deep tan, untamed mess of curly brown hair, and sometimes-questionable hygiene, he appears almost feral. (By all accounts, he has been significantly cleaner since he married. Heather told me that her wedding vows included a pledge to "love him regardless of how many times he showers or whether he brushes his teeth on a daily basis.")
That don't-care-too-much sensibility fits well with what Toms sells. It's not so much shilling tangible, sartorial accessories (shoes, sunglasses) as offering ineffable, emotional ones--an aura of goodwill, a sense that one is doing something positive with that consumer dollar. "We're about empowering people, inspiring people, helping them to see the life they could live differently," says Awad, the retail marketing head. "We've changed the way people think about consumption."
If that sounds a tad grandiose and self-righteous--the rhetorical opposite of the humble alpargata--it's also completely consonant with the way we live and market today. Toms has identified like-minded, high-profile influencers, partnering with Charlize Theron and Ben Affleck, who collaborate on limited-edition lines and appear at Toms events to promote the brand and their own causes. And it has heavily courted young, trendsetting actors and musicians, such as Olivia Wilde and Passion Pit, hoping that they'll be photographed in and tweet about their Toms. (The company says these unofficial brand ambassadors occasionally receive free products but are never paid.)
The Toms story has also been magnetic to big corporations, which have integrated the brand into major ad campaigns and saved Toms the expense of advertising. After an ad exec saw an item about Toms on a video screen in the back of a New York taxicab, Mycoskie and Toms were featured in TV commercials for AT&T. Microsoft, American Greetings, and AOL have promoted Toms in digital campaigns.
All this publicity has helped Toms become more than a small business very quickly. The company, which is wholly owned by Mycoskie, does not release revenue or profit figures. But Mycoskie did tell me that the average retail price for a pair of Toms is $55, and that about 30% of its revenues come from direct-to-consumer sales via Toms.com. Its giveaway projections--a trailing indicator of sales, since Toms aims to distribute its "giving" pairs within six months of a consumer's purchase--indicate that it expects to sell at least 7 million pairs of shoes this year. A little back-of-the-envelope math gives a conservative revenue estimate of nearly $250 million in 2013, but an inside source suggests that the figure will surpass $300 million (including sunglasses).
The hard part? "Giving, man," Mycoskie says with a shake of his head. "Giving is hard."
Toms's powerful marketing, its good intentions, and the potential of its model to do enormous good inspire widespread praise. Lane Wood, a not-for-profit consultant who has worked with Charity: water, the well-digging NGO that is one of Toms's partners, credits Toms with helping companies mature beyond basic corporate social responsibility. "People have seen the success of Toms and said, 'How do I get a piece of that?'" he says. "While you've seen some really disingenuous campaigns, what I'm excited about is that this will become ubiquitous. Companies have to understand the effect they have on the world."
Yale professor Dean Karlan, who has done groundbreaking research on poverty alleviation, seems cautiously optimistic about what Toms has achieved--and what it could yet accomplish. "Toms has a tremendous vehicle for figuring out how to do this right," he says. "It's a neat idea. I love the passion. But show us the impact, because it takes more than passion to do good."
Here is where the critics chime in. Laura Seay, a professor at Morehouse College, argues that by giving away millions of pairs of shoes, Toms is "just treating one symptom of a much deeper problem, and treating symptoms is not a cure." She adds that Toms's model is built on what's known in trade as dumping. "It undermines the local economy," she says. "The shoe seller goes out of business. He can't send his kids to school."
Others say Toms addresses the wrong issue. Scott Gilmore, CEO of the not-for-profit Building Markets, which works to boost local economies in post-conflict countries, says the problem of persistent poverty is "not a lack of shoes, but a lack of opportunity and a lack of jobs." While he concedes that Toms has helped to build awareness of poverty, he argues that its success really shows the power of monetizing white guilt. "How can we make ourselves feel better?" he asks. "This is the power of self-congratulatory smugness, of saying, 'I'm better than you because I'm helping somebody.' But the people who lose out are ironically the ones they say they're trying to help."
Such criticisms aren't new. They've been growing in number and vehemence--especially on the Internet--in lockstep with the popularity of Toms shoes. But Toms has declined for years to address its critics publicly, giving the impression that it is ignoring them. Mycoskie explains that he has chosen not to engage, in large part because most of the grievances have been broadcast online: "It's a debate you can't win in that medium." He expresses doubt that many of Toms's detractors genuinely want dialogue, and fears "that they'll just take that one sentence out of context."
Privately, Mycoskie claims, he has been seeking out constructive criticism for several years. "I've asked people, 'What could Toms do better?'" he says. "I've learned that the keys to poverty alleviation are education and jobs. And we now have the resources to put investment behind this. Maybe five years from now, we'll be able to say it's really good for business. But the motivator now is, How can we have more impact? At the end of the day, if we can create jobs and do one-for-one, that's the holy grail."
Toward that end, the company has sought to improve the effectiveness of its work throughout the supply chain. All of Toms's consumer shoes today are made in China, as are the vast majority of its giveaway shoes (a small number of which are distributed there). "Toms would not be what it is today without China," says Toms president Laurent Potdevin. "We wouldn't have the resources we have now. It has been the easiest, most cost-effective place to make shoes."
Three years ago, Toms began to make giveaway shoes in Ethiopia, which has a small but burgeoning shoemaking sector. Within the next couple of years, it expects to add shoemaking in India, Kenya, and Haiti, where an artist collective is already customizing Chinese-made Toms for a limited-edition line. Potdevin emphasizes the challenges of such ventures: "Getting a factory up and running, retention, training, finding local management--every aspect is more difficult in a place like Haiti." But separately, Jung, the supply chain chief, notes that it's not all altruism and sacrifice. "Let's not lie to each other," he says. "If you're creating product for the local market, you're spending less to distribute it. No sea freight. No duties." Staying local is especially important in Africa; Ethiopia and Kenya both belong to a free-trade zone that includes nearly every African country where Toms shoes are given away.
Head of giving Sebastian Fries adds that Toms is upgrading the quality of its manufacturing jobs. He rattles off a list of improvements: higher wages; tutoring for workers' children; company-provided take-home meals for working moms; financial education; an on-site preschool at a Kenyan factory where Toms hopes to begin production later this year. "The jobs we help create," he says, "should be in line with what Toms stands for."
At the other end of the business, Toms has lately decided that it ought to learn whether its giveaways work. In August, researchers from the University of San Francisco are expected to release results of a two-year study, funded by a $225,000 Toms grant, of giveaways in El Salvador. Fries, who in 2011 was hired away from Pfizer, where he had been devising products for consumers in low-income markets, says that more such research is planned.
Most of the data the company has gathered so far is anecdotal. Fries has pushed his team to act on the findings anyway. Toms is working with giving partners to integrate shoe drops into health and education programs; in Malawi, for instance, the respected NGO Partners in Health uses shoes to coax parents to bring children to clinics for checkups. It's targeting areas of clearer need; with Save the Children, Toms will give 100,000 pairs of shoes this year to displaced Syrians at the massive Zaatari refugee camp in Jordan. And in response to a common critique that the giveaway shoes don't always meet children's needs, this fall, Toms will begin distributing a winter boot in Afghanistan, India, Kyrgyzstan, Nepal, Pakistan, and Tajikistan. But as usual, Toms's impromptu ways might have hurt the effort a little; when it came time to test prototypes, winter was already over. "We found someone in Los Angeles to make artificial snow and ice," Fries explains. "People walked in it for about four hours to make sure they would hold up. But we should have tested it in the winter months."
The question is whether the quality of Toms's giving is as high a priority as the quantity. When the company advertised last summer for a new director of impact assessment, the job's main responsibility was described as "the building of a body of evidence that illuminates and supports the positive and compelling role of all aspects of Toms's giving strategy." What happens, though, if the evidence is not entirely positive or particularly compelling?
In those exhilarating six months after Mycoskie returned from Argentina with his story and his samples, Toms sold 10,000 pairs of shoes, and in the fall of 2006, he went back to the country for the first round of giveaways, which took place mostly in Misiones, a northeastern province near the Brazilian border. The company has returned multiple times since then to give away more shoes. Without Toms's knowledge, Fast Company recently went to several Misiones communities to see what, if any, lasting effects those giveaways have had.
The economy in Andresito revolves largely around the yerba tree, whose leaves are dried to make yerba mate, the strong tea that Argentines drink constantly. The sprawling municipality, hacked from virgin jungle just 40 years ago, is dotted with pockets of poverty. From the sleepy town center--there's just one restaurant and one guesthouse, catering mostly to passing truckers--you have to bump along red dirt roads for 40 hilly kilometers, past orchards and pastures and fields of mandioca, to reach School No. 436, one of the first that the Toms team visited in 2006.
That visit, says school director Sergio Dario Gonzalez, "was a gift from heaven." Typically, the only foreigners who come through Misiones are en route to Iguazu Falls, one of the seven wonders of the natural world, on the Argentine-Brazilian border. "They pass by in cars and buses, some take photos of the school, and then leave," Gonzalez says. "But this was real interaction." After distributing the shoes, some volunteers played basketball and soccer with the kids, while others sang, danced, and played other games.
The fleet of motorcycles parked outside indicates the region's improving fortunes--five years ago, most students came to school either on horseback or on foot, but today, many of the landowners' kids arrive by "moto." One of the most important, if unexpected, functions of the shoe drops tugs in the opposite direction of that richer-kid fleet: the erasure of a visible sign of income inequality. "It was really great to have these students next to each other with the same shoes--as equals," Gonzalez says. "The kid of the tobacco farmer had the same shoes as a kid whose mom can't always feed her kids. That was powerful. It was really a special moment for the kids, especially for their self-esteem." Adds Fabiana Ramos, a sixth-grade teacher: "At the time, it was really the only shoe that many of these kids had." Though most pairs lasted no more than three months, some of the students, she recalls, "washed and dried them until they broke." Those shoes lasted six or eight months.
About a four-and-a-half-hour drive south of Andresito, in the even poorer municipality of San Pedro, Toms has given away more than 20,000 pairs of shoes since 2006. In a destitute San Pedro village called Alacrin, where the population is entirely indigenous Guarani, residents have become dependent on donations--not just shoes but also clothes and school supplies. Toms's gifts were very welcome. Alacrin's rudimentary one-room schoolhouse, cobbled together from wood and scrap metal, bursts with chatty, smiling kids of all ages, many of whom go barefoot even in winter. "Mothers in need ask for two basic things for their kids: milk and shoes," says Mirta Allgayer, a San Pedro civil servant who helped coordinate visits by Toms in 2006, 2008, and 2010. "These are the basics. Especially in families with seven, eight, nine children."
Toms's legacy in Misiones is measurable in smiles, tears, and memories. Celia Romero, the head of School No. 341, which got a shoe drop in 2006, was moved as she recalled the Toms visit. "It was more than a gift," she says. "There are kids here who come to school with their toes sticking out of their shoes. The families came to watch and be part of it. It was very exciting. Everyone was happy." Allgayer, who still gets choked up at her memories of the shoe drops, says, "It was amazing to see the faces of these kids when they see someone giving them a gift one time in their life. The kids said, 'Someone is going to give me something?'"
But Toms's giveaways haven't been as transformative as the company might have liked. Though much of Misiones has grown rapidly in recent years, the improvement is mainly an outcome of the generous, vote-stoking subsidies of Argentine president Cristina Fernandez de Kirchner's populist government. Many of the shoes Toms distributed at the seven Misiones schools that Fast Company visited went to children who would not be considered poor; according to Clara Alicira Hirschfeld, director of the 370-student School No. 144 in San Pedro, all of her kids have always had shoes. ("But it was so much fun," she says, "like a party.") And in Misiones's poorest villages, like Alacrin, a shoe drop once every two years can't keep kids shod for long. The region's soil--rocky, red-stained, and prone to glooping into sole-sucking mud during winter rains--is devastating to the alpargatas' already limited life expectancy. Of the dozens of people interviewed throughout Misiones, only two said they still had hand-me-down pairs of Toms in use, rare survivors from the 2010 shoe drop. (The company now prefers to call the distributions "giving trips.")
But Toms's giveaways haven't been as transformative as the company might have liked. Though much of Misiones has grown rapidly in recent years, the improvement is mainly an outcome of the generous, vote-stoking subsidies of Argentine president Cristina Fernandez de Kirchner's populist government. Many of the shoes Toms distributed at the seven Misiones schools that Fast Company visited went to children who would not be considered poor; according to Clara Alicira Hirschfeld, director of the 370-student School No. 144 in San Pedro, all of her kids have always had shoes. ("But it was so much fun," she says, "like a party.") And in Misiones's poorest villages, like Alacrin, a shoe drop once every two years can't keep kids shod for long. The region's soil--rocky, red-stained, and prone to glooping into sole-sucking mud during winter rains--is devastating to the alpargatas' already limited life expectancy. Of the dozens of people interviewed throughout Misiones, only two said they still had hand-me-down pairs of Toms in use, rare survivors from the 2010 shoe drop. (The company now prefers to call the distributions "giving trips.")
Yet the giveaways don't appear to have damaged local businesses as much as the critics said they would, either. An hour's drive south of San Pedro, the El Gato alpargata factory makes shoes for all of Misiones Province. Owner Graciela Mabel Katz claims never to have heard of Toms, but thinks the shoe drops haven't hurt sales. El Gato produces 800 pairs of alpargatas daily--a child-size pair goes for about $3 retail--and sells out every two weeks. "They're seen as something accessible for people with little money," she says.
Gladys Pitsch, who runs a shoe shop in Andresito, also has seen little harm from the giveaways. "Alpargatas aren't really shoes," she says. "It might have been different if Toms had given out waterproof shoes or long-lasting ones."
A few weeks after visiting Toms headquarters, I flew to Austin, where Blake andHeather Mycoskie moved last year. He still typically spends a couple of days a week in L.A., but living in Texas has given him the space to think bigger and more strategically. He invited me to join him for a walk around Town Lake, the waterway that bisects central Austin, and he was in a more philosophical mood than when I'd seen him in California. Even his speech seemed a little slower.
To Mycoskie, Toms will be a failure if we keep appending the word shoes to the company name, because he's thinking much bigger and for the long term. Even now, if you type tomsshoes.com into your browser, you'll be redirected to toms.com.
One of Mycoskie's business heroes is Richard Branson, and he sees a model in the British mogul's unprecedented propagation of the Virgin brand. "Nobody has done that like he has," Mycoskie says. "Here's my hypothesis: In the 1960s and 1970s, when Richard was starting, he tapped into an energy and attitude that was countercultural and irreverent and disruptive. He started with music, which was perfect, and once the customer knew what the Virgin brand stood for and trusted it, he was able to take that same attitude into all different industries, and today, kids who listened to music from Virgin Megastores are flying his business class."
Toms-wearing teens and twentysomethings are, in Mycoskie's vision, today's equivalent of the Virgin kids of the 1970s and 1980s. "They're buying clothing that's organic. They're giving up their birthdays to raise money for Charity: water. They're shopping at farmers' markets. And they wear Toms," he says. "We started with shoes. Now we're doing eyewear. We're taking them along this path where they can integrate giving."
Mycoskie is mulling three or four categories for Toms's expansion, and the next could launch as early as the fourth quarter of 2013. "I want to show people that one-for-one is not just for the lifestyle-fashion space," he says. "It can even be everyday products."
Though he won't say what industries or categories he is eyeing, a search of the 200-plus domain names that Mycoskie LLC, Toms's parent company, has registered over the past few years suggests that he is considering everything from wine (tomswine.com) to event ticketing (tomsticket.com, tickettogive.com) to financial services (tomscreditcard.com, tomsinvesting.com, tomsmortgage.com, tomsstudentloans.com).
In March, a lawyer acting on Mycoskie's behalf also filed a trademark application for the tagline "You drink, we dig," which may indicate that the company could expand its partnership with Charity: water, the not-for-profit founded by Mycoskie's good friend Scott Harrison. The lawyer also sought an expansion of Toms's existing trademark "One for One," to cover "beers; mineral and aerated waters and other nonalcoholic beverages; fruit beverages and fruit juices; syrups and other preparations for making beverages."
There's a scene in Aleksandr Solzhenitsyn's novel Cancer Ward in which the patients stumble across "What Men Live By," a short story by Leo Tolstoy, another author Mycoskie has read and admired. The story is about a poor shoemaker who takes a naked beggar into his home. The beggar, who becomes the shoemaker's assistant, is eventually revealed to be a fallen angel. Before the angel can regain his wings, he must learn lessons about mankind, including the answer to the question, What do men live by?
When one of the Cancer Ward characters poses this question, his friends offer divergent answers: air, water, and food; "their rations"; "by their ideological principles"; "professional skill." In the Tolstoy short story, the right answer was "love"--which some of the novel's men find foreign, unsatisfying, even unacceptable. "No," one says dismissively, "that's nothing to do with our sort of morality."
If you ask, what does Toms live by?, the reactions will be similarly divergent. The model that Mycoskie pioneered, the mistakes he has made in execution, the profits he has reaped, the good he has done--all these will be read and received in different ways by different people.
At times, Mycoskie seems at once emboldened and bewildered by his success--and by people's reactions to it. "I had no experience in fashion," he says as we walk around the lake. "I had no experience in shoes. I had no experience being a public figure. I had no experience in giving. I had no experience in development. I never even read a book by Jeff Sachs!" He does appreciate some of the criticism. "Toms will never be a perfect company. Sometimes as entrepreneurs, we think of things and we sell them to ourselves. But I've learned so much along the way, and we want to think in a more holistic way about our impact."
I ask if the burden--of being Mr. Toms, of trying to do something unprecedented--sometimes feels like too much, and he reflects for a moment before answering. "The responsibility can at times feel exhausting, and some days I don't want it. There are definitely times I say, 'Is it even worth it?'" He smiles and then quickly adds: "But I'm not asking anyone to feel sorry for me." I feel the pace quicken just a bit. "I'm going to say this as humbly as I can: I believe what we're doing is affecting the way businesses will be built for hundreds of years to come," he says. "You stay true to what you believe, and what your message is, and then you let the chips fall where they fall."
Reporting from Argentina by Jessica Weiss
Photos by Mike Piscitelli; Justin Fantl (shoes)
Photos by Mike Piscitelli; Justin Fantl (shoes)
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