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The TOMS Development Model

Last week on this blog, Chris Horst gave us his take of the TOMS Shoes and Whole Foods strategies for do-goodism. Praising Whole Foods for trying to make their support for the poor an integral component of their broader business strategy, Chris also brings up an important critique about TOMS: the long-term impact of giving away something for free.

Chris and others herehere and here elaborate on this, but let’s break it down some more. First of all, what happens to local producers and supply chains when goods are given away? When TOMS distributes shoes in a poor Latin American or African community, what does that do to the shoe makers and vendors in that town?

First of all, a price of zero immediately changes shoe economics, regardless of how underdeveloped the shoe market may be. How does a merchant, who buys basic-quality shoes for, say, 2 dollars a pair from a local shoemaker then sells them for 3 dollars, compete with free? Maybe there is no local shoemaker and instead merchants buy their supplies from a distributor in the nearest city. Even the remotest of villages in the African bush or the Amazon have access to some sort of distribution system. Yet TOMS doesn’t take these supply chains into account in their charity strategy even though it may be intervening in them.

On the TOMS website, founder Blake Mycoskie speaks passionately about seeing barefooted children in Argentina and wanting to do something about it. We don’t really get a good reason why these children are barefoot. Being poor isn’t a sufficient reason—the kids are wearing clothes. And basic shoes don’t necessarily cost any more than, say, a pair of pants or a t-shirt. So it’s not enough to say that because many children’s families may not immediately be able to afford a pair of shoes, we should give them away. Unless we presume that literally everything that these poor children wear (and eat, and read, we could go on) was given to them for free, the TOMS mission doesn’t really make sense. Where do we stop?

In reality, TOMS is a company with a brilliant marketing campaign and a lousy development strategy. Marketing is supposed to evoke our pathos — think Hallmark or Coca-Cola commercials. TOMS takes it up a notch by stirring up our humanitarian concerns. (It’s not a shoe company, it’s a “movement.”)  But if we’re truly concerned about the well-being of the poor and the development of poor communities, the TOMS one-for-one strategy doesn’t cut it. In fact, it may even violate the first principle of “do no harm.”

Does this mean TOMS should do nothing about poverty and just be a regular shoe company instead? No, of course not. It just needs to address root causes to the social problems it perceives rather than taking the band-aid approach. What if TOMS studied the communities it wanted to help, and then if it sensed an opportunity, built a small shoe factory that employed local residents? Or what if it supplied shoes in bulk to local merchants for them to sell on their own? Ultimately, the choice isn’t either doing nothing or giving things away for free. Integrating the citizens they wish to help into their supply chain would bring TOMS closer to the Whole Foods model that Chris describes, and in the end, have more impact than a well-publicized giveaway campaign.