Nowadays, many fashion brands have launched many charitable sales models, such as Bombas launching a public welfare campaign to buy a pair of socks and donating a pair of socks. Everlane donated all the income of the Human series to various civil rights organizations.
When the brand of Tom shoes Toms was launched in 2006, the idea of combining fashion and charities is not yet mature. Toms, founded by Blake Mycoskie, mainly produces canvas shoes, which is an upgraded version of classic canvas slacker shoes. When the company was just founded, Toms bought a pair of shoes and sold a pair of shoes, and donated a pair of shoes to the poor areas.
The business mode of combining fashion and charity can make consumers irresistible for a while. It is reported that before 2013, the annual sales volume of Toms reached US $250 million, and we donated 10 million pairs of shoes. Although some critics point out that these donations are a marketing strategy, Mycoskie and his company have received a lot of praise from the industry. The names of companies often appear on the list of innovative brands.
But it turns out that this business model of stimulating consumption in the name of charity is not sustainable. Consumers are tired of Toms's symbolic buying of a "send" mode, which has long been new to them. This summer, the global rating agency Standard & Poor's downgraded its credit rating on the grounds of "declining sales and reduced liquidity, and the company's operating performance continued to be weak".
Toms said in November last year that it would abandon the "buy one" business model and use 1/3 of its net profit directly to charity.
Jefferies financial group, Nexus Capital Management Co., Ltd. and Brookfield Asset Management Co and other creditors also seized the company's actual control over last year's out of court transactions to avoid default. Jim Alling, chief executive, said in an e-mail to employees that the move is "the best choice for the company". Mycoskie resigned as CEO in 2015, but is still the core of Toms. It is not clear whether he will remain in office.
Toms declined to comment, and Mycoskie himself did not respond.
The rise and fall of Toms is a wake-up call for the brand of another star product. The brand should learn from the experience of Toms, constantly introduce new products and information, and find the right retail strategy to ensure continuous development after success.
Do not always rely on the same star product.
Mycoskie was a continuous entrepreneur before he founded Toms. He took part in the 2002 reality fast show. When Mycoskie traveled in Argentina, he found that locals like to wear canvas light shoes very much, thus creating the idea of Toms.
At first, many retailers refused to sell Toms shoes, and then American Rag of California agreed to buy it. In 2006, a report on the The Los Angeles Times greatly enhanced the popularity of the brand. Mycoskie also played a leading role in a group of Vogue magazine's Los. Toms was selected by national retailers such as Messi s (Macy) s, Neiman Marcus and Bloomingdales. Its most brilliant time was from Barneys to Whole Foods, and the brand shoes were everywhere.
Because this shoe is comfortable and simple and popular, it is popular among consumers. As Bloomberg puts it, "Anne Hathaway and Ozzy Osborne wear Toms shoes. Very few shoes are stylish." And their prices are moderate (about $55 each), with a variety of colors and patterns. The concept of charity marketing is that consumers also help those who need help while shopping.
The image of the brand has been closely linked to its first shoe. In 2011, Toms's business expanded from footwear to the eyewear industry, and in 2014 it launched the sideline coffee company, the Toms Roasting Toms, for the first time in 2014.
Toms's star products are easy to counterfeit, which is very bad for the company. Footwear giant Skech (Skechers) launched a similar shoe - Bbos shoes, while imitating Toms's charity sales concept, which is a blow to Tom 's company.
Gabriella Santaniello, founder of A-line Partners, a retail research firm, said: "everyone knows the shoes of Toms, but they are only short-lived.
Many direct consumer oriented startups rely on a unique star product to attract customers, including footwear brands like Allbirds and Rothy 's, which have also been successful. These brands and other brands are too dependent on single products, such as Away's carry on suitcase and Untuckit shirts, and they should consider the diversification of their products before their star products are out of date.
"Toms did develop its product style and introduced other styles of shoes, including women's slope shoes and boots, but these products did not attract consumers' desire like other classic models, and brand promotion methods did not work." Santaniello said.
Toms tried to enter the new business field but failed. Warby Parker beat Toms by selling directly to the consumer, because its price has more advantages.
Ari Bloom, founder of A2B Ventures, said: "we all know the experience of Toms, and it actually has the ability to develop more products, if it can do so earlier."
Don't let brands run out of fashion.
Toms buy one get one mode has made it popular in the United States and has been a great success. Many companies have also learned from this business model. However, the brand has not updated its operation mode in time, and has not been in the leading position among many competitors. Other brands have used charity as a marketing tool, which has led to the eventual decline of Toms. In 2011, Toms used to buy a "send" mode to sell glasses. It seems very outdated. Warby Parker has charitable marketing in the previous year.
"Charity marketing is an opportunity for brands in the past, but now it seems that all brands are doing the same thing, trying to attract millennials or Z generation consumers. Syama Meagher, chief retail strategist at Scaling Retail, said: "if you don't always adjust your brand operation mode, you will be eliminated by the times." Santaniello points out that in a highly competitive footwear market, Toms needs more than just upgrading its style and brand. Shoemaking giants like Nike and Adidas maintain huge R & D budgets to ensure that they are able to fully meet the supply requirements of new products. However, after the success of wool sports shoes, Allbirds even quickly introduced shoes made of new materials.
"To get rid of just a fashion, we need constant innovation. Show your creativity to customers. Otherwise, consumers' desire for brand consumption can not last, "Santaniello added.
Don't rely too much on wholesale business.
In 2012, Toms opened its first store in Losangeles, and then opened branches in 8 other places, including coffee shops, juice counters and other supporting facilities.
However, most of its sales depend on wholesale. Initially, cooperation with department stores helped Toms gain popularity. But it also made the brand surpass by competitors. The latter adopted a direct consumer oriented mode, which brought higher profit margins and faster innovation speed.
Bloom said that the opening of these stores is bound to move in the right direction, but it will be better if they are opened in two or three years.
Too much belief in the offline retail mode also has its drawbacks, especially when brand sales are not growing enough to maintain their store opening and operating costs. Australian shoe company Shoes of Prey's retail performance was so bad that the brand closed last year.
How to balance these two sales channels is equally tricky.
"If you operate two channels of wholesale and retail at the same time, you will encounter your own dilemma in the market," Santaniello said. "Because when you are in the forefront, the wholesale business is trying to expand your business, but ultimately the wholesale price difference is still for you to eat, so it's hard to make profits."
Although Toms may never have the market position once again, it still hopes. Some retail experts believe that the brand can make a comeback. It is a good start to turn the company over to creditors instead of bankruptcy.
According to Reuters, Toms has invested $35 million from its new employer. The agreement with creditors also helps to remove consumer concerns from financial difficulties.
"Nowadays, the impression of consumers is everything," Meagher said. "Consumer Forever 21 and Barneys are bankrupt big news. Knowing bankruptcy is a very bad thing. But consumers are not familiar with the takeover of creditors, so Toms is now out of trouble.
Meagher believes that Toms can adopt a smarter wholesale strategy to rally itself.
In 2000s, UGG's snow boots also experienced similar ups and downs, which was once a victim of over investment. Now the brand parent company Deckers has tightened its wholesale distribution network, and its sales have also increased.
Although Toms originally wanted to go to high-end department stores, the brand became more popular and now has 1700 sales outlets, which may help win new customers.
"I think wholesale is still a very good sales channel for Toms. In fact, every brand attaches great importance to this business, because it can play a great role in attracting more consumer attention," she said. "Toms can lower the price in the mass market such as WAL-MART (Walmart) or Sears (Sears), thus entering the middle class consumer market in the United States. If they re adjust their brand positioning, I think Toms can easily find a new shelter in the mass market.
Translation: Sharon Zhou
Source: BoF Fashion Business Review Author: Chavie Lieber