Why the "Buy One, Give One" Model is Outdated

When Blake Mycoskie imported the first couple hundred pairs of Toms Shoes from Argentina in 2006, he did so with a simple purpose: If he could sell 250 pairs in the U.S., he could donate 250 pairs to people in need.

A worthy cause, no doubt.

Toms was started at a time when consumers, investors, and the public were just starting to expect more from businesses. It wasn't enough anymore to run a profitable business. They were expecting businesses to do good in the world. To make a positive impact by building a sustainable and profitable business.

At the time, Blake's business model was revolutionary.

Within the first two years of announcing that Toms was going to give away a pair of shoes to a child in need for every pair they sold, the company was written up in the LA Times, Huffington Post, NBC, TIME, CNN, the New York Times, and more.

Here's the article from the LA Times in May, 2006 that Blake credits with kickstarting the Toms brand.

Toms received all this press and recognition because Blake was pioneering a business model that the world hadn't seen before, or at least one that hadn't been looked at seriously.

To date, Toms has sold over 10m pairs of shoes and is valued at over half a billion dollars.

The Toms Business Model Became Known as the "Buy One, Give One" Model

Since Toms pioneered the "Buy One, Give One" model in 2006, several other notable businesses have adopted it.

Some of the most notable to businesses to do so include:

  • Bombas
  • Warby Parker
  • Smile Squared
  • Soap Box 

The Pitfalls of the Buy One, Give One Model

As you can see, TOMs model has produced tremendous growth for many companies, but some economists question the impact of the strategy.

Listen to what Reason Street writes about it:

Does the “give-one” operation actually improve the people the company is trying to help? International development experts have noted how charitable gifts can often undermine the local businesses in the regions they are trying to help – forever creating a culture of dependency on donations. Western donations can hurt farmers, workers, traders, repair service, and sellers whose success is critical to reversing poverty.

Blake Mycoskie, TOMS’ founder, was inspired to start the company when he saw barefoot children in Argentina, and was criticized early on for failing the community they were trying to serve.

When businesses employ a BOGO strategy, it can have negative impacts on the communities they are trying to help.

Obviously, the intent of these companies is good. Giving away shoes and glasses to those in need, who could disagree with that?

The problem is, when Toms or Warby Parker gives away shoes and glasses in bulk in small communities around the world, they're robbing businesses in those communities the opportunity to make those products AND they're robbing store owners from the opportunity to sell them.

Here's what Fast Company says about the model:

The Toms buy-one-give-one model does not actually solve a social problem. Rather, the charitable act of donating a free pair of shoes serves as little more than a short-term fix in a system in need of long-term, multi-faceted economic development, health, sanitation, and education solutions.

“What’s wrong with giving away shoes?” you might be thinking. “At least they’re doing something.” The problem, we’ve learned, is when that “something” can do more harm than good. As Time recently noted, an increasing number of foreign aid practitioners and agencies are recognizing that charitable gifts from abroad can distort developing markets and undermine local businesses by creating an entirely unsustainable aid-based economy. By undercutting local prices, Western donations often hurt the farmers, workers, traders, and sellers whose success is critical to lifting entire communities out of poverty. That means every free shoe donated actually works against the long-term development goals of the communities we are trying to help.

The fact is, Toms isn’t designed to build the economies of developing countries. It’s designed to make western consumers feel good.

Wow. Harsh.

Here's what Forbes thinks:

NYU economics professor Bill Easterly, for example, once called TOMS the “worst charity in development,” while Ashoka’s Valeria Budinich told the New York Times that its model does little to address the root causes of poverty, and may even reduce demand for locally-produced products.

As you can see, the experts seem to be in agreement on this one.

The Buy One Give One Model Doesn't Help Anyone But the Business and Its Consumers

It's decided- the glory days of the Buy One Give One model are behind us. So why are new companies like Bombas still using it?

In this paper published in 2014 by the Stanford Social Innovation Review, authors Christopher Marquis and Andrew Park note:

The buy-one give-one model has become widely popular, but serious questions have been raised about its long-term viability. Much of the success of these pioneers stems from their novelty.

Most companies find success selling consumer products, more specifically accessories and jewelry, because these types of products provide a way for people to publicly express their unique style and personality while also provoking conversations that allow them to share the buy-one give-one story with other people.

In other words, consumers support these BOGO businesses because they want to tell their friends about how socially conscious they are. And businesses (marketers) know this.

Marquis and Park don't dance around this fact. They write in their paper that the Buy One, Give One model is "an attractive business model because it offers companies several marketing benefits. Companies also benefit from the free publicity they receive in the popular press."

A Better Way Forward: Supporting Small, Local Businesses

At Monte Verde Apparel, we believe businesses have a responsibility to support the craftsmen and communities that they rely on.

We've been inspired by the "Buy One, Give One" businesses model pioneered by Toms and others, but feel they fall short of supporting the craftsmen and their communities.

We're pioneering a business model that invests in small, local businesses in the communities we operate inInstead of giving away shoes and apparel, we're giving away capital.

10% of profits will be donated to small, local businesses in the areas our products originate from.

Your purchase is supporting an initiative to alleviate poverty, inequality, and unemployment in communities around the world.

Plus, supporting this new business model can help us finally move beyond the flaws of Buy One Give One model.

What do you think about our approach? Tweet us with your questions and comments or reach out on our contact page.

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