Ethical shoe brand Toms hit the big time by making shoppers feel good about buying shoes as it donated a pair of its canvas espadrilles every time it banked a sale. But then consumers stopped buying.
Now the US brand is on the comeback trail with a different profit-sharing setup and a new image. A chunky soled version of its slip-ons, aimed at Gen Z-ers cool enough to wear them with their socks pulled up, will hit the shops this summer.
Toms’ “one-for-one” shoe-giving promise, where it worked with humanitarian organisations to give a pair to children in poverty, has been replaced with a commitment to give a third of its profits to charity, says Magnus Wedhammar, who joined as chief executive in 2020. This is as much as it can give away “while still keeping the lights on” with grants directed to community groups promoting mental health, trying to end gun violence and improving access to education.
“There’s no secret that over the last couple of years Toms has struggled and we were in decline,” says Wedhammar. It still shifts about $250m (£180m) a year but is trying to attract a new generation of customers more interested in ethical shopping than their parents.
The shift to home working, which has left dress shoes buried in wardrobes, has helped the Toms turnaround. While its wholesale business has been hit by Covid store closures, its website has had a record year.
The colourful espadrilles are “kind of close to a slipper”, admits Wedhammer – an “indoor-outdoor slipper”. “We sold less of what we call ‘dressed’ casual shoes that people wear to work or to school, but a lot more espadrilles.”
Los Angeles-based Toms was founded in 2006 by the American entrepreneur Blake Mycoskie. The businessman’s one-for-one model of commerce would be copied by companies selling everything from backpacks to babygrows and would peak in 2013-14 when you couldn’t move without treading on the toes of someone wearing its slip-ons with skinny jeans.
At the height of its success Mycoskie sold half the company to the private equity firm Bain Capital in a deal that valued the company at just over $600m including debt, but it would end in tears. At the end of 2019 Toms, which could not repay a $300m loan due the following year, was taken over by its creditors, a group of financial investors that included the investment bank Jefferies.
Wedhammer says the level of debt was “crippling” and left it unable to invest “what we felt we needed to invest”. The restructuring ended Mycoskie’s financial involvement but the company now has a more favourable financial structure.
Fashion is a fickle business however, with the brand cast aside as trainers took over. “The wave of sneakers that that hit the marketplace was incredible,” says Wedhammer. “I’m not sure Toms responded fast enough to changing marketplace trends.”
So Toms has gone back to basics. Its two UK stores have closed, as have sidelines such as coffee – it used to donate a week’s worth of clean water to a person in need for every bag sold – as it focuses on getting its distinctive shoes, inspired by the traditional alpargata (espadrille) in Argentina, back on the fashion map.
Amy Smith, the chief strategy and impact officer at Toms – the same role recently taken by Prince Harry at the Silicon Valley startup BetterUp – says the business model was altered to “keep up with the consumer and what they really care about”.
“Fourteen years of giving shoes has really taught us a lot about how to give well,” she says. “This is a more flexible way for us to respond to what’s happening in the world. From the beginning we’ve been in business to improve lives and that mission is not changing.”
Young shoppers are particularly interested in ethical brands that take a stand on issues but it has become harder for companies to stand out in a crowded marketplace.
“There is a need to take a stand and push boundaries and over time, if you are doing it well, people are going to follow you, so it becomes standard so you need to move one step further to still be at the vanguard,” says Laetitia Mimoun, a lecturer in marketing at the Business School (formerly Cass) in London.
For Toms to make a difference it first has to convince people to buy its shoes, and Wedhammer predicts 2021 will be the year that it returns to healthy growth.
“We are working on tons of different versions [of the alpargata],” he says. It is keeping pictures of the thick-soled Mallow, which plays with the proportions of its classic shoe (the name is a reference to marshmallows), under wraps, other than to say all the classic features of the alpargata have been exaggerated.
The footwear brand also harbours ambitions to branch out again, selling clothing and accessories, and has just signed a partnership with a sock firm. “I can see a big trend in socks and sandals, and crew socks in general. So we’re going to do both,” says Wedhammer.