Shoestrings Attached

In 2006, TOMS began selling simple canvas shoes. But the business itself was not simple, because it was created to be equal parts shoe seller and shoe charity: For each pair purchased, the company donated another pair to a poor child somewhere in the world. TOMS became wildly popular, especially among the young and hip. The company doesn't release sales figures but says it's given away more than 1 million pairs of shoes. And last week, founder Blake Mycoskie announced that TOMS will now sell sunglasses. Each pair purchased will allow TOMS to subsidize one pair of eyeglasses or a cataract surgery procedure for someone in a Third World country.

TOMS inspired more-established companies to develop similar programs and beat a path for new entrepreneurs to follow. Not only did Sketchers create a blatant knockoff, called BOBS, but about a dozen other "one to one" companies have been founded in recent years--selling everything from neckties that enable kids to get free school uniforms to T-shirts that allow kids to receive free books.

But before do-gooder consumers get carried away with the guilt-free prospect of getting hip gear and making a difference in one credit-card swipe, they should take a closer look at whether combining retail and charity is as effective as it can be. There's no question that it's beneficial for a kid in Argentina to be able to sport a pair of TOMS shoes for school or soccer games; shoes prevent soil-inhabiting parasites from traveling into the human body through the skin of bare feet. But what about the larger economic system in which that kid finds himself?

A TOMS spokesperson told The Wall Street Journal that the company manages to give away as many shoes as it sells and to stay profitable by charging consumers nearly double--between $48 and $98--what the shoes would typically cost. Essentially, it is the vastly unequal global economic landscape that we're living in that makes it possible for one person to spend $135 on a pair of sunglasses, what TOMS is charging, while another can't even afford a pair of eyeglasses to see properly.

To begin with, giving a kid a pair of shoes manufactured elsewhere undermines the economic vitality of that kid's community, as many bloggers have noted. Further, as Saundra Schimmelpfennig, a blogger at Good Intentions Are Not Enough, points out, shoes are already manufactured fairly cheaply in countries like Argentina, where Mycoskie was traveling when he decided to start TOMS. Expanding the manufacturing industry in poor countries is often seen as critical to their economic future, and offering children free shoes from an American company can undermine that. Why not provide a resource kids can't find locally?

Schimmelpfennig writes: "TOMS Shoes is a good marketing tool, but it's not good aid." She has a long list of reasons, including: "It's quintessential Whites in Shining Armor. It's doing things 'for' people, not 'with' people."

This argument echoes the larger-scale critique by Dambisa Moyo, author of the 2010 book Dead Aid, in which she takes on big-aid advocates like development economist Jeffery Sachs and singer Bono for perpetuating the idea that what poor countries need is charity, when what they really need are long-term economic-development solutions that they, themselves, control.

Mycoskie seems unconcerned, and even willfully uninformed, about some of these systemic issues. He told USA Today in April: "When people ask me about the 'genius of the one-to-one model' or how I came up with such a 'great marketing idea,' they're surprised to learn that there was no thought ... behind it."

He also told "I created TOMS as a for-profit business to ensure a sustainable way of giving." His choice of words may be prescient. The one-to-one model, at least in its current form, may be more effective at sustaining the desire for First World charity to Third World countries than it is in making any large-scale shifts in economic equality.

Others argue that it's important to see TOMS, and the businesses it has inspired, as baby steps in public awareness. Kelsey Timmerman, the author of Where Am I Wearing? A Global Tour to the Countries, Factories, and People That Make Our Clothes, writes: "The problem isn't shoelessness. The problem is poverty. ... If every person who slips on a pair of TOMS stops for a moment thinks about that level of poverty, it can only lead to good things. I always say step #1 is getting people to give a shit."

It appears that, in fact, people do. In a study conducted last year by Cone LLC, a strategy and communications agency in Boston, 80 percent of 1,057 U.S. adults said they would favor a brand that's associated with a good cause over another that's similar in price and quality. Nineteen percent said they would even switch to a more expensive brand in order to support a cause that they care about.

With this kind of public will, it's even more crucial that one-to-one entrepreneurs invest in systemic change, not just give to the poor. Warby Parker, an eyewear company that sold 20,000 pairs of glasses in its first year of business with almost no advertising, has departed from the TOMS shoe approach in a crucial way. Warby Parker doesn't just buy eyeglasses for a citizen of the developing world every time it sells a pair of prescription eyewear for about $95; it donates to VisionSpring, an organization that empowers people, especially women, in underdeveloped nations to start local, small businesses that provide low-cost eyeglasses. VisionSpring has long-standing relationships with poor communities around the world. (Warby Parker has announced that it will also start selling sunglasses this month.)

Neil Blumenthal, one of the four founders of Warby Parker and the former director of VisionSpring, says, "With 1 billion people in need of glasses, we need more than just charitable handouts. VisionSpring empowers local communities to help themselves by creating jobs for low-income individuals to sell affordable glasses. VisionSpring's sustainable program is large-scale problem-solving at its best."

Another organization, the Acumen Fund, also tries to spur positive change with market-based approaches. It provides $300,000 to $2,500,000 in equity investment or loans to startup companies tackling primarily environmental and health problems in poor communities. The Acumen Fund calls this concept "patient capital," referring to the expectation that these local entrepreneurs need time to build a successful business; Acumen usually expects to see returns, be paid back, or, in some cases, forgive loans within three to five years. Started in 2001, the organization also provides a variety of coaching and support to help the local leader scale up their business.

This kind of innovation isn't, perhaps, as adaptable to a great press photo as is dropping shoes on soccer fields full of smiling kids, but it's more sophisticated. It also acknowledges the real complexity of global poverty. Companies like Acumen and VisionSpring offer poor kids not a free pair of shoes but a chance at a more sustainable future.