What is the key to profit for the next generation of consumers? Bain Capital is betting its purpose.
About a week and a half ago, Bain Capital acquired 50% of Tom’s Shoes. Reuters reported that the transaction valued the company at $625 million, and that founder Blake Mycoskie will retained 50% ownership of Toms, as well as his role as Chief Shoe Giver. Mycoskie will use half of the proceeds from the sale to start a new fund to support socially minded entrepreneurship, and Bain will match his investment and continue the company’s one-for-one shoe give away policy.
For those of us with social missions, this development is a good step forward to show that social entrepreneurship can do good and do well simultaneously. Thank you Bain for showing some faith in socially-minded business.
Historically, traditional business thinking has dictated that profit and purpose are at odds with each other, and that doing good will cost the company money. Toms stands as a counter-intuitive example of purpose actually driving profit. The company has sold and given away 20 million shoes. With its least expensive shoe selling for $54, the company has generated over a billion dollars of sales.
Increasingly, consumers would rather do good with their purchases than give to a charity. A recent survey from marketing company Good Must Grow indicates that for the second year in a row, 30% of US consumers plan to increase their purchases towards socially responsible companies in the coming year. Meanwhile, only 18% plan to increase charitable giving in 2014, a decline from 21% in 2013. A recent Nielson study also shows that consumers place a premium value on these products; 55% of global consumers are willing to pay more for products from companies that are committed to positive social and/or environmental impact.
Toms’ business model has been referred to as the “one for one concept” business model, because of Tom’s promise to deliver a pair of free, new shoes to a child in need for every sale of their retail product. The countries to which the free products are sent have included Argentina, Ethiopia, Guatemala, Haiti, Rwanda, South Africa, and the United States.
Recently the business has grown beyond producing shoes and has included eyewear and coffee in Toms product lines- all with the same one for one theme. For every pair of eyeglasses purchased, Toms will help give sight to a person in need. For each bag of coffee beans sold a person will get clean water for a week. Tom’s model is perfectly crafted for millennial consumers who wants to feel good about their purchases but needs a clear, simple and tangible means of understanding the social purpose of the company through point-of-purchase marketing. Millennial are Toms’ target demographic. According to the 2013 Cone Communications CSR Study, 72% of millennials believe that they can make a positive social and environmental impact through their purchases and 51% check the packaging to ensure social and environmental impact.
And millennials are becoming social entrepreneurs in a big way too to make their own impact. Check out Forbes 3rd 30 under 30 list of the brightest stars in 15 different fields, focused on social entrepreneurship. Onward and upward for those of us with social missions. May we all find the resources we need to do good and do well simultaneously and restore some faith in investing through purpose.
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