By Zaid Mansuri
We as consumers live disconnected from the consequences of our consumption. The things we eat, drink, wear or possess require resources and manufacturing, the consequences of which we would usually like to ignore. In the age of information, consumers are ever more aware of the effects of their consumption, and companies understand that. Retailers tell us what we want to hear; they justify consumerism by promising to negate undesirable byproducts or externalities. Starbucks advertises the use of fair trade beans to assuage guilt for the living conditions of coffee farmers and their families. Go shopping at the mall and you are likely to see advertisements claiming 10% of every purchase will be directed towards charity. These promises are incredibly effective at helping consumers numb the guilt we feel for not doing more to help, but are far less effective at actually helping those for whose struggles we feel guilty.
Shoe brands like TOMS promise to donate one pair of shoes for every pair purchased. To date, TOMS has distributed sixty million pairs of shoes, helping socially-conscious consumers purchase shoes and feel good about providing shoes to a child who needs them. The buy-one-get-one model has been widely embraced by consumers and businesses alike as an effective model for creating both commercial and social value.
The very success of TOMS has encouraged other entrepreneurs to adopt the buy-one-give-one model. Watch company WeWood plants a tree every time you buy a watch. Smile Squared sells and donates toothbrushes. Soapbox gives soap to a needy child with every purchase. Two Degrees Food does the same with food. Online marketplaces, such as Roozt and Given Goods, host hundreds of brands that use a buy-one-give-one model or something similar.
The buy-one-give-one model of business is associated with a lot of feel-good tactics. This business model allows consumers, who may feel disconnected from the problems of the developing world, to engage social problems while still purchasing for themselves. The buy-one-give-one model feels intuitively more human and tangible than most estranged corporate philanthropy. You can look down at your shoes and feel as though some needy child also has a pair thanks to your transaction.
The charity of TOMS seems like a win-win situation, a shining example of charitable capitalism. However, evidence of the dismal consequences of such business models will dismay you. Distribution of aid-in-kind gives economists and experts plenty about which to be very concerned. According to critics, handing out goods creates an inefficient allocation of aid-spending. We are giving things the poor neither want nor need. I may want a nice new pair of TOMS, but the money spent producing a second pair could be put to much better use feeding those who are hungry than providing them with a product identical to the third pair of shoes I own. An oversupply of unneeded resources can lead to a twisted game of white elephant. Developing communities become burdened by a flood of unwanted aid.
Marketplace competition looms as another threat to such forms of charity. “There is definitely a need for footwear in underserved markets,” said Valeria Budinich, Vice President of Ashoka, a nonprofit that supports social entrepreneurs. “But those markets need new technology, production processes and distribution chains that [are specifically designed for] rural areas. Models like TOMS have many great features but aren’t designed to come up with that level of transformation.”
Garth Frazer, an economist at the University of Toronto, published a paper in 2008 examining the impact of used clothing imports in sub-Saharan African countries, asking why bottom-round textile production has not emerged as a leading sector of development in Africa as it did in other developing regions of the world. He found that used apparel donations have had a strongly negative impact on domestic apparel producers in Africa. Using a regression technique known as instrumental variables, Frazer isolated the effect of clothing donations from effects of other potential causes like geographical setting or relative level of development.He found that while imports of cheap clothing benefit consumers, he estimated that used-clothing donations accounted for a 40% decline in production and a 50% decline in employment in the African apparel industry.
TOMS’ efforts are done entirely through non-profit NGOs, non-government organizations. When a consumer buys a pair of shoes, a second pair of shoes is manufactured and shipped to the recipient country where a non-profit acquires and distributes them. TOMS shoes are not customized for the region. This is especially problematic when one considers that, although closed-toe canvas shoes may be effective in some situations, they are not as effective in areas with heavy rainfall or rocky terrain. Unless TOMS is going to pave highways where none exist, a pair of TOMS won’t do much good to those who receive them. These resources could be used to help developing economies in more useful ways.
In response to withering criticism, TOMS studied the effects of its charitable methods. The company asked a group of academics at the University of California, San Francisco to investigate the social impact of the TOMS’ buy-one-give-one model on local developing economies. They promised that the researchers would be allowed to publish their findings, whatever those might be.
Late in 2012, the economists randomly selected 979 households, comprising of 1578 children across 18 rural communities in El Salvador. Each household received a pair of TOMS’ rubber-soled black canvas shoes. Researchers sought to examine potentially differing effects in communities that received the shoes and communities that did not.
To measure the effects of the shoe donations, researchers attempted to answer two specific questions:
Does donating shoes negatively impact local markets by weakening demand for local shoe vendors?
The researchers tested this by giving two discount coupons to every household in the study, one for a cheap (≤ $10) pair of shoes at a local store, the other for a more expensive (>$10) pair of shoes. The researchers recorded rates of coupon redemption, testing whether redemption was lower in the treated communities. The estimates consistently indicated a small negative impact on local markets. Specifically, local shoe vendors sell about one fewer pair of shoes for about every 20 pairs of shoes donated into a local community, a statistically insignificant amount. The study concluded that shoe donations have no effect on demand for locally-made shoes.
How do shoe donations impact individual recipients?
The researchers collected data on a wide array of outcomes: schooling attendance, general health, foot health, psychological impacts, and time allocation across an array of activities including schooling, homework, playtime, domestic chores, watching TV, eating and sleeping. They also asked recipients whether they actually wore the shoes and whether they liked them.
The results of the study presented positives and negatives for the TOMS business model. The good news was that 95% of the kids in El Salvador had a favorable impression of the shoes and wore them often: 77% of the children wore them at least 3 days per week, and the most common response by children was wearing them every day.
Good, right? Wrong.
Researchers also found that handing out the free shoes had little to no effect on rates of shoe ownership, general health, foot health or self esteem. “We thought we might find at least something,” writes Bruce Wydick, one of the academics. He laments in a blog post, “They were a welcome gift to the children…but they were not transformative.”
Despite his findings, Bruce Wydick was open in praise of TOMS. “TOMS is perhaps the most nimble organization any of us has ever worked with, an organization that truly cares about what it is doing, seeks evidence-based results on its program, and is committed to re-orienting the nature of its intervention in order to maximize results. In response to children saying that the canvas loafer isn’t their first choice, they now often give away sports shoes. In response to the appropriateness of their shoes in different contexts, in Mongolia they now give away these cute little kids’ snow boots. In response to the dependency issue, they now want to pursue giving the shoes to kids as rewards for school attendance and performance.”
Companies have sought to change their models as a result of the negative backlash. For every pair of glasses a customer buys, Warby Parker covers the cost of sourcing and producing a second pair of glasses for partners like the social enterprise VisionSpring. VisionSpring, in turn, employs a network of 9,000 sales agents in 13 countries to sell glasses in their communities. The energy bar manufacturer Two Degrees Foods, which donates a meal to a hungry child for every bar purchased, has reinvigorated their program. The group partners with medical organizations to identify children suffering from malnutrition. The business group then contracts with local food manufacturers to produce culturally appropriate food: peanut-based meals in Africa, chickpeas in Pakistan, lentils and grains in India for example. “It’s not only economically better for the communities,” Lauren Walters, one of the company’s founders, told Mother Jones, a nonprofit. “It’s better for the environment, too, since you don’t have to ship the food around the world.”
As for TOMS, the company has chosen to give shoes as rewards for children who join community building projects. In addition, TOMS hopes to see greater social good produced from their sunglasses program. For every pair of sunglasses bought, TOMS Eyewear provides a person in need with a full eye exam by trained medical professionals. Each patient then receives the treatment they need. Even Wydick is looking forward to this program for more life changing social change. However at the end of the day the perennial problem of the one for one shoes persists. The program is aimed at children who want shoes, but are unable to afford them. Footwear, besides being one of the first commodities offered in developing markets, is also one of the first things bought when families have access to money. For children who are too poor to afford shoes, other commodities (food, shelter, health care) would be more effective.
Alternative methods of distributing the shoes could help maximize positive effects on local economies. Economists suggest using money to subsidize the manufacturing of shoes in recipient areas. “If you told me the shoes were being produced and sold locally, helping with unemployment in the area, and they were paying good wages and had good working conditions, then that starts to be more appealing as well,” said Greg Dees, professor of social entrepreneurship at Duke University. “Those kinds of things tackle the underlying problem more.”
The effectiveness of TOMS’ buy-one-give-one model is still in question. Nevertheless, the core idea of buy-one-give-one remains powerful. It allows consumers to engage with the the rest of the developing world in ways other charity programs cannot. To be effective, however, the models must be designed to be organic, sustainable and in line with the needs of recipients.
- Bansal, Sarika. “Shopping for a Better World.” The New York Times. The New York Times, 09 May 2012. Web. 09 Nov. 2016.
- Frazer, G. (2008), Used-Clothing Donations and Apparel Production in Africa*. The Economic Journal, 118: 1764–1784. doi:10.1111/j.1468-0297.2008.02190.x
- Bruce Wydick, Elizabeth Katz & Brendan Janet. Do in-kind transfers damage local markets? The case of TOMS shoe donations in El Salvador. Journal of Development Effectiveness Volume 6, Issue 3, 2014. DOI: 10.1080/19439342.2014.919012
- Wydick, Bruce. “The Impact of TOMS Shoes.” Across Two Worlds. N.p., 16 Mar. 2015. Web. 09 Nov. 2016.
- Butler, Kiera. “Do Toms Shoes Really Help People?” Mother Jones. N.p., n.d. Web. 09 Nov. 2016.
Photo by Vivianna_love