One-for-One Business Model Companies: Pros and Cons, Explained

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May. 3 2022, Published 8:21 a.m. ET

Toms Shoes is credited with popularizing the one-for-one business model. Under the model, which is followed by several other enterprises, the company gives away a similar product to someone in need.

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The model has several pros and cons. Even Toms Shoes has evolved its giving program and isn't a one-for-one business model, at least in the strict sense. What are some of the examples of one-for-one companies and is the model worth it?

What is the one-for-one business model all about?

Businesses, especially the larger ones, undertake philanthropic activities in one form or the other. However, one-for-one companies try to institutionalize and formalize the process. They also try to appeal to the inner desire of many people to contribute to society. By buying merchandise from a one-for-one business, a buyer gets the satisfaction of helping someone in need.

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toms shoes one for one business model
Source: TOMS Facebook

Several examples of one-for-one companies

There are several examples of one-for-one companies. These include Bixbee which mainly sells kids' products, Roma Boots, Bombas, BetterWorldBooks, Warby Parker, and Smile Squared. Some of the companies have “evolved” from a one-for-one business. For example, Soapbox donates one soap bar for every product sold.

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Toms Shoes also “evolved” from the one-for-one business.

Ironically, Toms Shoes, which pioneered the one-for-one business, has evolved its giving program. In 2021, the company launched its “evolved Giving Model” under which it did away with the one-for-one business model. Instead, the company said that it would give away a third of its profits for “grassroots good.” Toms Shoes said, “Through cash grants and deep partnership with community organizations, we are already seeing incredible results in communities.”

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There are cons of a one-for-one business model.

Toms Shoes' decision to shift from a one-for-one business also highlighted some of the issues with the business model. Many argue that instead of donated products, a lot of people would be better served with cash or other targeted charities. Also, giving away a pair of shoes or a bar of soap might not help address the deep-rooted problems in some underdeveloped countries.

Simply put, giving away products for free isn't the best approach to fighting global hunger and poverty. The one-for-one business model doesn't help end poverty in a structural way and instead creates a sense of dependency. Also, freebies haven't proven to be a good model to eradicate structural problems.

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The one-for-one business model has advantages too.

However, while the one-for-one business model might have its share of cons, it has advantages too. From a business’s perspective, it can create brand loyalty because customers might prefer brands that follow a one-for-one business model. Also, the business can provide some tangible benefits to the needy.

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Many see one-for-one-one business as a marketing ploy.

Deborah Small, a professor of marketing and psychology at Wharton, believes that a one-for-one business model is a good marketing strategy. According to Small, “It's easier to connect to a person than to an abstract action. So, if a company is giving 10 percent for research, it’s hard to feel passionate about that. But if you are putting glasses on a poor child’s face, there is a very direct connection. It’s psychologically a smart strategy to connect one donor to one recipient.”

There are also concerns over how one-for-one business can negatively impact local businesses in undeveloped countries. Wharton cited a 2008 study by Garth Frazer in The Economic Journal which concluded that textile donations to Africa were a major contributor to the decline in the domestic textile industry between 1981 and 2000.

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