Nick Kozak for the Toronto Star
Case Studies

Toronto startup WeSell Socks struggles to balance growth with social good

Vital Stats
Owner:
Kevin Lee
Name:
WeSell Socks
Address:
www.wesellsocks.com
Contact:
Kevin@wesellsocks.com
Field:
Socially conscious apparel
Employees:
Offering:
A monthly sock club. For $14 WeSell will send a pair of socks every month to the subscriber and a pair to a shelter
Core customers:
Anyone who likes quirky socks and doing good while they’re at it.

The triple bottom line of a socially conscientious business is said to be planet, people and profit.

But Kevin Lee can’t help but see the pillars as more of a hierarchy.

Lee is a web designer and the entrepreneurial mind behind WeSell Socks — a $14 monthly club where members get mailed a new pair of socks selected by Lee and a pair donated to a shelter.

“If I had a choice between my customers and doing social good, I would probably lean towards the social good, but my customers aren’t far down the list from number one,” he says.

Lee’s altruism borders on stubbornness. So much so that the same principles which entice his nearly 300 monthly subscribers from Slovenia to Japan threaten to stunt the Toronto-based startup’s growth, only four months after launching.

The energetic entrepreneur is nearing his personal capacity to take on new customers, manage orders and connect with shelters. His first hire is on the horizon, but he’s more worried about cutting into the money he’s able to donate, than finding a way to maintain the company’s growth.

As is, Lee’s already adjusted the buy one, give one model from a monthly donation to a yearly donation. He plans to donate socks or a portion of his profits to a shelter in Toronto during the winter months. Lee says the deviation will ultimately maximize the amount he’s able to donate while giving him some breathing room from finding a new shelter monthly.

But he’s worried further growth will force him to neglect his values or short change what he intends to give.

“When it comes to scaling the cracks start showing,” Lee admits.

The 24-year-old entrepreneur is no stranger to the art of balancing. As a freelance web designer he had his fair share of wearing the myriad of hats required for running a business.

It was during that hectic period that he got the idea for WeSell.

After getting a pair of fancy socks as a gift, he saw an opportunity – combine the buy one, give one model, pioneered by brands like TOMS shoes, with the trendiness of socks.

Lee spent most of 2013 ironing out his business plan, researching ethical sock producers abroad and developing the WeSell website. He settled on a manufacturer in South Korea and sourced designs from brands like Richer Poorer and Happy Socks.

Although Lee won’t say exactly how much he pays per set of socks, he says manufacturing in South Korea costs three times more than China.

At $14 a pair ($19 with shipping), WeSell Socks is still cheaper than a $22 pair from somewhere like Abercrombie and Fitch.

The work is overwhelming at times, as Lee balances emailing subscribers, placing and updating orders with the manufacturer and handwriting notes for each pair he sends out.

“I’d like to keep doing it on my own as long as possible,” says Lee. “It keeps my overheads lower and paperwork to a minimum.”

He’s worried the first hire could impact the tight-knit-community feel he’s spent the past few months fostering with subscribers. He’s also worried paying an employee will cut into the amount of profits he wants to give. WeSell is cash positive at the moment but is still relatively new.

But each customer brings him closer to the tipping point.

Charlene Zietsma, a social entrepreneurship expert and associate professor of organization studies at York University’s Schulich School of Business, says the first hire is a classic challenge for entrepreneurs.

“He has got to be willing to delegate,” says Zietsma.

She notes that WeSell’s challenges are compounded by the fact he’s hiring for part-time hours.

“(Part-time) flexibility in the employee means sometimes you’ll get low commitment or quality control issues,” says Zietsma.

Lee needs to move past the cost factor and see the first hire as an investment that will eventually pay dividends, she adds.

“He’s going to hire somebody to do a relatively low value thing and increase his opportunities to do a higher value thing like marketing, increasing his revenue as a result,” she says. “(Eventually he’ll) be able to make larger donations — the (hiring) cost exists, but it only frees him up to increase revenues and business.”

In the meantime, Lee plans to call in favours from friends and family to help cope with the swelling workload, and his impressive 300 letters a month.

“My hand tells me exactly how impressive it is after handwriting every note,” says Lee with a chuckle.

Ultimately, he’s convinced that if he can overcome the challenges of scaling up, the business will not only survive — it will be able to have a genuine impact.

“There’s a lot of discussion as to whether a socially responsible business can be sustainable,” says Lee. “But I feel like there’s too much of a division between socially responsible actions and running a business. There should be some way to do both, and there seems to be some potential for that with WeSell.”

EXPERT VIEWS

As Interviewed by: Rosemary Westwood

It is possible for Kevin to scale and maintain his mission. There are a number of small and large companies — from Oliberte to Patagonia to Bullfrog Power — which have an embedded social mission while being a sustainable, profitable enterprise. I would recommend Kevin consider certifying as a B (benefit) corporation. That would allow him to differentiate WeSell as a genuinely good company from the companies that are just about good marketing. The certification assesses accountability, impact on community, workers and the environment. It’s like a fair trade standard for impact across multiple industries. The annual fee is based on revenues, so it’s affordable for small and early stage ventures. Also, Kevin can’t keep doing everything himself. He could use crowdfunding to generate presale revenue and then hire part-time or full-time staff. Lastly, he should remember to emphasize he’s got a quality product. Consumers can be willing to pay more both because the socks are awesome, and every purchase supports jobs, ethical sourcing, and puts socks on someone else’s feet.

by Adam Spence - MaRS DD

Kevin’s business seems like a prime candidate for a social enterprise: a non-profit with a revenue-generating venture that funds its activities. He could then take advantage of tax breaks, funding not available to for-profit ventures, and leverage volunteers. He would have a salary and a board of directors that would help steer the company, but operate much the way he is now, with a clear mandate to make a difference. He still needs to take the leap and hire a full-time staff member for administrative tasks. If he wants to stay for-profit, he needs to raise money through investors or through loans — CSI has a microloan fund, for example. Or, through crowdfunding: he has a product that inspires people, and he could pre-sell the socks and inject that money into the company's growth. As for his concerns about losing the company’s culture, if he’s able to express that culture well, he should be able to hire staff that take it on. The handwritten notes are great and give a nice personal touch, but the only way to scale is to start delegating to other people.

by Barnabe Geis - CSI

We see this tension quite a bit when it comes to social enterprise: the financial impact versus the social (and/or environmental) impact. But to me, it’s all about how to maximize the two. The more money you make, the more you’re able to make the world a better place. If Kevin isn't thinking this way, he may want to keep his business small or even convert it into a not-for-profit, where granting can be a key revenue driver instead of sales. Also, while admirable, both his ethical production and the buy one, give one models are expensive to maintain. I think Kevin should concentrate on the impact that's baked into his business model: ethical production. By removing the buy one, give one model, he will cut costs and increase the likelihood of successfully scaling. This will allow him to propel both the business and the associated impact forward. Cutting the buy one, give one model does eliminate one of Kevin's most powerful marketing pieces. But if he's really committed to creating the most amount of impact possible, he's going to have to cut something.

by Jory Cohen - YSI

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