There is much discussion within the sector about the role charity shops play in a charity’s fundraising strategy and, more importantly, their role in raising the profile of the charity within the community. However, the pressure on costs, uncertain political and economic climate and changing demographic all mean that charities need to remain vigilant and strategic in their approach to retail.
Risks
The main risk associated with charity shops is a changing demographic that affects the footfall and therefore income. A feeling that a charity shop should be in the most deprived areas to attract the most clientele is a false economy as the very poorest and most rich are the least likely to use or support charity shops.
Charity shops in the middle of a thriving high street are most likely to attract the most generous and therefore generate the most sales. The challenge becomes those cases where the demographics change due to development, economic shifts, or local consumer practices. Lease lengths, local taxation (ie discretionary rates reliefs), and activity trends all play a part in determining whether a shop is commercially viable.
Changing marketplace for shops
I can remember when there was a significant difference between a charity shop and a more traditional high-street retailer; however, the amount of work being done to upscale charity shops has meant that shops are more particular with regards to what they will accept in donations and look to ensure they are aesthetically compatible with the competition on the high street.
This has made them more attractive, but comes at a cost in terms of fixtures and fittings, as well as challenges over receiving the right merchandise from donors. Some shops look to use bought-in goods to attract customers; however, the consequences of this in terms of administration, VAT, procurement, and stock handling often make this not as attractive a business activity as it might initially seem.
Other challenges
The continued move to online retail following the pandemic has had an impact on how the public recycles its clothes using online portals. Some charities explored the online trend by working with retailers such as eBay and others to extract more value out of some of the higher-value donated goods. By tapping into a wider audience there is an opportunity to reach a larger market, however there are some challenges that need to be considered:
- Finding staff who can lead on the initiative has been difficult, and without clear strategies and policies the venture will struggle to succeed.
- Without a clear corporate lead there is a heightened risk of fraud, either through theft of valuable goods or theft of the proceeds from the sale.
- Reputationally it is important that the charity protects itself by only selling online those goods that are in line with its ethical policy – it should not be used to sell everything and anything to turn a profit.
- Positive gains can be made to the reputation of the charity by using online portals to spread the messages of the charity and not just make money.
Many charities are starting to effectively use online retail techniques, a clear strategy and strong project management to make this very successful.
Opportunities
Gift aid on donated goods has been in place for many years and the processes that need to be followed are well embedded for those charities that avail themselves of the income that it derives. For those that have not embraced gift aid it is worth reconsidering the reasons, and perhaps working with one of your more successful shops to see whether the skills and infrastructure can be put in place, as for many this is very material to retail income.
All in all, the market for charity shops is and will continue to change. Responding to the changing marketplace and the impact of political and economic risk will help ensure that your portfolio of shops remain a positive contribution to the charity’s income. Staying abreast of current affairs also helps to find other ways in which the shops can help to promote and support the work of the charity and its place in the community. When every other aspect of the economy is struggling, charity shops can often thrive if they are positioned to serve the community that needs them most.
Adam Halsey is partner and head of charities at haysmacintyre
