Some larger members of the Charity Retail Association (CRA) are considering following in Scope’s footsteps and significantly reducing their shop estate, the trade organisation has said.
Charity retailers told CRA that “this is the worst time for trading they have ever encountered” and shop estates would “unlikely come out of this 100% unscathed”.
In a blog, CRA’s directors wrote: “We’ve already seen a significant reduction in the shop estate of one of our most experienced and sizable members – Scope – and anecdotally we’re aware that there are others of our larger members in particular who are considering similar action.
“There appears to be a bit of a perfect storm at the moment, with income being relatively flat, and cost pressures being almost unprecedented.
“These two factors are combining to hit profitability in a way that most charity retailers have rarely seen before.”
Earlier this year, Scope announced plans to close 77 of its 138 shops over 18 months to reduce expenditure, focus its resources in the “right places” and maximise impact, the disability charity said.
Income growth is now ‘very modest’
CRA’s directors said “income growth for charity retail is now very modest” compared with 2022 and 2023, “the best years charity retail has ever had”.
“It’s hardly surprising that the sort of double-digit growth that was experienced during those years hasn’t been able to be maintained,” they said.
“Maybe we should be pleased that those high levels of income have been maintained through the cost-of-living crisis and turbulent times in the economy. Just as long as we didn’t budget for similar growth in 2024-25.”
They said inflationary pressures, including increases in rents and utility costs, coupled with a “significant” increase in labour costs due to the rise in the national living wage and changes to the national insurance contributions, have put enormous pressure on the sector.
The directors also noted a decline in the service provided by textile collectors, which has led to higher waste disposal costs for some charity shops.
In response to a recent survey of 52 CRA members, more than a third of respondents said they might reduce their number of paid staff or working hours in response to rising costs.
Nearly one in three respondents said they might close shops, while almost two in five said they might scale back plans to open new shops, and just over a fifth said they might reduce trading hours.
Meanwhile, two-thirds of respondents said they might put up prices in their shops.
Smaller chains doing better than larger ones
Speaking at BDO’s Charity Retail Update webinar last month, CRA’s chief executive Robin Osterley said that although times are tough for charity retailers, trading and donation levels remain strong.
“At the moment, our latest figures show that from about a £1.4bn turnover, our members are contributing around a third of a billion to their parent charities, which is a huge amount,” he told attendees.
“This is coming from our quarterly market analysis and based on the last calendar quarter of 2024. Like-for-like [in-store income] is down by about 0.3%, so almost completely flat.”
Osterley said that percentage figure is distorted by the performances across the top four charity retailers: the British Heart Foundation, Barnardo’s, Cancer Research UK and Oxfam.
He said: “Across those four charities, there’s been quite a significant decline, and that has pulled the overall sector figures down. We’re slightly struggling to understand why that is.
“One of the reasons why it might be is because they’re so dominant in the market overall, a poor result in one of those charities is likely to drag down the whole sector a bit more than it would otherwise do.
“If you extract the very large charities from those Q4 figures, you end up with a [like-for-like] sector growth of around 3.5%.”
‘Creative and innovative’
Osterley said some CRA members predicted that “this year is going to be the hardest year that any of them can remember”.
“When I say hard, I’m not saying this is terrible,” he said.
“I’m not saying there’s a disaster and I’m certainly not saying there’s an existing thread or even an existential threat to our members as a result.
“They’ll cope because they’re very good at coping and very motivated to cope because that third of a billion they provide to their parent charities is vital income.”
Osterley concluded by saying the charity retail sector is “brilliantly creative and innovative” and full of people who understand “how to leverage their assets in the best possible way”.
“There’s an extraordinary amount of creativity. This is particularly being noticed in attempts to replace income from rag, which has disappeared. [There are] all sorts of different exciting things that people are doing, like kilo sales and lock-ins.”
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