Data is the key for charity retail

Just walk down any high street and you will find loads of different charity shops. Love them or hate them you simply cannot ignore and you should thank them for being the saviour of our high streets.

Most people would say charity retailers are doing well because they appear to be increasing in numbers and the shops are generally looking more upmarket. This perception is misleading as we are now at the end of the charity retail boom, with many struggling and closing shops and more shocking Shelter actually lost money in 2012/13 and 2013/14 because of “difficult trading conditions and stock supply”. Many are investing more in better looking shops and more paid staff but failing to address the fundamental issues.

So what’s happening within our charity retailers?

In recent years there has been a massive growth of eateries, charity retailers and coffee shops which has somewhat disguised the shrinking of the traditional retailers high street presence and kept shop rents artificially high. The traditional high street retailers are declining, and they will continue to do so as online retail sales grow and already 22% of clothing is bought on line.

With over 11,000 retail units, charity retailers have become increasingly important for the health of the high street. In fact the growth of eateries, charity retailers and coffee shops has somewhat totally disguised the changing face of our high street, with many traditional retailers reducing their high street presence. Just look at the changing high street we have lost BHS and Austin Reed and some of the iconic high street brands like Gap are struggling. Despite this high street rents remain high. In fact, if they didn’t receive rate relief of between 80% to 100% many charity shops would no longer be viable, and many would disappear from our high streets.

The vast majority of people recognise that charity retailers do a great job in sorting and recycling clothing, books plus many other household items. There is however a limited supply and the more charity shops you have in one location obviously the less donations each one will tend to receive. Rejected clothing and books are recycled to rag merchants, which used to generate significant income for charity retailers. Unfortunately in the last few years there has been consolidation within rag merchants as their market conditions have radically changed. In fact the rag prices have halved in the last few years, which has caused a serious loss of income to charity retailers.

That is not the only problem, these are the market changes charity retailers are facing today:

•  Increasing cost of shop rents
•  Reduced stock due to increased competition of where to donate
•  Reduced rag income
•  Reduced sales income due to increased competition from charity retailers and some value retailers like Primark
•  Pressure to increase wages, driven by the rising minimum wage and the focus on paying a living wage is increasing.

What does the future hold?

In technical speak the charity retail market has reached saturation point and market conditions will normally force consolidation. However within charity retail this means only the fittest will survive and adapt while the rest will face serious revenue reduction.

Strangely many charity retailers are not yet tackling the fundamentally problems of operating in a saturated market. Some will close a few ‘unprofitable shops’, some will chase falling sales by opening more shops or increasing new products. While others will standardise shop operations, or refit older units. Worryingly only a few charity retailers are maximising their revenue form their existing retail estate. The key is to use the available data to scientifically maximise the sales, it definitely makes a considerable difference but amazingly, so few charity retailers do it.

In short, the decline of charity retail has started and only those charity retailers who scientifically use data to maximise sales from their current retail estate will thrive