The proliferation of charity shops has been a feature of high streets across the country. Now, however, major charity retailers are set to shut dozens of stores because keeping them open has become too expensive.
Charity shops face challenges on the high street
Scope, the disability charity, has already announced plans to close the majority of its network after forecasting that its retail operations would make a loss of £1.5m in the last financial year. This could lead to around 200 of its 458 retail staff being made redundant while approximately 2,000 of its 4,337 shop volunteers could also be affected.
Scope chief executive Mark Hodgkinson said: “Our shops have helped us raise vital income to support our work with disabled people and their families. But the high street has had growing trading challenges. Despite our best efforts, our shops are collectively now losing money when taking account of all of their costs. A number make strong profits but there are loss-making shops too.”
Tough times for all charities
Other charities are considering following suit because of rising rents, soaring energy costs, increased staff costs, the cost-of-living crisis reducing customers’ spending power, and competition from online retailers.
The Charity Retail Association (CRA) says: “These are tough times for charity retail. Some of our members are (saying) that this is the worst time for trading they have ever encountered, and others are being clear that it is unlikely that shop estates will come out of this 100% unscathed.
“There appears to be 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.”
According to the CRA, their members’ growth is now “very modest”. Charity retail’s best years were 2022 and 2023, when growth was double digits but this has not been maintained.
CRA’s latest figures show an increase of around 3.5%, in Q4/24 over Q4/23 with smaller chains showing better results than the largest, and sub-sectors such as hospices doing even better. “The problem is that growth of this nature is insufficient at times when costs are growing so rapidly.”
Charity retailers face rising costs
The issue of costs is hurting charity retailers the most because as well as normal inflationary pressures like increases in rents and utility costs, there is also a significant increase in labour costs as a result of the increases in the National Living Wage and National Insurance. Also, the costs of waste disposal have risen.
A CRA survey on the potential effect of these cost increases revealed that 67% would raise prices, 36% were considering reducing paid staff, 35% reducing paid hours, 38% scaling back plans to open new shops and 27% closing shops. Trustees and senior management are being forced to re-examine the profitability of charity retail.
The CRA says that financial considerations are not the only ones. “… there is an almost universal acknowledgment that charity shops create a halo effect for their charities.”
While impossible to quantify what this effect has, it is a factor that needs to be considered in making decisions.
“The visible presence of charity shops in the high street, the social value that they provide and the opportunities that having this real estate can afford to the charity as a whole must not be underestimated.”
Closures also mean further gaps in high streets already in the doldrums because many major non-charity retailers as well as small businesses have shuttered their stores.
Charity shops are still big business with hope for the future
So despite the threatened closures, CRA says “the picture is not all bleak.” The sector may be in line for a dramatic reduction in size and profitability, but an alternative view is that its creativity and resilience will kick in again – there are certainly some positive signs.
It’s also clear that the second hand markets in the UK, especially for clothing, continue to experience significant growth. The association believes that as an established player in this market, the charity sector has to feel confident about its relevance going forward – provided, of course, it remains competitive.
There is an indicator of hope: some 68% of CRA members are considering opening new shops or are actually doing so, compared to 36% considering or actually closing. However, new openings are largely driven by smaller members.
Charity shops are still big business. According to the CRA’s figures, there were 11,000 stores in 2022-23, employing 26,100 in equivalent full-time positions and using 187,000 volunteers. They contributed £387 million profits to their parent charities and generated £75 billion in social value.
They have become ubiquitous in town centres. My own small market town, in south Warwickshire (population 6,000) has three: West Midlands Air Ambulance, Katharine House and the Myton Hospice – but the Red Cross has just closed its shop.
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