Commissioning, social investment, and trends in donor giving are hot topics at the moment, and high on NPC’s list of current research priorities, as charities fight to adapt to a tough and fast-changing funding environment. While less high profile, charity shops have also been hitting the headlines in recent months as their popularity soars with cash-strapped shoppers.

The 2012 Charity Shop Survey published a few weeks ago reports rising numbers of charity shops and a 14.3% increase in profits since last year. Oxfam alone made profits of £20.9m from its stores in 2010/11.

But it’s not an easy market. Here at NPC we’ve analysed charities that achieve profit margins of nearly 25% from their shops, and others that fail to break even.

With so much choice for the public, charities that do want to trade on the high street need to invest in establishing and maintaining the necessary infrastructure. As with any retail operation, it’s important to consider how to gain a commercial advantage, whether through specialisation or economies of scale. And there’s also strong competition for donations of goods, so there’s a need for charities to market themselves to donors as well as buyers.

Sometimes it’s necessary to make tough decisions. The Alzheimer’s Society announced last month that it was closing its last charity shop as it was no longer financially viable. It now retails solely online, as many charities are now doing.

Despite the challenges, sometimes it’s worth the expense and complexity of maintaining a network of charity shops. And it’s not only about raising funds. Having a high street presence makes an important contribution to fulfilling a charity’s mission—it can help connect a charity with its service users, improve marketing, support advocacy, and attract volunteers.

Shelter aims to double its number of charity shops in the next two years and is exploring ways to provide advice directly from its stores. And Scope has launched an ambitious new scheme to ‘make donations go further.’ Instead of funding direct services, Scope is asking philanthropists to loan or donate £50,000 to open a new charity shop. As well as providing a valuable ongoing income stream (a shop can generate as much as £30,000 per year), the stores allow Scope to provide retail experience to volunteers and raises the visibility and awareness of disability on the high street.

So as the funding landscape evolves and the sector gets to grips with payment by results and social impact bonds, it’s clear that traditional charity shops still have an important role to play. They too are evolving—with new sources of funding and new roles in service delivery. Ultimately, while less contentious than debates around commissioning, as with any fundraising strategy, the decision about whether charity shops are the right option ultimately depends on fit with mission, not just making money.

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