Charity retailers leading the way to boost charity investment

Guest blog by Womble Bond Dickinson

There’s never been a better time for charity trustees to place retail at the heart of their charity’s strategy when looking at diversifying their income streams. Charity shops find themselves at the heart of the “retail revolution”. Many are outperforming traditional stores and modern online retailers and the sector is increasingly seen by investors as a valuable, sustainable, business model.

The growth of charity retail is not just a temporary consequence of the current economic landscape:

While its correct to say that lockdowns, supply chain issues and the cost-of-living crisis have increased transactions in charity shops, it is Environmental, Social and Governance (ESG) concerns that are permanently transforming the priorities of shoppers and investors.

Charity shops are a key player in the ESG movement, providing an ethical alternative to fast fashion and preventing 339,000 tonnes of clothing from being sent to land fill sites each year.[1] The language being used to describe products purchased from charity shops also reflects the shift in public attitudes – no longer are items referred to as ‘second-hand’ but are now often described as ‘pre-loved’.

The uncertain position of traditional high street retail provides real opportunities for trustees to capitalise on the growth of the charity retail sector. Last year, the Centre for Retail Research reported that, on average, 47 shops closed down every day.[2] The British Retail Consortium estimate that in the last quarter of 2022 13.8% of retail shops across Great Britain stood empty.[3] With nearly 11,000 charity shops in the UK, the charity retail sector has had an overall year on year growth in February 2023 of no less than 16.8%.[4] Statistics revealed by charities such as the Salvation Army are making investors sit up and take notice (last summer its sales were up 22% compared to before the pandemic with some shops even trading at more than double what they were previously.[5]). So the economic value of charity shops to the retail sector is clearly huge and, with the right investment, charity shops could prevent units from going unlet and provide a lifeline to struggling highstreets across the UK.

Charity shops are popular to private investors as staffing and stock costs are lower and most shops receive a mandatory 80% business rates relief (and can be offered the remaining 20% relief at the local authority’s discretion). Low overheads and rates should continue to help the sector to thrive.

The pre-loved market is booming and, if properly run and invested in, charity shops could rival their competitors in the high street and online and secure a stable new income stream to fund a charity’s vital work. To be at the forefront of this trend, trustees must keep a close eye on their retail portfolio and investor opportunities to maximise potential.

At Womble Bond Dickinson we enable charities to harness this potential and provide advice to charities on securing sustainable and increased investment as your portfolios look to develop further.  Not only are charity shops finessing brand awareness and connecting with service users and people they work with but increasingly, run well, they are becoming the much longed for alternative diversified income stream.

As a full-service Top 20 UK Law firm and with one of the largest dedicated charities retail legal teams in the UK market, we advise charity and retail clients representing more than 35,000 stores, £180 billion turnover and 850,000 employees helping store portfolios grow while leveraging retail market knowledge and trends to gain competitive advantage. Our retail sector knowledge is underpinned by our deep understanding of charities and their additional needs. We know that sometimes charity trustees are concerned about the risks attached to expanding your charity’s retail offer and the additional risks of running a large volunteer ‘workforce’ but we’re always happy to work with you and your team to build a strong case to capitalise on the investment opportunities that are now becoming available.

[1] Why charity shops are the best stores on the high street | The Independent

[2] Almost 50 UK shops closed for good every day in 2022, says report | Retail industry | The Guardian

[3] Key statistics – Charity Retail Association

[4] Charity retail sector outlook – Charity Retail Association

[5] Charity shops reveal surge in interest with sales 22% higher than pre-pandemic due to cost-of-living crisis (inews.co.uk)

30/03/2023