Well, you know how the media love a scary story, and recent events have been causing some to ask whether charity retail faces an existential challenge. The answer from our perspective is a firm “no” – but that doesn’t mean that our members haven’t been experiencing a few quite tricky bends in the road to negotiate recently.
Trading has been great – we are now seeing significant like-for-like growth in income, which is a big turnaround from mid and late 2024 – but so has been the increase in costs.
Profitability, which was once a given in a sector largely run by volunteers, has been under more and more strain over the last year, and this was especially exacerbated by the 2024 budget and its increase in staffing costs. The government could listen to the sector’s calls: for example, for the mitigation of the budget’s changes in the national insurance regime that we requested. But in the absence of specific help for the sector, we can expect change.
All retailers have been subject to these pressures, and the constant stream of high street closures has now been mirrored by a couple of eye-catching announcements in charity retail – Scope closing half of its shop estate, and most recently Cancer Research UK (CRUK) closing some 190 shops over the next 18 months. What on earth is going on? Our answer is that we’re seeing evolution – with some charity retailers moving to an exciting new model – not an existential challenge.
Adapting business models
Charities, of course, are not just about making profits for their own sake. But the contribution to their income made by their retail operations is huge, and is increasingly important as other sources of funding are also becoming harder to find. We know that charity retail adds a huge amount of value over and above its financial contribution, for example in sustainability and being the hub of many communities, but there is no getting away from the fact that their raison d’être is to raise much-needed unrestricted funds for their parent charities.
Against this background, charities are having to think very carefully about how best to structure their retail operations. To ensure we remain financially resilient and mission-relevant, we need to be brave enough to show agility and adapt our business model to ensure relevance and sustainability.
If you read the announcement from CRUK carefully, much of it mirrors that of Scope earlier this year. CRUK is actually opening 12 new large stores, significant centres of funds for their charitable purposes. It will still have over 300 shops at the end of the process, whilst Scope will still have half of its original retail estate open at the end of its own restructure. What is happening is that they are both concentrating their ongoing investment in the shops that they are confident will bring in sufficient profit contribution to advance their good causes as much as possible.
And that’s the rub, isn’t it? This is not about the shops themselves. It is about supporting the good causes that their parent charities support, and doing that to the best of their ability.
Not the end of the road
Of course, behind these closures and rationalisations are significant human costs, and we mustn’t forget that. I know that both charities have been as careful and conscientious as possible to reduce the impact of these reviews on their staff and volunteers, and the communities in which they operate. It’s never easy to reduce costs, and we only wish that the government was able to see its way to mitigating some of the budget-related impacts on charities, who are after all, performing much of the government’s work in areas such as medical research, support for the disadvantaged and animal welfare. But in the absence of clear signals that this might happen in the next or even future budgets, charities really do have to maximise the funds from their investments in retail assets.
Will there be other reviews leading to closures? Possibly. For example, many of our members are looking at investing in larger format stores in the same way as CRUK, causing a few shop closures in the same area when one superstore opens. There is little sign of cost pressures diminishing, so our members, like everyone else, are having to cut their cloth according to its width. They are using their famous creativity, resilience and determination to weather the storms and move forward in what they do best – contributing to good causes through the provision of unrestricted funds.
And remember the words of Helen Keller, whose miraculous life serves as a reminder of the whole human spirit exemplified by charities: “A bend in the road is not the end of the road… Unless you fail to make the turn.” So it isn’t the end of the road by any means. It’s an evolutionary shift in practice, and a new and more focused way of doing charity retail.
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