Why goodwill is king of thrift now and in the future

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US consumers are reeling from inflation, but they still want to spend. Goodwill Industries, the Washington, DC-based non-profit bargain hunter, is here to help.

On a recent weekday, Nick Adams, senior director of retail at Goodwill-Easter Seals Minnesota, the St. Paul-based subsidiary of Goodwill Industries, gave me a tour of the organization’s brightly painted, two-story local flagship store. “Our average price is under $4,” he said, pausing with a bundle of back-to-school items, including a book bag, rugby shirt, jeans and hiking boots. “Have you seen what a new backpack costs these days?”

It’s usually a lot more than $3.99, and that’s one of the reasons Goodwill Industries is booming with 3,200 stores across the US and Canada. According to Bill Parrish, senior consultant at Goodwill Industries International, these stores and a growing e-commerce platform generated $5.47 billion in revenue from donated goods in 2021.

The St. Paul-based retail operation, which includes 48 stores and an e-commerce facility, had net retail sales of $47 million in 2021. So far in 2022, revenue has been rising in Minnesota and elsewhere with no sign of a slowdown hurting other retailers.

It was a long journey. For modern consumers, second hand has long been associated with second best. This image was the natural result of a consumer culture that marketed the value and status of new and improved products.

But it also developed in part because of a long association between used clothing and donations to the poor. Founded in 1902, Goodwill began by collecting clothing to teach the underprivileged in Boston the art of mending.

Over time, the tide of things — not just clothes — pouring out of middle-class homes became so great that Goodwill and other charities took to selling used goods directly. But Goodwill’s focus on preparing people for employment hasn’t changed.

Today, according to the company’s 2020 annual report, retail revenue funds a sprawling network of social services that is responsible for placing one in every 600 US employees. The St. Paul-based subsidiary, one of 156 local goodwill organizations in North America, was responsible for 725 job placements in 2021.

It doesn’t come cheap to operate, and keeping it running motivates Goodwill’s management to innovate, improve efficiency, and outperform other discounters. “We really depend on retail revenue to support our programs,” Adams said. “When retail goes away, it makes things harder.”

Transforming yesterday’s thrift stores into attractive, highly efficient omnichannel retailers took time and experienced retail managers. Before joining Goodwill, Adams was Director of Sales Operations for Best Buy Co. Inc., based in Richfield, Minnesota, where he led retail operations across the company’s large and mobile specialty stores. As he walks through the flagship store in St. Paul, he speaks retail fluently.

“DVDs and books are super hot,” he said as we passed shelves full of media. This is what kids’ shoes are like during the back-to-school season. Proof is a half-full shelf of it. “I hate empty shelves,” Adams said. But he’s beaming at the sight of a Halloween costume hidden in the boys’ clothes. Halloween is the biggest holiday in the thrift industry. “A costume in another retailer’s pop-up shop costs fifty to seventy dollars. It’s fifteen here.’

Achieving this low price is not easy. For starters, Goodwill needs donations. As long as Americans keep buying stuff, it shouldn’t be a problem. During lockdowns in 2020, Goodwills across the country were so overwhelmed with goods dug up during house clearances that many shops rented extra space to stash it all.

Adams said there hasn’t been a breakup since then. Donations also rose after each of the Covid relief payouts, likely from consumers looking for space for their new purchases. Goodwill also experienced a jump in sales.

Of course, charitable donations aren’t the only way to lighten the burden of excess items. Flea markets, eBay, and a growing ecosystem of apps like RealReal, Poshmark, and Mercari offer opportunities to make money instead of donating.

But Adams said he’s not under threat because, unlike most online thrift markets, Goodwill doesn’t rely on high-end brands that sell for more in the apps. It can survive and thrive with lower-end items, such as: B. Used private label Target clothing that sells for $1.99 and isn’t worth the trouble of listing on Poshmark. “The focus is on turning the product, all things being equal,” explained Adams. “It’s not about squeezing the extra bucks out of a Lululemon top.”

As a non-profit organization, goodwill is not publicly traded. But it’s having a bigger impact on the online thrift market than all the public companies trying to oust it. Part of that impact can be measured by the amount of donated goods it processes.

Goodwill diverts around 3 billion pounds of goods from landfill to retail and recycling each year. That’s about 3% of the furniture, clothing, and other durables Americans threw away in 2018 (the latest year for which data is available).

These collections, in turn, serve as inexpensive inventory for fins who monetize their more valuable finds online. If there weren’t goodwill, many sellers running the online apps would struggle to purchase inventory.

For the Minnesota-based Goodwill Easter Seals alone, the volume of products being rotated is extraordinary: over 75 million items donated in 2021 alone. “The more donations we receive, the better the quality of our products,” Adams said. Not everything has to be offered for sale immediately. Halloween costumes come in all year round but are kept until after school is over.

To overcome these inventory challenges, the charity employs teams of sorters who have experience with everything Americans buy from clothes to video games. Much of that merchandise ends up in retail, but that’s no longer Goodwill’s sole distribution channel.

For example, goods not sold there are usually diverted to outlets known colloquially as “the bins” where they are sold by the pound. Goodwill-Easter Seals operates three outlets in the Twin Cities area, where they’ve become popular with younger customers flipping their finds via online apps.

Elsewhere, collectibles, jewelry and other high-end branded items are sent to a central e-commerce facility where they are priced and listed on shopgoodwill.com. The online platform was founded in 1999 by the Goodwill of Orange County, California; according to information the charity provided me, it currently manages around 14,400 transactions per day for 139 regional goodwill partners.

Between 2020 and 2021, the website’s revenue grew from $216.1 million to $302 million. In comparison, ThredUp Inc., the premier publicly held thrift and savings app, reported revenue of $251.8 million in 2021, up from $186 million in 2020.

At Goodwill-Easter Seals, e-commerce sales have grown 134% over the past three years and will account for about 14% of total retail sales in 2022. Business is so good that the charity recently opened a new 100,000-square-foot facility for merchandise listed on shopgoodwill.com. It’s the final piece to transforming Goodwill into an omnichannel sales organization capable of competing with any discounter, especially in the second-hand space.

Younger consumers, who are interested in cheaper and, if the price is right, more sustainable consumer models, have known about the Goodwill shift for some time. “Gen Z shops differently,” Adams told me. “This younger generation saves money first.”

Now they are not alone because of inflation. Elderly consumers, families, and anyone else battered by rising prices have a reason to at least consider the thrift store shelves. A generation ago this might have been a much less attractive and fruitful visit. “Inflation is a way of telling our story,” Adams told me as the day’s first shoppers began browsing clothes racks in St. Paul.

But it’s not the only story, not even the most important.

After exiting the retail store, I drove a mile west to a warehouse where a group of young men were building a plywood structure in the parking lot. Inside, Cassandra Avery, Goodwill’s senior manager of workforce development, guides me through a sprawling training facility.

There is a classroom where students repair cars on hydraulic platforms and an area where the plywood frame constructions are in various states of construction. There are also offices for consultants and computer rooms.

Recently, the institution began offering training for the Securities Industry Essentials (SIE) exam, an entry point into the financial industry. “Some of the first students are starting their exams and have offers,” said Avery, who has worked at Goodwill for 14 years. She has no formal connection to the retail operation, but as she showed me around the facility, she emphasized the connection: “We get grants, but retail is more reliable. It is the consistency and reliability of our funding.”

It doesn’t come cheap to do what the charity does. Last year, 4,819 people received services from St. Paul-based Goodwill-Easter Seals at a cost of $35.6 million. To incentivize struggling individuals and families to pursue vocational training, the charity often helps with wages, childcare support and even gas money to ensure training is completed. The results are worth it: the average participant saw a profit increase of $26,452 over the past year.

That result isn’t why inflation-conscious consumers are shopping at America’s most overlooked retail chain. But it’s exactly the kind of long-term solution to tight family budgets that goodwill represents.

More by this author at Bloomberg Opinion:

• Don’t let Congress cut exports of used equipment: Adam Minter

• To solve the fertilizer crisis, just look down the toilet: Adam Minter

• Plastic recycling works, so ignore the cynics: Adam Minter

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Adam Minter is a Bloomberg Opinion columnist covering Asia, technology and the environment. Most recently, he is the author of Secondhand: Travels in the New Global Garage Sale.

For more stories like this, visit bloomberg.com/opinion

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