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Where Brick and Mortar Retail is Succeeding

Investing in People

Written by Briton Ryle
Posted April 28, 2014

As investors, we search long and hard for investment opportunities that offer us the greatest benefits. Investing in our own future is prudent, responsible, and can even be fun when we do it right.

Yet there are other kinds of investments that can be just as rewarding in their own special way – investments that benefit others.

All across the country, retail outlets devoted to reselling pre-owned merchandise from clothing to furniture to appliances to canned foods have been attracting more shoppers with each passing year since the Great Recession five years ago, helping families endure through desperate times. Many such retailers will even donate large portions of their proceeds to community programs assisting people in hardship.

These thrifts and second-hand shops could not benefit their communities at all were it not for the investments received from donors and shoppers alike. Such patronage is more than just an investment in a business; it is an investment in people.

Record Sales – A Sign of the Times

Where retail giants have been struggling with several years of weak sales performance – WalMart (NYSE: WMT), for one, recently posting just 1.5% year-over-year revenue growth - thrift stores like Goodwill-Easter Seals Minnesota have flourished. Over the past three years, Goodwill’s retail sales have grown by 75% to $67 million annually.

More than half of this particular Goodwill’s 35 stores have opened since the financial crisis struck in 2008. Now we know why mainstream retailers have been hurting… because shoppers have been hurting too, and are turning to thrifts and second-hand stores to help them get by.

But it’s not just the “poor” who are availing themselves of the opportunity to stretch their shopping dollars. College and university students and graduates, for instance, have been turning to thrifts in growing numbers in the face of ever increasing student debt.

“People often think that our stores are only for poor people, whatever that means for them,” CEO of Goodwill-Easter Seals Minnesota, Michael Wirth-Davis, explains the misconception. “We’re saying we have stuff for everyone.”

In fact, “the portion of U.S. consumers saying they shop for used goods has doubled in the last decade to about 30%,” informs Britt Beemer, an analyst for America’s Research Group. “There's no longer a stigma about buying there. If it’s a good deal and value, they’re not ashamed.”

What is more, there is a good deal of pride to be had from shopping at thrifts when considering the assistance they provide to non-profit charitable organizations.

Charity Through For-Profit Companies

Besides the obvious savings they enjoy, shoppers at thrifts gain the added satisfaction of having helped families in need. Goodwill, Salvation Army, Silver Angel and other non-profit thrifts use part of their revenues to support the hungry, the homeless, the elderly and children in need.

Yet you may not be aware that there also exist a number of for-profit thrifts and second-hand goods retail chains that also support charities, but in a slightly different way. As for-profit companies, these are typical businesses with owners and in some cases shareholders who are in business to make money. Yet they have partnered with charities and other non-profit organizations which they support by purchasing donated clothing, furniture, and other items.

Because many non-profit charities are not large enough to open and manage retail outlets where they can sell the items donated to them, there is a need for thrift store chains who handle the re-merchandising of donated goods.

For-profit second-hand retailers like Savers, Unique Thrift, and Valu Thrift, for example, will purchase goods from non-profits such as Arc, the Epilepsy Foundation, the Lupus Foundation, and then resell them at their stores. The non-profits enjoy the benefit of converting their donated goods into funds which they can use to finance their charitable causes, without the added expense of running their own retail stores.

As Savers explains at its website, “When you shop at Savers, you help support many local community programs” through their “more than 140 non-profit alliances”. “Last year, we paid our non-profit partners and their programs more than $180 million to fund their programs and services,” the company proudly announces. “To date, we've paid more than $1.5 billion over the last 10 years.”

There are environmental benefits to shopping second-hand as well. Each and every year, some “20-billion pounds of used clothing and textiles [are] tossed into landfills”, Savers reveals. “Our recycling program prevented 600 million pounds of unsold merchandise from ending up in landfills last year.”

More Than Just Money

But the benefits that many thrift store chains extend to their local communities are more than just monetary or environmental. Many put into practice the ancient Chinese proverb, “Give someone a fish and they will eat for a day. Teach them to fish and they will eat for a lifetime.”

Nonprofit thrift Goodwill, for instance, provides employment skills training to thousands of unemployed Americans each year. “The goal is to sell things, yes,” CEO Michael Wirth-Davis admits. “But it’s why we’re selling things - and that’s to produce revenue to provide services and programs for a wide variety of folks who are trying get work, keep work and advance in their careers.” In 2013 alone, Goodwill provided employment and job-training services to more than 30,000 people.

This goes against the broader retail industry trend where employees are being cut to lower costs.  Fewer retail employees are used to complete sales, and overhead can be slashed.  The Atlantic recently called it "The death of America's Retail Workforce."

Retail Jobs 1975-2011

Source: The Atlantic

Like retailers, as investors we too have financial goals – be they to save for a home, augment our income, or save for retirement. But there are times when investing takes on a broader meaning that extends far beyond investing in a stock or a bond, in a company or a commodity. There is another type of investment that pays a completely different type of dividend altogether – investing in people.

Far from requiring untold hours of research and analysis, this type of investment is as simple as shopping at our neighborhood thrift store. While the still turbulent economy may be splitting the haves and the have-nots further apart than ever before, these retailers are doing wonders in connecting the haves and have-nots with each other.

Joseph Cafariello

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