Not so long ago charity shops tended to be no more than glorified jumble sale outlets, so the fact that they have survived so long was more to do with the efforts of the persistent bargain hunter and charity supporter rather than smart merchandising. To think that the first charity shop or second hand clothing shop was set up by the Salvation Army in the 19th century. However, modern charity shops did not appear until after world war two with the first of these being operated by Oxfam in 1947.
One of the main advantages the charity shop has is that many are located in the town centre high streets, taking prime positions along side mainstream retail outlets. Over the years the high street has experienced a major overhaul as shops and cafes modernised to cater to the increasingly sophisticated consumer demands and expectations. As a late comer to embracing change, the charity shop had no option but to up their game to compete.
One of the big changes has been their implementation of technology such as Electronic Point-of-Sale (EPOS) systems. The biggest driver for bringing EPOS within reach of the charity shops is GAoDG (Gift Aid on Donated Goods). This allows charities to reclaim the tax on sold donated goods as long as they can provide an audit trail, and they have the permission of the donor. Many EPOS systems have been adapted to address the needs of the charity retail sector and this encompasses a GAoDG module. Today some charities are achieving an ROI within 12 months simply because of their GAoDG claims.
However, it has not been plain sailing as there have been a number of issues specific to the charity sector that have made embracing new technology challenging and slow. For instance, the charity shop volunteers are often not computer savvy so the systems would have to be simple to operate. Also charity shops operate on very low budgets, and up until recently have not generally had the retail-focused management teams in place to implement and run the EPOS systems. While EPOS systems provide clear management data about business performance and trends, they are mostly driven by inventory levels and charity shops depend on donated goods to a greater extent which are not inventory controlled.
Today, many of these challenges have been overcome and charity shops are running more like mainstream retailers using technology and better merchandising. What will the future charity shop look like and what will they need to do to remain competitive and be agile enough to address modern market forces? You could argue that the current economic slowdown has energised their sales as people are looking for bargains, but then the mainstream retailers have been aggressively discounting too.
Posted by andrea 6th August 2009 at 1:19pm
"Also charity shops operate on very low budgets, and up until recently have not generally had the retail-focused management teams in place to implement and run the EPOS systems" As someone who has worked in charity retail for many years, this is deeply offensive and completely untrue of many of the chains I have worked in!! It's nothing to do with not being ABLE to use EPOS, but that the cost is so huge compared to the information you get in return! 90% of charity shop stock is donated, and you don't need to account for a stock-holding.
Absolutely agreed, as the article says, the biggest driver for EPOS in charity retail is being able to claim gift aid on donated goods provided that an audit trail can be provided and the charity has the permission of the donor. With the large percentage of donated goods going through charity retail doors then being able to claim gift aid makes the return on investment much quicker. If the gift aid is integrated in an EPOS system then there will be better business information available within the shops and at head office.
I didn't think claiming gift aid was a driver for EPOS though, as plenty of chains seem to be claiming it without a costly EPOS system, don't they?
It is true that many charity retailers do reclaim gift aid on donated goods without using an integrated EPOS system, the alternatives are to create manual audit trails (very labour intensive), or to contract with service providers to manage the process on their behalf (expensive in the long term).
The use of a modern integrated EPOS system can minimise the administration of Gift Aid and provide all of the additional benefits of retail management reports for those organisations who appreciate the need for real time performance reporting on shops. EPOS has been shown to provide real management benefits resulting in increased store performance even where donated goods sales are greater than 80% of total sales. The integration of Gift Aid has provided a more tangible route for charity retail management to demonstrate a relatively quick ROI on the investment for combined system.
