October 31, 2018
Over the past few years, the growing number of charity shops has been one of the many topics of debate across the country. The social benefits of these stores can’t be denied, offering those in need a source of low-cost clothing, homewares and support during tough economic times. Aside from the benefits to customers, charity shops also raise money, awareness and exposure of social issues for a broad range of causes. Volunteer staff also benefit from working in these stores, being a first job for many or a way to build confidence and learn new skills. However the business rate relief they enjoy means that they can occupy valuable units at a fraction other retailers would be required to pay.
Collectively, charity shops across the UK bring in revenues of around £270 million each year and they employ around 220,000 volunteers (Source: The Guardian). Across the country, there are just over 11,000 charity shops and although there has been growth in this sector since 2013 (+2.8% stores), this has slowed right down and even started to reverse over the last 12 months as closures have overtaken openings. This has resulted in a net loss of -1.6% of the total charity shops since October 2017. Figure 1 below shows the percentage change in store numbers between what LDC class as independent businesses (those with less than five stores nationally), and multiples (the larger, national chains).
Percentage change in number of charity shops
Figure 1: Percentage change in the number of charity shops across GB, comparing a 1 and 5 year period to October 2018 (Source: LDC)
The growth of independent charity shops since 2013 has been significant, increasing in number by 4.4% as local organisations look to raise funds. Independents now account for 19.9% of all charity shops in GB.
Openings and closures of charity shops Independents vs Multiples
Figure 2: Openings and closures of charity shops across GB between October 2017 and October 2018 (Source: LDC)
Although charity shop growth has started to reverse, there are still significant numbers of store openings, which have been overtaken by closures as can be seen in figure 2. This high rate of churn suggests that some stores are being relocated to more effective locations, potentially within the same area. When investigating these openings and closures of multiples at a more granular level, we can see that the closures are spread thinly across a number of brands, with only three retailers experiencing a net decline of more than 10 stores since October 2017. This suggests that many charity brands are consolidating their portfolios; being increasingly strategic about how many stores they need and more precise about the locations that work best for their particular offer.
Number of charity shops by location type
Figure 3: Number of charity shops across GB by location type as of October 2018 (Source: LDC)
High streets are, unsurprisingly, the most popular location type for charity shops with 68% of units (7,528) located here. High street locations are popular due to their high visibility and high foot traffic which encourages both shopping and donations. The sheer number of available units on high streets allows charity shops to have their choice of attractive units at a fraction of the normal rent cost due to the business rate relief that charities enjoy. Out of town locations are the second most popular location type (26% of all charity shops) due to their proximity to residential areas, again encouraging both donations and shoppers.
Percentage change in charity shops by location type
Figure 4: Percentage change in numbers of charity shops across GB by location type between October 2013 and October 2018 (Source: LDC)
When looking at trends across varying location types from October 2013 to October 2018, retail parks have seen significant growth (+118.6%). Retail parks have become increasingly popular as shopping destinations in recent years, due to easy access and parking, which could help to explain the increased presence of charity shops here. Retail parks also typically offer larger units that are more suited to charity shops that specialise in furniture and homeware sales. With some big retail park names falling into administration and more space becoming available on retail parks, charity shop brands may take advantage of opportunities for further growth in this area.
The top 10 charity shops with regards to largest portfolio can be seen in figure 5 below.
Figure 5: Distribution of charity shops by brand across GB as of October 2018 (Source: LDC)
The top 10 brands make up just 37% of total charity shops, which shows that this is a fragmented and busy market, rather than one dominated by a few large brands. The reason for this spread is the sheer number of charities out there, all of which have the same aims for their stores; to gain exposure and raise funds for important causes. Some brands also have varieties of specialist stores, for example, those selling homewares, books and electrical items.
A number of charity shops have been expanding their portfolio to include some of the specialist stores mentioned above such as Books for Amnesty, BHF Books & Music, BHF Furniture & Electrical, BHF Home Store, Oxfam Books, Oxfam Books & Music, Oxfam Music and Oxfam Homeware. British Heart Foundation, for example, have just over 25% of their portfolio as these specialist stores, and when combining the above-mentioned brands, they account for 4% of total charity shops, highlighting their increasing presence in the market.
Charity shops, like many other retail sectors are increasingly looking online to bolster their fundraising attempts, with Oxfam leading in this space. A number of charities have an eBay presence allowing them to sell higher value or collectible items to a larger market, but Oxfam has a dedicated ecommerce website (www.oxfam.org.uk) which has been running for around 10 years. Oxfam has a warehouse in West Yorkshire, and a second sorting centre in Milton Keynes, which sort donations to distribute to their 600+ stores across GB, and they have developed their logistics at these sites to include online sales.
The charity shop market is constantly evolving, influenced by trends in donations, shoppers and volunteers. We'll be tracking the next developments in this market as sustainability and recycling increase in importance in consumers' minds. Charity shops will inevitably need to work hard to compete in a busy market whilst keeping their unique missions and causes at the forefront of what they do