How do you improve the performance of a charity retail business?
When a mainstream retailer is not performing to its optimum performance the focus to improve performance is normally on the buying and marketing, however within charity retail it is different. Charity Retail has an extraordinarily complex range of interdependencies. It is very dependent on donations, with most commercial decisions not being made by the retail head office but being made by the shop managers. This local decision making on a wide range of key commercial decisions makes it far more difficult to improve and optimise a charity retail business performance.
However, there is a tried and tested formula, that when fully applied, it is proven to improve / optimise a charity retail business performance. There are six cornerstones to the formula.
1.Donations
The starting point in improving or optimising a charity shop and charity retail business performance is always understanding the total donation value per location and overall value of the donations. Understanding the donation value over the door in each charity shop and donation centre (if you have one) is complex but critically important as it is one of the cornerstones of strategic decision making. The formula is ‘donation quantity x donation value’. However, it needs considerable experience and expertise to calculate average donation value in every donation location.
2.Shop format
Whist there has been a growing tend to have different shop formats within charity retail and some of these formats are very creative, but the shop format needs to mirror what the local market wants plus it needs to consider the donations available. Deciding the shop format and market positioning of each shop in its location will enable good strategic decisions in terms of pricing and shop layout. The recognised shop formats are: Boutique, Better Charity Shops, Traditional Charity Shops, Community Charity Shops, Bargain Charity Shops, Superstores and Specialist Charity shops.
3.Shop layout
Mainstream retailers have a highly skilled specialist team to design their shop layouts using a mixture of data and knowledge to influence the customer journey in every shop, including the use of space and the defined ‘hot spots’ which helps optimise sales. Charity shops however depend on the local expertise of the Shop Manager, Area Manager, Head of Retail etc but it is very rare that the charity shop layouts use the same degree of science that mainstream retailers use. Getting the right shop layouts does require expertise but the benefits of influencing the customer journey, with scientific positioning of products and ‘hot spots’ is a proven method across all mainstream and charity retailers to improve sales.
4.Donation pricing
Good pricing of the varied range of donations is very challenging for shop teams. It’s very important because good pricing can add up to 20% of additional sales to charity shops, so it should be a key area of focus. There are a range of tools that should be used to support charity shop teams, including a Brand Guide for clothing and accessories that has over 1,000 brands (most brand guides used have only 400 or less which is not good enough). There are four brand pillars in the best brand Guides: Designer, Top End High Street, Hight Street and Value. A price guide specifically designed for each individual shop based upon the shop format, shop location, the brand pillar, style, and condition should be issued for the shop teams to ensure consistency of pricing and optimum sales.
5.Improve the capability of retail team
The importance of the fifth cornerstone is often underestimated, with some charities failing to fully invest to improve the capability of the retail team. Compulsory training whilst important is not enough to fully develop the retail team. Some charities invest in online training to develop their retail team capability, and whilst this is often good value for money the vast majority of this type of training does not consider the different learning styles and learning preferences of the retail team, so reduces the effectiveness of the training. The lack of engagement through poorly aligned learning preferences reduces the effectiveness. Investing in world class commercial training is proven to deliver better results from the retail team because within charity retail so much is dependent of the capability of the retail team.
6. E-Commerce Charity Retail E-Commerce is more complex in many aspects than mainstream e-commerce due to mainly selling single donated items rather than product ranges with multiple products. The challenge is that currently most charity retail e-commerce operations are very manual with very little automation. There are three key elements to charity retail e-commerce:
- Supply Chain: Having enough of the right donations in a location where they can be sold online at the lowest cost.
- Selling Platforms: Selling the products using the right photos, the right product description, the right algorithms to ensure great visibility on the right selling platform at the right price.
- Distribution: So often the forgotten element, yet automation of the process of online process saves considerable time allowing more time to be spent selling
Summary There is a formula to optimise a charity retail business, but due to its complexity most charities use Skyline to assist them to identify the specifics for their charity retail business and to produce a detailed plan to help the implementation.
