The Dark Side of Thrift Stores: Profiting off of Charity

There’s been a big rise in popularity of thrift stores across the United States mainly in Suburban areas. It’s gotten to the point that you can find these big box type thrift stores in driving distance from any town. There is big money in the big business of thrift, with an estimated annual revenue north of $10 billion.  

Non Profit Thrift Stores Rely on Donations

 

Many charities depend on their own thrift stores to pay for their mission, and most of the merchandise for those stores comes from people kind enough to donate clothing and household items. But there has been a constant rise in for-profit businesses, creating confusion for customers and donors. Ultimately, shoppers and donors don’t know how much is going to the charity. 

Donations to the Salvation Army help pay for their adult rehabilitation centers that help people battling drug and alcohol abuse. When you shop at the Salvation Army, you are helping Americans on their path to recovery. Goodwill Industries also does a lot of good work with its donated goods. Goodwill and Salvation Army are the largest nonprofit players in the thrift space, but there are many smaller thrift stores that are run by nonprofits – think of your local church thrift shop. If your local church has its own thrift store, when you drop an item off there, you know the item’s proceeds will go straight to the mission. 

For Profit Thrift Stores Collect Goods on Behalf of Charities

But what about the donated goods that get picked from your house by some truck for a specific charitable cause like Lupus research. These donated goods go into a massive inventory stream that winds up on store shelves of multimillion dollar businesses. Shoppers and the public can’t really tell between charitable giving and giving to for profit entities because of how well these for profit thrift stores conceal their arrangement. The charities they associate with get a guaranteed income stream, since these for profit companies pay for items in bulk by the pound, regardless if the merchandise sells. But, these for profit businesses don’t clearly disclose how much money or the percentage it pays to its partner nonprofits.

Donors deserve to know who benefits from donations 

 

Would you donate to a financial firm in one of the richest neighborhoods of California? 

The biggest privately owned thrift store chain in the Southeast,  America’s Thrift Stores collects processes and markets more than 50 million pounds of donations year in, year out. The Alabama based business is a major moneymaker and is now primarily owned by a private equity firm out of California called Alpine Investors. Yes, the same company that owns RetailMeNot owns a thrift store. 

Are all Thrift Stores Non-Profits? 

As described above, many thrift stores are actually running for-profit businesses. They collect goods on behalf of charities, but actually make a lot of money off of the donations. 

Can a thrift store call itself a thrift store if it’s not raising money for charity?  if they’re in business for profit purposes only? 

The answer is yes, absolutely many thrift stores are in the business of making money, and that is their singular reason for existence. Many thrift stores make a ton of money by selling donated goods for extreme profit, while only giving a nominal amount back to charities. In reality these for profit thrift stores are just like any retail business that sells bargain merchandise like Marshalls or Old Navy except their merchandise is sourced through mainly donations.

How thrift stores use charities as cloaks for taking in donations?

 

Here is an example. 

Local charity (let’s call them “A Cure Foundation”) wants to raise money and the local thrift store (let’s call them Thrifty Shop) wants to make money. Thrifty shop makes a deal with A Cure Foundation to collect the donated goods on behalf of A Cure Foundation. 

  1. Thrifty Shop creates TV commercials, emails, postcards and other marketing materials making it seem like they are being sent by A Cure Foundation. 
  2. Donors call the 1-800 number that is operated by Thrifty Shop.  
  3. Thrifty Shop sends a truck to the donor’s house. The truck is wrapped in the branding of A Cure Foundation, but the truck is owned and being driven by Thrifty Shop. 
  4. Thrifty Shop brings all the items to its facility for sorting, disposes of all the unsellable merchandise, and then puts the rest on the shelves at their stores. 
  5. Thrifty Shop pays A Cure Foundation an agreed upon cost per pound for all the merchandise that was collected whether it sells or not. But A Cure Foundation only receives a very small, nominal amount. 
  6. The donor gets a tax deduction and A Cure Foundation raises a little money, while Thrifty Shop makes money hand over fist. 

The Bottomline: For-profit thrift stores are extremely greedy. 

 

They are collecting goods under the disguise of a charitable organization and then turning around and selling them merchandise for-profit. Now that in it of itself wouldn’t be such a bad thing, except the amount of money that the charities receive is minimal compared to the amount of money that the thrift store makes. 

 

Used Clothing Sold for More Than New Clothing

 

The whole purpose of a thrift store was to provide people who do not have that much disposable income a place to buy household and life necessities. But if you walk into some for profit thrift stores, they are selling t-shirts and sneakers for 100s of dollars. But even worse, you will most likely see a stained, plain Old Navy t-shirt for $6. But you can go directly to Old Navy and buy a brand new shirt for $1 less. 

 

Sure, there has been an increase in demand at thrift stores. So yes, it’s only fair that they charge more for certain items especially if resellers are making money off of the valuable merchandise. But that doesn’t mean that thrift stores need to charge an arm and a leg for merchandise that really has 0 resale value. There is no reason why they can’t charge $1 for those used t-shirts from fast fashion brands. 

Who is Profiting off your second-hand items?

 

It’s really interesting to learn about who is profiting off of your second hand stuff in the goods that you’re donating to way you think charitable causes you might think that the old pair of sneakers but is worth $40 is going to the charity that you’re supposedly donating to and they’re going to see a good amount of that $40 whether it’s down 20 bucks or something like that but in reality they’re probably only getting $1 for it. 

 

It’s gotten so bad that several years ago one of the largest thrift store chains in the country was sued by the government for misrepresenting the fact that they were not actually a charity. This thrift store misled donors to overestimate their tax deduction by making it seem like a very significant amount of the revenue was going to charity. Critics are adamant about how they encouraged donors to overestimate the value of their charitable contribution. With prompts like “please insert fair market value of the merchandise” the thrift store chain made it seem like the entire value of the donation is tax deductible. But in reality the vast majority of the value of the donated goods is going to the for profit side of the arrangement, and not as payment to the charity. 

 

While the non-profit thrift stores do have some problematic practices, they are way more impactful to bettering society. We might be a little too critical of Goodwill for paying their executives really high salaries. At the end of the day, Goodwill spends about 95% of its revenue on programs that help the disabled and others who struggle to secure work. For-Profit thrift stores don’t even come close to having any sort of positive impact. 

FAQS about Thrift Stores' Nonprofit Status

It’s a widespread myth that all thrift stores are charities (nonprofits). Although, some of the largest ones (like Goodwill and The Salvation Army) are, the truth is that many secondhand shops, it turns out, are run as for-profit businesses.

No, Savers is most definitely not a nonprofit organization. Savers states on their website that they are a for-profit organization. Simply put, shopping at Savers does not support any nonprofit initiative. 

No Value Village is not a nonprofit. In fact, they are technically the same company as Savers, and neither are nonprofit organizations. Value Village is a for profit business.