Money: Charity shops and the cash that won't reach the needy

If you want to combine bargain hunting with altruism, the obvious place to go is a charity shop. Finding one shouldn't be difficult. It is estimated that, following rapid growth over the past few years, there are now more than 5,000 charity shops in the UK.

But few shoppers really know how much of the money they spend benefits charities. In fact, while the shops are a very useful source of income for charities, purchases are an inefficient way of donating your money. On average, 73p of every pounds 1 you spend is soaked up in the expenses of running the shops, according to a survey published last year by the magazine NGO Finance.

Charity shops have become big business. The annual income of the largest five chains of shops alone is now in the order of pounds 150m. At the same time, a number of shops have started selling new, as well as donated, goods and most of the big chains are using paid staff to work alongside the volunteers.

This is transforming the way outlets are run. "Chains which employ professional staff have revamped themselves from fund-raising opportunities to professional charity retail operations," says Chris Gallagher, head of retail at Barnado's.

The new approach has upset some local shops, which have complained of unfair competition since charity shops enjoy 80 per cent relief on business rates and may even, at the discretion of the local authority, not pay rates at all.

Stephen Alambritis, of the Federation of Small Businesses, says: "The system's unfair. Charity shops are going for prime sites, pushing new goods. We don't mind them doing commercial trading if there's a level [business rates] playing field."

The growth of charity shops, as well as threatening their privileged tax status, could also put pressure on some of the smaller charity outlets. "The growth is coming from the big chains, which are going for it as professional retailers," says Colin Sandford, chief executive of the British Heart Foundation's shops division. "There are also some tremendously professional, well-supported local charity shops, such those connected to hospices. It's the ones in between that will tend to get squeezed."

Charities' rivalry is over the volunteers and donated goods. Sarah Shekleton, of Oxfam, says: "There's no shortage of customers. Where it's becoming tough is getting donated goods. We're trying to make it more convenient for people to bring things to the shops via clothing banks or house-to-house collections."

Oxfam, with about 24,000 volunteers working in its shops, is one of the few big chains still principally staffed by volunteers. This helps contain costs. While the wage bill of most other chains accounts for 20 to 30 per cent of turnover, Oxfam's pay packets soak up only 8 per cent of the shops' turnover.

But this saving doesn't necessarily translate into proportionately more money for the charity. Charities that use paid staff say this factor helps each shop generate a higher income to offset other fixed costs such as rent and electricity; so they make a higher net profit.

Certainly, profits vary a lot between chains. The profits of the top 20 chains range from 42 per cent of income for the Salvation Army Trading Company to just 16 per cent for NCH for Children, according to the NGO Finance survey. One chain, run by the disability charity Capability Scotland, even made a net loss in the last financial year. "The loss is due to a vigorous acquisition policy. We're investing in new shops for the future," explains a spokeswoman.

While such short-term losses are the exception, it's clear that, in general, the profits made from the shops aren't that high. Even added to other trading activities, like direct mail, these profits account for less than 3 per cent of the total income of the leading 100 charities, according to the Barclays/NGO Finance Charity 100 index.

Charities, however, say that making the public more aware of shops' costs is not the answer. "We've nothing to hide," says John Tough, head of retail at British Red Cross. "It has to be understood that charity shops are not the most productive means of raising money. Paying for rent and so forth erodes our profits. The costs are very high, compared to, say, the 1 per cent administrative costs on a legacy.

"None the less, charity shops make roughly pounds 100m a year net profit for the charities sector as a whole."

The costs of charity shops also need to be seen in the light of the other retailers' take from charity-related goods. An amendment to the 1992 Charities Act means that retailers must now say how much money from each pack of charity Christmas cards goes to the stated charities. Last Christmas, the average donation was just 10p in the pound - and that was twice as good as the year before. The profit charities made from cards sold in their own shops was far higher.

The charities say there are also a number of other benefits to their shops. Howard Stirrup, head of shops for Help the Aged, says: "They're environmentally sound because they help recycle a lot of goods; they provide affordable second-hand items for people who may not be able to afford new goods. They offer helpers, who are often elderly, a way of making a positive contribution to society through their volunteer work. And they can provide useful work experience and training for people."

Shops in the high street can also help charities' campaigning work by maintaining their public profile. In the case of Oxfam, the shops are an outlet for its fair trade initiative, which supports overseas producers in poor countries by setting fair, agreed prices for goods, as well as providing training and other support.

CHARITY SHOPS

Number Annual Annual Annual

of shops income costs profit

Oxfam 844 43.3m* 28.0m 15.2m

Imperial Cancer Research 474 26.0m 21.0m 5.0m

British Heart Foundation 300 24.6m 18.8m 5.8m

SCOPE 276 22.7m 17.5m 6.2m

Barnado's 315 18.0m 13.2m 4.8m

Help the Aged 322 16.5m 12.0m 4.5m

Cancer Res Campaign 227 14.5m 11.7m 2.8m

Age Concern England 400 9.6m 7.3m 2.2m

British Red Cross 355 8.9m 5.7m 3.2m

Save the Children Fund 158 6.6m 4.4m 2.2m

*Oxfam shops had an additional pounds 12.7m income from the sale of Oxfam Trading goods. The table shows the largest 10 charity shop chains, measured in terms of the total income generated. The information given is correct as at the date of the charities' last annual reports and accounts.

Source: NGO Finance, Oxfam, Cancer Research Campaign.

Start your day with The Independent, sign up for daily news emails
Suggested Topics
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Expect a new wave of fishing expeditions by fraudsters now we can invest our life savings

Cold callers and your pension: watch out for dangerous boiler room scams

Sean O'Grady received a cold call last week that was much more sinister than normal. Yes, someone wants to get their hands on his pension...

Fuel poverty could claim 100,000 lives over next 15 years, warns energy charity

The NHS is currently bearing a yearly burden of approximately £1.5bn treating cold-related illnesses every winter

MPs call for Equitable Life policyholders to be paid £2.8bn owed by government

Hundreds of thousands of people's policies were hit when the mutual insurer almost collapsed at the turn of the century

The elderly woman's family discovered the mistake

DWP criticised after it left a pensioner £26,000 worse off

The Department for Work and Pensions has been slammed after a series of cock-ups left an elderly pensioner £26,000 worse off.

The FCA has today issued a consultation paper on its plans to tighten up consumer credit rules to give consumers greater protection on guarantor loans and in other areas

Payday loan companies must publish their rates, says CMA

A 20-month investigation concluded that a lack of price competition between lenders has led to higher costs for borrowers

Vulnerable consumers are defined as those with poor literacy skills, those who have caring responsibilities, people with disabilities, dementia or the old

Financial companies are not meeting the needs of vulnerable consumers, says City Watchdog

The Financial Conduct Authority said the industry needs to start thinking about solutions to these challenges

The FTSE 100 is inching closer to its record high but can it maintain these levels?

In 1999 stock markets quickly tumbled, losing many a fortune in the process

Tax-free savings: Freedom dawns for the junior savers caught in low-income accounts

The parents of six million children stuck with low-interest saving accounts worth more than £5bn will be able to move the cash from this April. But what are their options? Samantha Downes reports

How much lower will mortgage rates go?

Another day, another cut. As lenders compete to offer the cheapest deals, Simon Read asks if borrowers should jump in now or wait for further falls

Are bills ruining your family life? Try the lover's guide to coping with debt...

If you're in the red and can't find a way out, it's time to get some help. Neasa MacErlean hears that relationships will suffer unless you are open with your partner, but there are organisations that will put you on the right track and get you talking

How to complain: From retailers to energy suppliers, it's easier than you think

When companies let us down, millions of us just take it on the chin. Simon Read shows how to make your voice heard

The dark side of debt: Descending into financial desperation is not due to self-indulgence

Three stories reveal financial desperation that was born of other, serious concerns, from being a victim of sexual assault, to losing a family member
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Recruitment Genius: Office Manager / Financial Services

    £30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

    Jemma Gent: Year End Accountant

    £250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

    Jemma Gent: Management Accountant

    £230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

    Day In a Page

    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
    Yvette Cooper: We can't lose the election. There's too much on the line

    Yvette Cooper: We can't lose the election. There's too much on the line

    The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
    A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

    It's not easy being Green

    After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
    Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

    Gorillas nearly missed

    BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
    Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

    The Downton Abbey effect

    Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
    China's wild panda numbers have increased by 17% since 2003, new census reveals

    China's wild panda numbers on the up

    New census reveals 17% since 2003
    Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

    Our woman in Beijing builds a new relationship

    Britain's first female ambassador to China intends to forge strong links with growing economic power
    Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

    Courage is rare. True humility is even rarer

    Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
    Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

    Alexander McQueen's astonishing vision

    Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
    New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

    Dinner through the decades

    A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
    Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

    Philippa Perry interview

    The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
    Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

    Bill Granger's Indonesian stir-fry recipes

    Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
    Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

    Harry Kane interview

    The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
    The Last Word: For the good of the game: why on earth don’t we leave Fifa?

    Michael Calvin's Last Word

    For the good of the game: why on earth don’t we leave Fifa?
    HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

    Scientists hail daily pill that protects against HIV infection

    Breakthrough in battle against global scourge – but will the NHS pay for it?