Social Enterprise as a Non-Profit Fundraising Approach

Introduction

A social enterprise is a revenue-generating organization whose objective is to have a social impact. Definitions of "social enterprise" vary and there is no unified definition in Canada. For our purposes, social enterprises fall into a wide spectrum of business models. A social enterprise does not have a specific corporate form. Social enterprises include "non-profit organizations" or "registered charities" who operate revenue generating related businesses and include organizations that operate as "for-profit" businesses with a social goal.

You can operate a social enterprise in the corporate form that suits you best, whether it is more socially or commercially focused. In the graph below, social enterprises fall anywhere between a "charity operating a related business" and a "business corporation with social purpose."

Spectrum of Social Enterprises in Canada

Government resources and charitable donations cannot address the world’s social problems by themselves. Government funding is often scarce and will never fully satisfy Canada’s social and environmental needs. As a result, Canada’s charitable and non-profit sectors are significantly underfinanced and undercapitalized. Traditional philanthropists are limited in their capacity to meet this need, charities’ investment accounts have been reduced, corporate and foundation philanthropy has regressed, and access to capital for non-profits is more limited than ever.

A gap currently exists between government supported services and services rendered by the non-profit community. Despite the scarcity of traditional governmental financing, the door is wide open and there are many opportunities for innovative solutions to sustain the work of charitable and non-profit organizations. Some charities and non-profits are looking to social enterprises as a way to diversify their funding base in today’s marketplace.

 Social enterprises are not a new addition to the charity and non-profit world. Museums and art galleries have operated gift shops as a way to generate revenue to support their exhibits and promote art. Service organizations such as the YMCA and YWCA have used fee-based programs to support their charitable activities. Many non-profit social service or relief agencies have operated thrift stores as a means of generating revenue for their activities, providing low-cost goods to their clients, and providing training and jobs for people with barriers to employment.

Enterprising Non-Profits

Faced with rising costs, more competition for fewer donations and grants, and increased rivalry from for-profit companies entering the social sector, some non-profits are turning to the for-profit world to leverage or replace their traditional sources of funding. In addition, leaders of non-profits look to commercial funding in the belief that market-based revenues can be easier to grow and more resilient than philanthropic funding.

The drive to become more businesslike, however, holds dangers for non-profits. In the best of circumstances, non-profits face operational and cultural challenges in the pursuit of commercial funding. In the worst, commercial operations can undercut an organization's social mission. To explore the new possibilities of commercialization and to avoid its perils, non-profit leaders need to craft their strategies carefully.

Non-profit organizations have traditionally operated in the social sector to solve or ameliorate such problems as hunger, homelessness, environmental pollution, drug abuse, and domestic violence. They have also provided certain basic social goods – such as education, the arts, and health care – that society believes the marketplace by itself will not adequately supply. Non-profits have supplemented government activities, contributed ideas for new programs and other innovations, and functioned as vehicles for private citizens to pursue their own visions of the good society independent of government policy. Although some non-profits have relied heavily on fees, government grants and private donations have also accounted for a considerable portion of the funding that many non-profits receive.

An increasing number of non-profits have been seeking additional revenues by behaving more like for-profit organizations. Some are raising funds through auxiliary commercial enterprises. For example, Save the Children, an international development agency, sells a line of men's neckwear. Such ventures are for the most part bold, creative extensions of the old-fashioned bake sale or car wash; they get the word out about a non-profit organization and its cause and, if successful, generate cash.

Non-profit leaders are searching for the holy grail of financial sustainability. They view earned-income-generating activities as more reliable funding sources than donations and grants. Many of them now consider extensive dependency on donors as a sign of weakness and vulnerability. At a minimum, organizations seek a diversity of funding sources to provide a cushion in case one source declines or disappears. Commercial funding is particularly attractive because it is potentially unrestricted. Owners of a commercial enterprise can use excess revenues for whatever purposes they like, whereas the use of grants and donations to non-profits is often restricted to particular projects and purposes. Furthermore, commercial markets are potentially huge.

The sources of funds available to non-profits are shifting to favor more commercial approaches. Competition for philanthropic dollars is intense, but money is becoming available for operating on a more commercial basis. Consider the following changes: Today few foundations want to provide ongoing funding – even to highly successful projects. Most choose to limit their funding to short periods in an effort to press grantees to become increasingly self-sufficient. Corporations are thinking more strategically about philanthropy. They are no longer deciding where their grant dollars will go solely on the merits of the programs they will fund but on the value they will derive from the relationship with a particular non-profit. Some corporations are exploring the benefits of direct business relationships with non-profits, and others have started paying for social services as an employee benefit – again creating new commercial opportunities in the social sector.

Navigating Dangerous Currents

Market-based funding approaches do have an important role to play in the social sector. If those social programs that are able to generate their own income in fact do so, philanthropic dollars can be allocated to activities that truly need to be subsidized. But embracing commercial opportunities can be risky. The often perilous currents of commercialization in the social sector must be navigated with care. There are a number of dangers that non-profit leaders should be aware of.

Like the proverbial tail wagging the dog, new sources of revenue can pull an organization away from its original social mission. Consider the YMCA. The association today generates substantial revenues by operating health and fitness facilities for middle-class families, but critics charge that the YMCA has lost sight of its mission to promote the "spiritual, mental, and social condition of young men." Similarly, a former board member of a major dance company resigned because he felt the company had neglected its artistic mission and had become too commercial by performing popular pieces to generate revenue. Of course, changing a mission in order to ensure the survival of a worthwhile organization may be justifiable. But non-profits should be aware that by seizing market opportunities, they may be drawn incrementally and unintentionally into new arenas far from their original focus.

Non-profit leaders should also recognize that creating a sustainable and profitable business is not easy. Market discipline can be harsh. Some studies indicate that more than 70% of new businesses fail within eight years of their inception. Substantial profits, although not impossible to achieve, can be hard to come by. In perfectly competitive markets, companies make only enough to cover costs and to compensate capital providers adequately. Running a profitable business requires skill, luck, and flexibility. Non-profits may have some advantages when competing in commercial markets. Those advantages include their tax status and their ability to capitalize on volunteer labor, to attract in-kind donations and supplier discounts, and to use philanthropic money to help cover start-up costs and capital investments. But those advantages alone will not ensure profitability.

Launching an enterprise is difficult under the best of circumstances. There are formidable challenges non-profits face for several reasons:

Conflicting Priorities. Unlike purely commercial enterprises, non-profits focus on both financial and nonfinancial concerns. They may, for instance, feel obliged to pay what they consider a "living wage" or to hire employees from some disadvantaged pool of people. They may price products to be more affordable to low-income groups or offer products that are deemed "better" or "healthier" than market norms. And they may reach out to customers in locations or in groups that have not had access to certain products or services.

Those are all appropriate social objectives. But they can put non-profits at a distinct disadvantage in the intensely competitive commercial marketplace, dramatically reducing the likelihood that profitability will be achieved. Even if a non-profit's managers and staff are as talented as its competitors', such secondary considerations can doom a venture by dampening revenues or increasing costs or both. They can also keep a non-profit from building the kind of highly competitive, profit-focused culture that is essential to the success of many commercial enterprises.

Lack of Business Perspective. Because philanthropic contributions typically do not have significant operating costs associated with them, non-profits can easily misjudge the actual financial contribution that a venture will deliver. In particular, they tend to overlook the distinction between revenue and profit. If a non-profit receives an unrestricted charitable donation of $100,000, all $100,000 (except for the comparatively small fund-raising costs) can be put to work in pursuit of the organization's mission. In this case, revenue is essentially the same as profit. However, if a non-profit generates $100,000 from a venture, such as a thrift store, some of the funds must be used to cover expenses. Typically, what's left over is at best a small portion of total sales. An examination of standard for-profit business margins shows, for example, that retail eating and clothing businesses with less than $1 million in annual revenues have profit margins of just 2.5%, while the margins of similarly sized employment agencies (these examples are cited because many non-profits operate ventures in these areas) run at only 2%. Even if we assume that the margin on a non-profit's earned-income activity is 10% - an extremely optimistic assumption - a $100,000 business would generate only $10,000 of unrestricted funds in a year. In this regard, the widespread use of the term "earned income" to mean the revenues of non-profit ventures has not been helpful. It has made the distinction between revenue and profit less clear.

Reliance on Indirect Customers. In many earned-income ventures, the intended users can't afford the products or services. That's hardly surprising – many non-profits work with society's most disadvantaged citizens. But it means that ventures must often rely on indirect customers for their revenues, making for complex and sometimes convoluted business models.

Philanthropic Capital and the Escalation of Commitment. Even when non-profit managers realize that their ventures are facing financial problems, they rarely pull the plug. Instead, as is sometimes the case in the for-profit sector, they tend to throw good money after bad, hoping to turn the ventures around and avoid the embarrassment of failure. One non-profit, for example, had a mission to offer teenagers a safe after-school environment with Internet access. It found a historic building with more space than the program needed. With government funds, the organization rehabilitated the building and rented out the upper floors. But the rental income didn't cover the lease and maintenance costs, so the non-profit launched an additional earned-income activity – an after-school café selling cappuccinos and baked goods to the teenagers – to fill the gap. Unfortunately, the teenagers were not interested in, or couldn't afford, its offerings, so the café lost money too.

Rather than abandoning its money-losing ventures, the non-profit expanded its earned-income program by extending the café's hours, broadening the menu, and opening the doors to adults. The results are not yet known, but the likelihood of success seems low. What remains is the picture of a well-intentioned non-profit, which had simply intended to offer Internet access to teenagers, on its way to building a large, money-losing conglomerate encompassing property management and food service.

The slope for weakly performing businesses is always slippery, regardless of which sector they belong to. But the problem of commitment escalation is made even more acute when philanthropic contributions provide the funding for an earned-income venture during its first few years. Because expenses during this period are covered, the risk of losing money seems less pressing to the non-profit. If (or, more likely, when) the philanthropic funding stops a few years later, what began as a well-funded earned-income venture may become an unfortunate legacy.

A Question of Mission

Non-profits that take a cold look at the disadvantages of launching a commercial business will probably conclude that the odds of it generating real financial returns are extremely low. That does not mean that all potential ventures should be abandoned.. Rather, it means that executives of non-profits must ask a critical question: "Does this venture contribute to our organization's core mission?" If a venture furthers a non-profit's mission while allowing it to recoup some portion of the costs, the venture could well be attractive even if it never breaks even.

Sometimes, the pursuit of profit directly conflicts with the pursuit of social good. Take the case of one environmental organization that had a unique database of statistics on important environmental issues. The broad dissemination of the information helped support the organization's causes, but the database was expensive to maintain. The organization decided, therefore, to begin charging users for access. But as soon as fees were imposed, the number of users plummeted and dissemination of the information was severely curtailed. The organization had reduced its environmental impact in its effort to generate revenue. That may be a trade-off worth making, but it highlights the complex interplay, and the managerial challenge, of balancing mission and income.

Even without such a direct conflict, an earned-income venture can impede a non-profit's pursuit of its mission. Launching and running a venture consumes scarce management resources, diluting an organization's focus on its social programs. Consider what happened to an agency that provides training and support to the disabled. It opened a medical supplies store that proved to be chronically unprofitable. Direct costs were routinely more than two times revenue. The store took up more and more of the agency's time and energy as the non-profit's management team made "figuring out this issue" one of its highest priorities. Yet the store was doing little to fulfill the organization's mission. Only a small percentage of the agency's targeted beneficiaries shopped there. It drew only about 25 customers a week and was competing with at least ten other large stores. After ten difficult years, the agency shut down the venture.

The allure of earned income is understandable considering the way philanthropy is often practiced today. In many cases, the impulse that leads non-profit leaders to search for earned income is their passionate commitment to their organizations' missions; they want to help the organizations escape the challenge -- and often the enormous frustration – of attracting the necessary philanthropic support. Most grants are small, short-lived, and restricted to specific uses. Earned income is precious because it comes with no strings attached. It can be used for whatever purpose the non-profit's leaders deem most important, including operating support for programs that have proven their worth and "overhead" such as managerial talent and development that philanthropic and government funding typically do not cover.

Nevertheless, executives of non-profit organizations should not be encouraged to search for a holy grail of earned income in the marketplace. Sending social service agencies down that path jeopardizes those who benefit from their programs – and it harms society itself, which depends for its well-being on a vibrant and mission-driven non-profit sector.

Charting a Favorable Course

Despite the risks of commercialization, non-profit leaders can chart a favorable course through commercial waters in their search for ways both to reduce their organizations' dependence on grants and to enhance their mission-related performance. The challenge is to find a financial structure that reinforces the organization's mission, uses scarce resources efficiently, is responsive to changes, and is practically achievable.

In the end, commercial operations will not – and should not – drive out philanthropic initiatives. Many worthwhile objectives cannot effectively be pursued by relying on market mechanisms alone. In any case, people tend to get something out of giving that they cannot get out of market transactions. People want to make contributions to the common good, or to their vision of it. The challenge is to harness these social impulses and marry them to the best aspects of business practice in order to create a social sector that is as effective as it can be.

The Business of Clothing Donations

The growth of for-profit thrift stores like Value Village is expanding as many people use the extra time at home during the pandemic to clean out their closets, while others turn to thrift stores as they tighten their belts. The surge in secondhand shopping opens opportunities for the public to be misled about how much money these for-profit retailers are making off the charities they brag about benefiting.

For anyone who doesn't want their old shirts, pants, or dresses to end up in a landfill, clothing donation bins sound like a win-win-win solution: the donor gets to declutter, the charity operating the bin gets to resell the clothing to fund good deeds, and a shopper on a budget gets to buy affordable clothes. But in reality, the path your worn-out jeans take isn't so straight and doesn't always benefit the people you may think.

"It's very difficult to see what's going on," said Kate Bahen, the managing director of Charity Intelligence Canada, an organization that aims to help donors make informed decisions. "It sort of goes into a murky world, and it's difficult to follow up what happens to the clothing — how is the clothing actually helping people, how is it charitable?" Bahen asks.

Charities including the Society of St. Vincent De Paul, the Salvation Army, and Goodwill collect their own donated goods and sell them at their own thrift shops, but only about half of what they collect makes it onto the shelves and racks, and only half of that will actually sell. At the Salvation Army, clothes have four weeks to sell before they're replaced by the next wave of donations, according to Tonny Colyn, the national donations manager for the charitable organization.

Other charities may operate their own donation boxes, but they don't always sell the clothes themselves. The Canadian Diabetes Association and Big Brothers/Big Sisters, for example, contract the sorting and selling of the clothes to for-profit enterprises such as Value Village. Value Village agrees to take the contents of the charities' bins, sight unseen, and pay them a flat fee based on the weight of the load. That fee is negotiated on a case-by-case basis and is not publicly available. Value Village then sorts the clothes, and — like the charities that do it themselves — only sells about a quarter of it. So about three-quarters of the clothing sent to thrift shops fails to find a second home. And some clothing donation bins skip thrift shops altogether. This means about 80 to 90 per cent of donated clothing isn't being resold in Canada. So where does it go?

Some use a for-profit broker to find a home for all those unwanted donations. According to the Secondary Materials and Recycled Textiles Association:

·      20% of donated clothing is resold locally

·      25% is sold second-hand abroad

·      30% is cut down and used as rags

·      20% is ground down or reprocessed

·      5% is unusable (ends up in the landfill)

Some of the clothing may be repurposed as rags for industrial use. Some is ground down and reprocessed for use as insulation or car-seat filling. And some is sorted and sold overseas to second-hand retailers in countries such as Kenya, which imported close to $21 million in worn clothing from Canada last year, according to Statistics Canada. In 2017, some $173 million in worn or used clothing was exported from Canada to countries and regions around the world.

The Case of Value Village

Some of the biggest thrift stores (like Goodwill and The Salvation Army) are non-profit organizations, but it's a common misconception that all thrift stores are non-profits. As it happens, many thrift stores are for-profit.

Headquartered in Bellevue, Washington, Value Village and parent company Savers, Inc. state that donations benefit charities, but those claims may be overblown, a 2015 investigation showed.

Savers now operates more than 330 stores in 29 states, Canada (approximately 120 stores), and Australia and employs 22,000 workers. The chain increasingly competes with longstanding non-profit thrift stores that devote most of their revenue to those in need.

Emblazoned on the wall behind cash registers at Value Village’s, the meaning of the feel-good message can’t be missed by shoppers: The purchase of slightly used pants, a vintage jacket, and other thrift-store treasures is an act of charity. The black T-shirts worn by cashiers carries a matching message for bargain hunters with a heart of gold: “Good deeds. Great deals.”

Ubiquitous promotion of charitable activity is a big reason why Value Village’s corporate parent, Savers, Inc., does more than $1.2 billion in business annually. For years it has been the single largest player in the prosperous and growing industry of for-profit thrift stores. Thrift has proved lucrative for the firms’ executives. Former Board Chairman Tom Ellison, for example, owns a $22 million waterfront mansion in the same exclusive Seattle suburb where Bill Gates lives.

But Savers’ claims about doing good for charities may be overblown. Behind many a great deal at Value Village is what others might see as a pretty meager good deed. Behind others there appears to be none.

Sometimes Savers’ charity partners have received less than 5 percent of sales revenue on goods donated on their behalf. Overall, it appears that between 8 percent and 17 percent of the firm’s revenue ends up with charities. Meanwhile, Savers does not routinely tell donors how much of their used-goods donation actually goes to charity. That may mislead donors to overestimate their good deed, and according to tax experts and charity-watchers, prompt them to take a tax deduction that is far too high.

And Savers, after decades of relying heavily on its partner charities to gather goods for sale at its stores, has embraced a new strategy: asking donors to drop off merchandise directly instead of donating to charities that then bring the goods to Savers. These in-store donations pay charities far less per pound than merchandise brought in by the charities themselves.

Many charities have severed ties with Savers in recent years citing terms that were too unfavorable. One charity that pulled the plug was the Boston-area Big Brother Big Sister Foundation which now is netting three to four times the revenue it received under the Savers deal by operating its own thrift store, according to Steven Beck, director of the non-profit. “If a charity is making 4 to 6 percent, that’s pretty unbalanced,” Beck says. “If you’re making a million, and we’re making $40,000, how is that helping charities?”

Critics say Savers’ consumers and donors are being deceived because so little of the stores’ revenue actually reaches charities. Consumer advocate Sylvia Kronstadt says consumers and donors should shun Savers because of its business model. The company, she says, "preys on donors’ good intentions to create fabulous wealth for itself.” To her, “the charities who ‘partner' with Savers are guilty as well, for allowing their names to be used in exchange for a few pennies on the dollar."

“A lot of people coming in here think we are a charity,” Sean Macrae, a floor worker at one of Savers’ Value Village stores in Seattle told InvestigateWest, even though Savers is registered as a for-profit business in Washington state and elsewhere.

Goods sold in Savers’ stores come from charities’ collection bins, at-home pickups scheduled by telemarketers paid by Savers or a non-profit partner, and special fundraising drives. And from the in-store drop-offs Savers now favors. Potential donors are targeted with radio and TV ads, direct mail appeals, postcards, and brochures. Charity-watchers say Savers and stores like it are quietly reaping a bonanza on donated goods, giving back minimally to charities while spouting slogans like “Donating to Value Village is a great way to Donate to Charity.”

Savers’ non-profit competitors are pointed in their criticism. "It would not be deceptive if Savers stated clearly on its doors that they were collecting on behalf of certain charities and let you know whatever percentage that amounted to,” said Michael Meyer, a vice president of Goodwill Industries International. “Now … the presentation is creating enough grayness that it’s not clear to the consumer."

Overall, Savers says it paid $200 million to charities last year. If the $1.2 billion in annual revenue that Moody’s estimates Savers made for the year is accurate, that works out to Savers keeping roughly 83 cents of every dollar it takes in, while charities get 17 percent. Hoovers estimates Savers’ annual revenues at $2.4 billion (and Dun and Bradstreet estimates $2.6 billion). That would mean about 8 percent of Savers’ revenue is going to charity.

Savers’ largest non-profit competitors, which are required by law to report their finances to the public, spend a large majority of revenue on helping people in need. For example, even though Goodwill Industries International has been criticized for extravagant executive salaries, its audited financial statement shows that it devotes 95 percent of its revenue to programs that help the disabled and others who have difficulty securing work.

The price discrepancies between what Savers pays the charities and how much items earn on the sales floor are also stark: A tie that Value Village might pay a nickel to buy from a charity sells for $4.99. A vintage women’s top that costs Value Village a dime sells for $9.99. A purse that Value Village gets for about a quarter retails for $12.99. A vase, which Value Village doesn’t pay anything for under the contracts InvestigateWest reviewed, goes on the sales floor for $14.99. Those figures, based on one typical contract and purchases made by InvestigateWest at a Seattle Value Village, vary from store to store and non-profit to non-profit, but across its operations, Savers’ business model is based on paying a few dimes per pound for clothing it sells at secondhand-retail prices — a considerable margin.

Calling itself “the thrift superstore with a community conscience,” Savers defends itself against supporters of non-profit thrift store operators, stating that it offers medium-sized non-profits a way to earn money even if they can’t open their own thrift stores, like behemoths of the industry, Goodwill and The Salvation Army. Indeed, some of Savers’ charity partners have done business with the chain for decades.

In 2015, Value Village thrift stores were sued in the U.S. for "misleading people about how much of their donations actually go to charities and concealing its role as a for-profit company," In late 2019, a judge ruled that the organization had indeed violated the law and misled its customers into believing the stores were not-for-profit.

Laws help protect consumers, of course, but it's important to note that even bona fide non-profit thrift stores don't donate all of their money to charity or use all of it on their programs. "About 90 percent of our revenue goes towards job training and sustainability," Ted Chellis, a Canadian Goodwill Stores district manager says. Additionally, 10 percent is set aside for administration costs and a small percent is for fundraising. The Salvation Army, which generates about $10 million annually from thrift shop sales, spends 75 percent on programs.

Thrift Store Success Stories

At the Women in Need (WIN) flagship thrift store in Victoria, BC, volunteers greet customers as they walk in the door. Groups of teen hipsters peruse the vintage section, young couples buy their first furniture together, and struggling single moms use gift certificates from the organization to clothe their children. In the administrative office overlooking the store, a small staff runs everything from operations to programs helping women.

“We’re a community service co-operative, so everything is integrated,” said executive director Clare Yazganoglu. WIN has 37 paid staff and about 50 volunteers to operate three thrift stores, two drop-off centres, and five social programs ranging from crisis referral and training to helping provide furniture and clothing for women in crisis and fleeing abuse. “Staff overlaps. We run the stores and the programs,” said Yazganoglu, adding WIN relies almost solely on its thrift stores for its $1-million-a-year operating budget.

Dozens of charity organizations such as WIN bank on revenue from thrift-store operations to sustain a variety of social programs. For example, in Victoria, the Salvation Army operates six thrift stores and a recycling centre to support local shelters and food banks, providing vouchers to the needy. Beacon Community Services has operated thrift stores for 33 years in the region. The $1.6-million annual revenue from its seven stores is its main source of non-government funding and supports programs for everyone from babies to seniors. Other organizations, such as the Society of Saint Vincent de Paul, run stores to help fund housing and create an access point for clients.

Like other businesses, thrift stores are subject to economic whims and consumer trends. But unlike many other sectors, the charity used-goods market thrives when the economy is down and people choose to spend on second-hand items rather than new ones. After the 2009 recession, an increase in unemployment and decline in disposable income in Canada resulted in a surge in used-goods revenues, which rose from about $1.1 billion to $1.3 billion in one year. Low income (i.e. those below the poverty line) households are a major market for industry operators because they have limited income to spend on discretionary goods.

Canadians spend close to $30 billion a year on used goods, according to the Kijiji Second-Hand Economy Index. To stay viable and competitive with the fast-growing cheap-goods market, charity thrift stores are getting creative in how they solidify a niche for shoppers and a specific community. “A lot of people come for our vintage,” said Shoko Sato, WIN’s marketing and communications coordinator. Since its inception in a tiny Quadra Village storefront more than 20 years ago, WIN has had a vintage section. That, along with a boutique section for higher-end women’s clothing, are major draws — WIN even sets up a table at vintage and collectible fairs around the region. The organization also holds an annual auction of designer goods.

It’s a smart strategy, considering 30 per cent of the used-goods market in Canada is women’s clothing. Another 30 per cent is furniture, which has prompted many thrift stores to post furnishings for sale on online classified websites.

“It gets people in the door who might not know we’re here,” said Allan Cuthbertson, retail programs manager for the Society of Saint Vincent de Paul. The non-profit organization operates six thrift stores in the Victoria region and runs six programs, ranging from a food bank and vouchers for store goods to housing and supports for those with a variety of needs.

The six St. Vincent de Paul stores have a combined staff of about 56 people and the same number of volunteers. They generate about $1.8 million a year, with 15 to 20 per cent of revenue going to support the organization and its programs — including $145,000 in gift vouchers. The administrative and programming side of the organization is managed separately.

“Then there are the social benefits of the stores,” said Cuthbertson, noting the shops act as outreach locations and provide reasonably priced goods for everyone. “We’re community-based. Any money we generate stays in the community.”

Thrift Stores During the Pandemic

Thrift shops across Canada are experiencing a surge in donations as people stuck at home during the pandemic turn to decluttering. People have a lot of space and time at home and they are cleaning up.

Donations of clothing and household items at the Salvation Army’s 100 thrift stores across the country have tripled since the beginning of the pandemic. But the same driving force behind the spike in donations is also responsible for a decrease in sales. Retail sales at stores across the country are down 25 per cent due to temporary store closures and customer in-store limits, and the charity has also been forced to shut down nine of its stores that were no longer profitable as a result.

Steve Preston, CEO of Goodwill Industries International, says $4.5 billion of the group's $6 billion in annual revenue (internationally) comes from store sales. As Goodwill stores across the nation have closed, the non-profit faces severe losses.

Conclusion

The language, practices, and outlooks of business and philanthropy are becoming increasingly intertwined in the field of social entrepreneurship, with important ramifications for both for-profit and non-profit institutions. On the non-profit side, some donors are trying to bring the logic of markets to the way charities raise money. A new type of business that integrates financial returns with social good is becoming common. Sometimes called 'for benefit' companies, these hybrids have access to capital markets but they're explicit that profit isn't the top priority, or at least not at the expense of the workers, the environment, or the community.

Pursuit of earned-income activities attracts and even demands an influx of new talent with business expertise at both the board and staff level, resulting in a fresh perspective on a non-profit group's traditional services and operations. Competing in the open marketplace helps a non-profit shift its focus from process to results, with a parallel benefit to its overall effectiveness and accountability. Social enterprise often raises a non-profit's public profile and exposes it to new audiences that may be the source of additional human and financial capital. And finally, social enterprise represents good stewardship; when successful, it reduces demand for philanthropic resources that are more appropriately invested in organizations that have no earned-income potential.

Non-profit business ventures can be a powerful tool to meet community needs, address social and environmental challenges, and produce important revenue for non-profits. They can help build more inclusive, co-operative, and sustainable local economies and communities. The pursuit of earned income can enhance a sense of self-determination in non-profits that live under the threat of changing funder priorities and endless fund raising. The revenues of thrift stores like Value Village, Salvation Army, and Goodwill – and even smaller operations like Women in Need – demonstrate that non-profit retail ventures can be tremendously profitable, but are not without risk.

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