Thrift Stores

A Discussion by: Dave Barringer, SVdP National Chief Executive Officer

The concept of Pricing is the least understood among the “4 P’s” of marketing – Price, Product, Place (distribution), and Promotion. However, a good pricing strategy can be your strongest tool toward sales and profits in a thrift store program.

In this article I will discuss several pricing strategies you can use to develop a set of guidelines for your store that help ensure you are creating maximum value for your store as well as your customers. As the former National Chief Marketing Officer and National Director Stores Support for Goodwill Industries, my insights below are based on twenty years of supporting more than 2,500 thrift stores across the United States. While the Society of St. Vincent de Paul is quite a different organization, the pricing theories and practices between the two retailers are much more the same than different.

First, know your limits. There is no point in operating a store unless it makes money for your organization. Certainly, the Society of St. Vincent de Paul (SVdP) may give away some, or even a lot, of what it collects directly to people in need, the store still needs to make enough money to keep the operation going. Fortunately, there are proven ways that a store can properly integrate with other aspects of the Society and still meet business objectives.

Here is an example of how this might work: The Council that owns the store wants to provide mattresses at no charge to families in need. They create vouchers for its Conferences to give to those who need this product, who bring them to the store for redemption. You know what each mattress costs from the supplier. Add to this any storage, transportation and other costs, such as labor and administration. From this, derive a “price” for the mattress, even though you will not charge the family in need for it. You will, however, charge the Conference this price for the mattress. In this way, you maintain the sales you need for the store’s livelihood, still provide the mattress at no cost to the family and keep a reasonable cost for the Conference who would otherwise need to purchase a new mattress elsewhere. A corollary example: The Conference may use its own vouchers to purchase the mattress, earned from its collection of saleable goods that are given to the store. Again, pricing plays a role here. The retail team determines, for example, that a truck full of used donated goods is equal 100x. The Conference holds a collection event at its parish and fills the truck. Upon pickup, the retail team pays the Conference in vouchers worth a percentage, say 60x, of the truck’s contents resale value. Everyone wins.

The first critical component of a good pricing strategy is to know your costs. This includes both direct costs (the cost for each unit) plus the indirect costs (costs that are there regardless of the number of units, such as rent) that are then applied to each unit. Most retailers take the total cost of the unit and then double it to set a price to ensure its profits. This becomes your baseline pricing strategy, cost times 2. This price allows for the unforeseen, such as shrink and damaged goods to some extent, and gives you wiggle room to stimulate sales through pricing discounts later.

Competitive Pricing

Some thrift stores simply copy the price of the other stores in town. This is dangerous because their costs may be radically different. The competitor with many area stores can spread its indirect costs over more stores and more items. Perhaps the competitor wants to price you out of business, by selling their goods so low that if you match them, you go broke first because of your cost structure and/or charitable goals.

I once saw a store that priced its goods exactly double those of another thrift store directly across the street. The higher-price store went shopping at the competitor, took its best goods, then doubled the prices for sale. Customers only saw inferior goods at the lower-priced store and were happy to pay the higher prices for the better goods at the other store because, after all, every item is one of a kind. Believe it or not, the lower-priced store was happy for a while being the wholesaler in effect for the other store. Ultimately, though, they realized that shoppers weren’t coming in any longer, because the “treasures” that shoppers enjoy in all thrift stores were being picked away before most shoppers had a chance to find them. What to do? They raised their prices to cut the profit margin opportunity for the higher price store and kept good values for its own customers who had already proved they would pay the higher prices by their defection to the other retailer.

The same concept applies to shoppers who use our stores as suppliers for their yard sales and eBay/online businesses. They show us that our goods are worth more in the marketplace, so why don’t we price them to keep the profits for ourselves? It may be our charitable intent, which I will discuss later. Remember, the first customers to complain when you raise prices are these retailers who make money from what they buy from you. Thus, these complaints are a sign that you are doing a good thing!

Know your Environment

If you are reading this article in hopes that I can give you a specific price point for every item, or even any item, in your thrift store, then you don’t understand your local environment. Did you know, for example, that food prices may be 30 percent lower in Baltimore than only a few miles away in Washington, DC?

We all live in areas with separate economic conditions and cost-of-living realities. Separate from our competitive status, we also have economic truths to consider in pricing. That four-dollar blouse is a bargain in a high-cost area but priced too high for another one. You probably have some sense of your relative trade market economy. Scoping out other thrift stores and discount retailers will help you gauge the range in which your prices may need to reside, at least as a starting point.

NEXT TIME: PART TWO – Different Pricing Concepts to Explore

If you have a topic that you would like addressed in a future Stores Corner article, please e-mail our Jeff Beamguard, National Director of Stores Support at jbeamguard@svdpusa.org

Written By: Rick Bologna, Stores Director, Central Texas

Are you willing to take a hard and honest look at your store operations? Are you willing to say and admit – I DON’T KNOW WHAT I DON’T KNOW? I would like to share my firsthand experience with you in this article.

Have you ever wondered how you can make your store more profitable? How can you generate more income and move more product through your store more efficiently and faster? As store leaders, we no-doubt have asked these questions in our minds.

In October of 2020, our store in Austin reopened after being closed due to the pandemic. The store had annual sales of $200K and a warehouse stacked high to the rafters with clothes, housewares, donations, and junk, with more items coming in daily.

Through brute force, common sense, and a lot of trial and error, our team installed processes and workflows to push additional product to the floor and generate additional income.

Our customer-base loved the changes we were making in the store; however, our processes and workflows were not sustainable. The key to sales and income is through the back-room production. Please read that sentence again!

We were working extremely hard, but not very smart.

After the first fiscal year, we increased sales to $400K from $200K. Then we went to $610K in our second fiscal year. We had plateaued. This was as far as I could lead our team.

I was tapped out on my knowledge-base and experience in getting us to this level. This was an awful fact that I had to personally own and share with my team — I DON’T KNOW WHAT I DON’T KNOW!

I reached out to the Director of Stores Support in the National Office, Jeff Beamguard, for help. Jeff heads up the National Training Store in Phoenix, AZ and leads the National Stores Committee.

Jeff arrived in Austin in October of 2022, bringing 40 years of thrift store experience and completed a full assessment of our store.

Key components we learned from Jeff:

• Initial sorting of product – Is it sellable, recyclable or trash? This will save you a ton of time on product selection for the floor.
• Each product has an exit strategy from your store — the product will either sell during the color rotation cycle or it does not sell, and it comes off the floor for recycling or trash. IT IS REALLY THIS SIMPLE!
• Initiated the 5-Week Color Rotation Cycle – If the product has not sold after five weeks on the shelves with various markdowns to .99 cents (in a thrift store) the market will tell you, they do not want the product. Put new products out on your shelves and turn over the shelf space more rapidly by selling more profitable items.

In conclusion, I must say, our Austin team has completely embraced what we are doing and where we are going. Without the team’s buy in, we would not achieve this success utilizing Jeff’s assessments, suggestions, and our implementations.

This fiscal year, our sales will be around $800K. Our workflows and processes are now sustainable, due to education. Our annual production in three years went from 109K pieces to 176K pieces, to about 300K pieces this fiscal year.

As a staff, we NOW KNOW WHAT WE KNOW! We are headed towards the million-dollar store benchmark because of education, proven methodologies, and continued support from the National Stores Committee and Jeff Beamguard. The National Stores Committee and Jeff are here to serve you.

How much money are you leaving on the table in your store without this education? Are you doing your store and Council a service or disservice by not running the store as efficiently as possible?

Please take advantage of this educational opportunity for your store and get into the KNOW!

Please encourage your store personnel to subscribe to the to the e-Gazette, by emailing mboyer@svdpusa.org.

If you have a topic that you would like addressed in a future Stores Corner article, please e-mail our Director of Stores Support-Jeff Beamguard at jbeamguard@svdpusa.org.

Written by: Lori Malcom, Northeast Region — Archdiocese of Boston

Determining the appropriate amount of labor hours is critical for an efficient retail operation and can appear to be a very daunting task. Guessing can often lead to overstaffing or understaffing, each of which has negative effects on the bottom line and employee morale.

The following tips will help guide you through the process and may be applied to existing stores operations as well as those in the planning or feasibility stage.

Start by determining the size of the store and hours of operation. Be sure to include the hours the store is open for donations. A manager/assistant manager or lead staff person must be in the store at all times. You can determine if your store will have an assistant manager or lead based on the size and hours of your operation. Some smaller stores may not need an assistant manager. You will need to consider any break periods for the staff to insure you have proper coverage during these times.

Consider all of the duties needed, including sales, production, merchandising, janitorial etc. For example, you will need a cashier and a donation attendant during all business hours. Be sure to include hours when multiple cashiers and or donation attendants may be need for busy times.

Allocate an appropriate amount of time for each job duty for each weekday of operation. Some duties have established labor standards, such as production, others will be reasonably determined estimates. Discuss this with your store leadership and consider their input. Staff acknowledgement and buy-in is the key to an efficient labor standard, accountability, and success!

Please consider attending the National Assembly Stores Meeting on September 6, 2023 in St. Louis, MO to learn more ways to serve your thrift store customers.

Please encourage your store personnel to subscribe to the to the e-Gazette, by emailing mboyer@svdpusa.org.

If you have a topic that you would like addressed in a future Stores Corner article, please e-mail our Director of Stores Support-Jeff Beamguard at jbeamguard@svdpusa.org.