It's a tough time to be a retailer. The spiralling cost of living is expected to make consumers increasingly reluctant to spend, and that will affect charity shops too. But many charities have hit upon a new way to combat the credit crunch: niche retailing.
The British Red Cross, Oxfam, Traid, Fara and Amnesty International are among the many charities that run niche shops. These outlets specialise in vintage designer clothes, 'upcycled' clothes by new designers, wedding clothes, books, records - the list goes on. But how successful are they? And what makes a successful niche retailing operation?
In the past, conventional charity shops have fared well in tougher economic conditions. But today they cannot rely on low prices alone to get shoppers through the door: they are undercut on the high street by low-cost retailers such as Primark and Matalan. David Moir, head of public policy and public affairs at the Association of Charity Shops, an organisation that represents 300 members with 6,800 shops across the UK, says: "Consumer behaviour is unpredictable at the moment, but we're expecting the figures from June to show that sales are down across the board. Competitors such as Primark not only sell clothes more cheaply than charity shops, but they also reduce the number of quality clothes that are donated to charity shops. These are two major challenges for our members."
This is where niche retailing comes in. The charities that run niche shops hope their distinctive, original merchandise at affordable prices will divert the consumer's attention from the big budget names on the high street.
However, an announcement from Cancer Research UK in May that it was closing its Wishes chain of niche greetings cards stores caused some doubts about the success of this strategy. Many charities rely on their shops for revenue, so it is vital that they take on board the lessons that are emerging from the failure of the Wishes chain.
CRUK launched Wishes in 2004. In May 2007, it invested nearly £1m in refitting and stocking 16 new outlets. So it came as a shock when the charity announced only a year later that it was to close all 29 of them.
The charity will clear most of its stock through a closing down sale and sale-or-return agreements with suppliers. Its traditional stores will continue to sell Wishes cards, sometimes in a special section of the shop, and the Wishes stores will be converted back to standard CRUK shops by the end of September at a cost of about £3,000 a shop. The charity hopes to find employment for all Wishes staff in its other stores.
Once that is done, all that remains is to analyse what went wrong. Simon Ledsham, trading director at CRUK, says: "Since we began trialling the Wishes concept, the greetings cards market has moved towards more convenience and impulse purchasing, with customers tending to buy at supermarkets, petrol stations and other outlets that they are visiting for other purposes. This has tended to put additional pressure on dedicated card shops, which need to attract 'destination shoppers' in order to thrive."
Ariane van de Ven, a strategist at brand agency Brandhouse, believes CRUK has failed to fully appreciate where it went wrong. She agrees that the first error was relevance. "Consumers who lead hectic, busy lives don't have time to visit a specialist gift card shop, preferring to pick one up at a convenience store or supermarket instead," she says.
But she also believes the charity failed to develop an effective identity for Wishes. "The identity was quite boring," she says. "Consumers are now able to support charities that are sexier and more representative of their own lifestyles. Hallmark's range of RED cards - with their bold, sleek graphics - are more appealing, as are Paperchase's charity cards, which feature stunning designs."
Finally, she believes Wishes failed with its locations. She says: "In the event that consumers did want to do a good deed and buy their greetings cards from Wishes, they had to search reasonably hard for stores. In London, the shops were in areas such as Pinner and Orpington, which are not typical shopping locations."
Martin Greenwod is managing director of Fara Enterprises, the commercial arm of Fara, which works with disadvantaged families in eastern Europe. He agrees that location and brand are crucial elements for a niche charity shop. "We have 40 shops in total, five of which sell children's clothes, toys and books," he says. "We wanted to address the high cost of kids' clothes and offer mums an option to buy high-quality, affordable recycled clothes. We've opened our five stores in Fulham, Pimlico, Earlsfield, Clapham and Ealing over the past three years and have considered the location very carefully each time.
"You have to understand your target audience very well and know exactly where they shop. Once you've got the right locations, you need to be clear about your brand values. We don't compete on price; we offer high-quality clothes. Finally, you need to staff your shops with people who are good at dealing with the public."
Oxfam opened a boutique shop in Westbourne Grove, west London, in May 2008, and van de Ven believes it is a good example of how to run a niche charity shop successfully. She says: "It's located in the heart of London's boutique shopping district. Jane Shepherdson, formerly of Topshop, is heading the creative direction. It's selling vintage designer clothing, such as a Miu Miu skirt at £50 or a Stella McCartney jacket at £90, some of which has been customised by students from the London College of Fashion.
"It also sells fairly traded labels, such as People Tree and Kazuri, and labels that specialise in fabric recycling, such as Junky Styling and Kitty Cooper shoes. The shop is run as a proper business venture, and the offering is strong, exciting and renewed regularly to keep consumers coming back."
Getting niche charity retailing right involves a challenging mix of product, location, brand and personnel, but the experiences of Fara and Oxfam suggest that a wide range of charities, both large and small, can get it right. The fact that a growing number of charities are moving in this direction also suggests that niche retailing will become increasingly important to the sector.
Perhaps the strongest evidence that niche retailing is the future for charities comes, paradoxically, from Ledsham at CRUK. "There are some towns that have both a general CRUK shop and a Wishes shop," he says. "In those situations, each area manager will be able to look at alternative propositions for the extra store. This might be a premium store, a book store, an audio store or some other specialist area."
Wishes may not have succeeded, but CRUK remains convinced of the value of niche retailing. Having learnt from its mistakes, the organisation should be well placed to become an even more successful retailer in the future.
CASE STUDY: C@Walk
Veterinary charity the PDSA opened its first niche shop, C@walk, in Worksop, Nottinghamshire on 25 April. It sells high-quality, up-to-date fashion pieces from brands such as Dirty Pretty, an eco-friendly clothing range by fashion designer Sam Wain.
Eric Russell, area retail manager for the PDSA in the north west and south Yorkshire, says: "It's becoming more and more difficult to get quality donated clothes. We'd already stocked some new clothes in our existing stores and they'd sold well, so it made sense to expand in this direction. It will allow us to reach a younger audience."
The charity chose Worksop because it had the right demographic, attracted shoppers from a wide catchment area and was able to obtain a high-street site.
Two months on, Russell is unwilling to divulge sales figures, but says the shop is achieving forecast sales. The PDSA is so convinced it will be successful that it is already looking for new sites, one in the north and another in the south of England.
Russell offers this advice on how to succeed at niche charity retailing: "Differentiate your new shops from your core ones. The charity connection is clear once you're inside the shop, but from the street C@Walk looks like a ladies' fashion shop. You also need to make it clear to shoppers that they are not only buying good products at a great price, but also supporting a worthwhile cause. In the end, that's what will make them come back and tell their friends about it."