PROMOTIONAL MERCHANDISE: Promotional power

Rose Smith

He adds: "Although the knickers and flip-flops are targeting a customer of a similar age to the T-shirts, it gives the charity access to a wider audience."

Selling branded merchandise through high-street stores has opened up a new revenue stream for charities and provided them with a chance to reach a wider audience.

The ring of cash tills is not synonymous with charities but is becoming music to some fundraisers' ears. As organisations successfully recruit donors on the high street through face-to-face fundraising, the next step is to target the public from inside a retailer with promotional merchandise.

Charity pins, badges and antler horns have all appeared in large high-street retailers, but persuading a consumer to buy a product because they want it and not because of its charity logo presents a fresh challenge to the voluntary sector.

WWF-UK launched retail animal adoption kits on the high street last Christmas. The charity wanted to engage a younger audience and, by adding purchasers to its database, promote its direct debit scheme. But adding a new revenue stream to the charity's fundraising was its main objective. "Year one of the retail adoption is a cash cow for WWF," says Andrew Foot, retail fundraising manager at the organisation. "It is too early to say whether we will convert purchasers to being long-term donors." With profit of £210,000 from a pilot run of 16,000 boxes, the organisation doubled its expected sales target.

The RSPB has entered into licensing a soft songbird for different reasons. While netting £6,000 in royalties in just over two months of the toy being on the market, the charity is keen to stress the promotional value of the product. "Our main objective is brand awareness and income is secondary to that," says Tom Oakley, licensing co-ordinator at the RSPB. "We have more than a million members who would be upset if they saw us spending money on marketing. The birds have given us free PR. Terry Wogan, for example, played one on his BBC Radio Two show."

Other charities are drawn by a combination of income and brand promotion. The RNLI plans to launch a range of branded outdoor clothing through high-street retailers by the end of next year in an attempt to meet the shortfall of shrinking legacy income. Foliomoda, the agency which it is working with, is also in discussions with the RNIB, the British Museum and Royal Shakespeare Company. "We are unlocking the intellectual property of these charities to allow them to license merchandise which can be made widely available through UK and US retailers," says Sean Chiles, managing director.

Under current legislation, voluntary sector organisations have two ways of selling promotional merchandise on the high street. First, a charity licenses a company to use its brand and receives a royalty payment. The other method involves more risk but higher profits. It takes the stock risk and places goods in a third-party premises which then sells them. This is classified as for-profit trading and must be conducted through a trading arm.

The latter model represents a refinement of licensing companies to sell goods and allows for products which are directly related to the charity. Andrew Watt, head of policy at the Institute of Fundraising, says this method of selling can concentrate a message more clearly on the brand, but adds it is vital that the focus remains tight. "The public has to understand why they are targeted with a product and what the organisation is hoping to gain from it," he says. "There needs to be clarity of the net benefit for the charity and the commercial partner."

After a charity has decided which approach it wants to make to the high street, it must find the right merchandise. "Charities must get it right by providing a product that people would buy anyway and then the charity element is really a bonus," says Saskia Heath, account manager for WWF-UK at marketing agency TC Communications. The charity compiled a profile of who they wanted to target based on five years of selling its catalogue adoption product. "Retailers said to us 'we love this idea', and that's definitely as good as any research you do," says Foot.

Heath agrees by saying that retailers will only buy the product in the first place if they know it will sell. However, the pull of charity association can help. "Working with a brand like WWF-UK is considered very valuable by the retailer. I am amazed how many department stores are very green but they're not putting the message across," she says.

With only a handful of charities making forays into high-street retailing, the recommendations in the Cabinet Office's Strategy Unit report to relax trading restrictions could unleash a host of merchandise into the market. Charities could produce and supply products without the need for the creation of a trading arm.

But experts don't predict too many organisations will take advantage of this. "It is difficult to envisage a lot of charities trading like this," says Stephen Lloyd, partner at solicitors Bates, Wells & Braithwaite. "The business world sets up other companies to reduce financial risk and I can't imagine the charity world being any different."

Watt agrees: "Why bother taking risks with the costs of product development when you can take a percentage from goods through a licensing system?"

CASE STUDY: WWF SELLS ADOPTION BOXES IN SHOPS

WWF-UK has sold animal adoption packages through its catalogue for the past five years and decided to launch the scheme as a retail product last year. After being approached in January by marketing agency TC Communications, the charity selected the tiger, panda and dolphin - the three best-selling animals from its range of six - to sell as gifts on the high street.

The agency designed and produced the boxes in-house, charging WWF-UK an initial fee of £10,000. Inside each kit is a soft toy, a pen made from recycled materials, a window sticker and an activation card that can be registered online or through a dedicated telephone hotline. After registering, the purchaser receives regular updates and newsletters about their animal.

TC Communications negotiated with around 30 retailers to find a good match with the WWF-UK's business and industry policy, which would prevent the boxes from being placed in Esso petrol stations, for example. Debenhams, which is advised on its environmental policy by WWF-UK, Superdrug and Selfridges agreed to stock the product.

As soon as Debenhams and Superdrug had placed their orders, the agency produced 16,000 boxes. From hitting the shelves in September until Christmas, the three stores had sold 15,000 boxes retailing at £39.99. Under different agreements with each retailer, WWF-UK made an average of £13 profit on each sale while the agency received £9. This compares to the charity selling 1,000 boxes at £20 profit through its catalogue.

WWF-UK plans to extend the range of animals and sell the boxes through card and bookshops as a year-round gift. After a review of the product sales, it is also considering lowering the price to around £30.

CASE STUDY: RSPB TURNS TO THE HIGH STREET

The blue tit, goldfinch and puffin are part of a range of 12 soft songbird toys which play an authentic birdsong when activated. The birds are sold from baskets in a mock-up tree in John Lewis, the Rainforest Cafe, zoos and sealife centres as well as the RSPB's own reserves. Since going on sale in February, suppliers have ordered 41,000 with 3,000 being sold in reserve shops.

Toy manufacturer K&M Europe approached the charity with the idea of producing a premium soft toy for the retail market. After in-house research, the RSPB signed a deal with the company through its trading arm, RSPB Sales Ltd, licensing it to use the charity's logo. In exchange, the firm is responsible for all the costs including shipping and manufacture.

Of the £5.99 retail cost, the RSPB receives 14p or 6 per cent of the wholesale price. It has signed a three-year agreement that includes an annual guaranteed income which the toy manufacturer must meet if sales fall short of target.

The charity was closely involved in the production process ensuring that the appearance of the birds was as realistic as possible. It had direct control over the pricing of the birds, imposing a limit on the wholesale price to prevent the product being seen as too lucrative. It also expressed a preference over sale locations to protect its brand, for example, the birds were not sold on market stalls. But the charity admits it is difficult to impose extensive limitations under the licensing agreement.

The location and conditions of manufacturing were also a consideration. The birds are made in China and K&M Europe had to provide the RSPB with a certificate guaranteeing that employment regulations are followed.

CASE STUDY: TRAID TEAMS UP WITH TOPMAN

Textile Recycling for Aid and International Development, an organisation which sells second-hand clothing to fund overseas development projects, has charity shops in London and Brighton. Eighteen months ago, it entered into a partnership with high-street fashion retailer Topman.

Under the agreement brokered by Wayne Hemingway, a designer and consultant for Topman and a strong advocate of second-hand clothing, Traid sells vintage and customised clothing through the London and Manchester branches of the men's retailer.

Every Monday, the store calls Traid and requests stock according to demand. On average, it takes 100 customised and 200 vintage garments a week. A vintage T-shirt retails at around £12 with a shirt selling for £25, while higher-priced customised pieces sell in Void, a designated area of the shop.

The partnership allows Traid to make a higher mark-up on vintage items than through its charity shops, and customising generates more income on lower quality garments.

Each piece of clothing provided by Traid carries a tag which states that by buying the item, the customer is supporting its work. Sales in 2002 generated £51,000 for the charity.

Although Topman takes a profit margin from sales of Traid clothing, the retailer has classified the supplier as "homebuy", which means the charity can take a higher margin than its other suppliers.

The main benefit of the partnership is being able to access male shoppers, says Maria Chemoweth, commercial manager at Traid. "Most charity shops have a female customer base and so this clothing would not appeal to a typical Traid customer," she says.

CASE STUDY: BREAKTHOUGH EXTENDS ITS RANGE

Breakthrough Breast Cancer has developed a strong high-street presence through its annual Fashion Targets Breast Cancer campaign. Launched in 1996, it is best known for its range of target T-shirts, which change colour in line with the season's palette. Stockists include River Island, House of Fraser, Kookai and Morgan.

This year, the campaign has expanded its range of merchandise by teaming up with retailers H&M and Accessorize.

H&M has made 5,000 pairs of knickers featuring a small target to sell throughout its UK stores. Each garment retails at £5.99 with £2.50 donated to Breakthrough Breast Cancer.

The charity also approached Accessorize about developing promotional footwear. The retailer came up with the idea of producing brightly coloured, target-branded flip-flops to sell in its stores. Around 5,000 pairs have been made and will go on sale from next month for £8.99, with £3 going to the cancer charity.

The two additions to the range are made under licence through Breakthrough Promotions, a departure from the target T-shirts which are produced and supplied to high-street retailers by the charity and which generate £6 profit on each sale. The risk, however, is reduced with the retailers covering the set-up costs.

The new merchandise adds value to Fashion Targets Breast Cancer by getting people talking about the charity, says Peter Reynolds, director of fundraising.

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