How Charity Shops Work and Where Your Money Goes

You drop a bag of jumpers at the charity shop on the high street, buy a paperback for two pounds on the way out, and assume most of that money reaches the cause on the window sticker. Sometimes it does. Often a large share goes on rent, wages and the cost of throwing away donations nobody can sell, and very few shoppers know how charity shops actually turn a bag of clothes into funding.

That is not a scandal. It is retail. But knowing how the numbers work changes what you donate, where you shop and which questions are worth asking. Here is how a typical charity shop runs, using figures from UK retail charities and the trade body that represents them.

How charity shops make their money

A charity shop is a trading arm of a charity. In the UK there are roughly 11,000 of them, and together they raise somewhere around 300 to 400 million pounds a year in profit for their parent charities. Income comes from three main streams.

• Sales on the shop floor. Clothing is the backbone, usually 40 to 60 percent of takings. Books, homeware, toys and small furniture make up most of the rest.
• Gift Aid on donated goods. If you sign a Gift Aid declaration, the shop sells your items as your agent and the charity can claim an extra 25 pence on every pound raised. That can add 10 to 20 percent to a shop's income.
• Rag and textile recycling. Clothes that do not sell are bundled and sold by weight to textile merchants. Prices swing a lot, but a shop might get 10 to 40 pence per kilo.

Some charities also sell new goods, such as cards, candles and Christmas wrap, which carry better margins than donations but have to be bought in first.

Where the money goes before it reaches the cause

A shop with 250,000 pounds of annual sales is a fairly typical mid-sized high street unit. Here is a rough breakdown of how that sum might be spent.

So from that two pound paperback, somewhere between 40 and 80 pence might fund services. A well run shop in a cheap unit with a strong volunteer team can do better. A shop in a pricey city centre unit with poor donations can run at a loss for years.

If percentages like these make you uneasy, our guide to the charity overhead ratio explains why spending on running costs is not automatically a sign of waste.

The volunteers behind the till

Most charity shops run on volunteers. A typical shop has one paid manager and somewhere between 10 and 30 volunteers, each giving a shift of three or four hours a week. Across the sector there are well over 200,000 volunteers.

The manager's job is mostly logistics: sorting incoming donations, pricing, steaming clothes, building window displays, rotating stock every couple of weeks and handling the waste. Stock that has not sold in two or three weeks is usually moved to another branch, sent to an online shop, or bagged for the rag merchant.

Volunteering in a shop is one of the easiest ways to get involved with a charity. You learn retail skills, most shops are flexible about shifts, and you can see for yourself how much of a donation pile is actually sellable.

Why more donations is not always better

The usual advice is simple: clear out your cupboards and give the lot to a charity shop. I think that advice does real harm when it is followed without thinking, and shop managers say the same thing in private.

Somewhere between a quarter and a third of donations cannot be sold. Stained clothes, broken electricals, single shoes, old textbooks, video tapes and anything with a safety concern have to be sorted and disposed of. The charity pays for that disposal. Commercial waste collection can cost a shop 1,000 to 3,000 pounds a year, and fly tipped bags left outside overnight are often ruined by rain before anyone opens them.

A bag of 20 good items is worth far more than four bags of mixed quality, because the volunteer time spent sorting is the real bottleneck. The same logic sits behind why a small nonprofit sometimes says no to donated goods. Before you donate, ask one question about each item: would I pay money for this in its current state? If the answer is no, the rag bin or the tip is the more honest home for it.

How to get the most from your donation

1. Sign the Gift Aid form. It takes two minutes once and adds a quarter to the value of everything of yours the shop sells, as long as you pay UK income tax.
2. Wash and pair things. Clean, folded clothes go straight to the rail. Shoes tied together and sets of plates kept complete sell faster.
3. Drop off during opening hours. Never leave bags outside a closed shop.
4. Donate seasonally. Coats sell in October, not May. Many shops have limited storage and cannot hold stock for months.
5. Ask about specialist branches. Some charities run separate furniture, book or bridal shops where higher value items fetch better prices.

And when you shop, remember that buying is as useful as giving. A shop full of donations but short of customers still loses money. A regular Saturday browse, a few pounds spent on books or a winter coat bought second hand instead of new, keeps the till moving and the shop open.

Frequently asked questions

How much of a charity shop's money goes to the charity?

It varies widely, but a typical figure is 20 to 40 percent of sales once rent, wages and other running costs are paid. Shops with low rent and a strong volunteer team can pass on more. The charity's annual report usually shows the trading profit from its shops as a separate figure.

Do charity shop staff get paid?

Most charity shops have one paid manager and sometimes an assistant manager. The rest of the team is usually made up of volunteers working short weekly shifts. Larger chains also employ area managers and warehouse staff.

What happens to clothes charity shops cannot sell?

Unsold clothing is normally moved to another branch first, then sold by weight to textile recycling merchants. Some of it is exported for resale abroad, and the lowest grade is shredded for insulation or cleaning cloths. Items that are dirty or damaged may simply be thrown away, at a cost to the charity.