One of the things I really enjoy about the calls I get from journalists is that they prompt me to consider new aspects of consumer issues.  This morning I was called by BBC Radio Bristol to talk about the rise of charity shops on UK high streets.

At the heart of the issue is the advantageous cost base that charity shops enjoy.  Not only do they receive heavily discounted business rates (80% discounts are mandatory), they also capitalise on difficult economic conditions by taking on retail premises at very low rents: the landlords must continue to pay business rates even if their premises are unoccupied, so they are under considerable pressure to find a retail tenant.

With their donated stock and volunteer staff, charity shops benefit from significantly lower running costs.

The issue is far from simple.

The very nature of ‘charity’ is highly emotive: few people would say charities are, in themselves, bad things or motivated by anything other than very worthy goals.

A high street with empty shops is not a good thing, so in filling such a space a charity is making the retail environment better for everyone.

Whether being next to a charity shop (or several) is good or bad won’t have one answer.  Some retailers will benefit from the extra traffic and framing of their store against a charity one.  Others may be undermined by this context, and be perceived as more expensive or more indulgent than when the psychological frame of a charity shop was not present.

At present the default advantage given to charity shops makes no allowance for how their presence or weight of numbers might impact the high street as a whole, but it would be relatively straight-forward for a team of behavioural economists to identify when their presence was for the greater (retail) good and when it would be better to say no.

However, there is another issue involved.

At present the UK itself is virtually a charity case.  The revenue generated from charity shops who charge no VAT on the sale of donated goods, who pay no tax on profits and who pay tiny business rates, is very small indeed.

In my view it would be far better to create a level playing field.  Have business rates linked to profitability to encourage more people to start retail businesses (not just charities).  One consequence of this would be to create a more level playing field between the supermarkets and high street stores, the former enjoy substantially lower business rates, proportionately.

A prosperous retail environment is vital to the economy and that is more likely to be obtained with diversity: not just in terms of charity and non-charity, but in terms of the psychological drives that people can satisfy there: yes, saving money is one, as is buying something to fulfil your sense of social belonging, but feeling great from the purchase of a designer shirt that satisfies your desire for status is another that is no less important in psychological terms to some people.

Subsidies always risk corrupting markets.  My view is that the commercial advantage charity shops enjoy is too great.  Particularly when you consider that we may all be paying the price for them for many years to come, in terms of their very limited contribution to the local economy (they are often not paying staff a wage) and the national economy.

As I mentioned, none of the above is intended to take-away from the role charities play in society.  But the balance is all important and other routes to charitable fund-raising don’t have the same long term cost to the economy.

For example, a charity concert has the capacity to boost the economy as a whole.

Where a charity shop is an asset to the shops around it, where the upside has been evaluated and is understood, then the incentives should exist.  But a charity shop isn’t always the answer and, by affording non-charity retailers similar opportunities the potential prize is arguably greater for society as a whole.

Philip Graves

Leave a Reply

Your email address will not be published. Required fields are marked *