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Questions Are Raised Over Thrift Store Chain’s Charitable Deeds

“Every used item in this store was PURCHASED from our non-profit partners.”

Emblazoned on the wall behind cash registers at a Value Village thrift store in Bellingham, Washington, the meaning of the feel-good message couldn’t be missed by shoppers at the store’s grand opening in 2011: The purchase of slightly used pants, a vintage jacket and other thrift-store treasures is an act of charity.

The black T-shirts worn by cashiers carried a matching message for bargain hunters with a heart of gold: “Good deeds. Great deals.”

Ubiquitous promotion of charitable activity is a big reason why Value Village’s corporate parent, Savers, Inc., does more than $1.2 billion in business annually. For years it has been the single largest player in the prosperous and growing industry of for-profit thrift stores.

Photo: A Value Village store in Kirkland, Washington.
A Value Village store in Kirkland, Washington. Paul Joseph Brown for InvestigateWest

Thrift has proved lucrative for the firms’ executives. Board Chairman Tom Ellison, for example, owns a waterfront mansion in the same exclusive Seattle suburb where Bill Gates lives.

But Savers’ claims about doing good for charities may be overblown. Behind many a great deal at Value Village is what others might see as a pretty meager good deed. Behind others there appears to be none, InvestigateWest found during a two-year investigation.

Sometimes Savers’ charity partners have received less than 5 percent of sales revenue on goods donated on their behalf, InvestigateWest found. Overall, it appears that between 8 percent and 17 percent of the firm’s revenue ends up with charities.

Meanwhile, Savers does not routinely tell donors how much of their used-goods donation actually goes to charity. That may mislead donors to overestimate their good deed, and according to tax experts and charity-watchers, prompt them to take a tax deduction that is far too high.

Over the course of nearly a year, Savers repeatedly declined to be interviewed or provide answers in response to written questions for this story.

Savers is aggressively expanding. From 2009 to 2014, Savers grew at a rate of about 5 percent each year and opened or acquired up to 20 stores a year, according to industry-research firm IBISWorld. The company now operates more than 330 stores in 29 states, Canada and Australia and employing 22,000 workers. The chain increasingly competes with longstanding nonprofit thrift stores that devote most of their revenue to those in need.

Map: Value Village, Savers and Unique store locations
Savers Inc. store locations in the U.S.

And Savers, after decades of relying heavily on its partner charities to gather goods for sale at its stores, has embraced a new strategy: asking donors to drop off merchandise directly instead of donating to charities that then bring the goods to Savers. These in-store donations pay charities far less per pound than merchandise brought in by the charities themselves.

And it has paid off. From 2005 to 2010 Savers was the nation’s fifth-fastest-growing discount retailer, according to the trade journal Chain Store Guide. And since 2006 its revenue has more than doubled, according to Moody’s Investor’s Service, to $1.2 billion, although privately owned Savers does not disclose its financial performance to the public.

Meanwhile, at least six of the more than 100 charities associated with Savers stores have severed ties with the company since 2009, at least three citing terms that were too unfavorable.

One charity that pulled the plug was the Boston-area Big Brother Big Sister Foundation, which now is netting three to four times the revenue it received under the Savers deal by operating its own thrift store, according to Steven Beck, director of the nonprofit.

“If a charity is making 4 to 6 percent, that’s pretty unbalanced,” Beck said. “If you’re making a million, and we’re making $40,000, how is that helping charities?”

“It may be legal, but it’s not right.”

There’s no question that charities make money they wouldn’t otherwise have.

“I can’t say enough good about our relationship with Savers,” said Lori Konya, CEO of Big Brothers Big Sisters of Northern New Jersey and its donation-gathering subsidiary Clothes For Kids’ Sake. “Federal funding has dried up. A lot of government funding has dried up for nonprofits and I’m not even sure we’d be in business without Savers.”

But critics say Savers’ consumers and donors are being deceived because so little of the stores’ revenue actually reaches the charities.

Consumer advocate Sylvia Kronstadt, formerly a fraud investigator in New York City’s Department of Consumer Affairs, says consumers and donors should shun Savers because of its business model.

The company, she told InvestigateWest, “preys on donors’ good intentions to create fabulous wealth for itself.” To her, “the charities who ‘partner’ with Savers are guilty as well, for allowing their names to be used in exchange for a few pennies on the dollar.”

Photo: Marketing material for Savers stores.
Marketing material for Savers stores. Savers

Long before Macklemore’s monster 2012 hit “Thrift Shop” spotlighted an evolution in Americans’ shopping habits, Savers perfected a “community service” marketing veneer that suggests its main goal is to help charities.

“A lot of people coming in here think we are a charity,” Sean Macrae, a floor worker at one of Savers’ Value Village stores in Seattle, told InvestigateWest, even though Savers is registered as a for-profit business in Washington state and elsewhere.

Founded by the son of a Salvation Army executive in San Francisco’s Mission District in 1954, Savers created a business model that today is growing increasingly widespread: the for-profit thrift store.

Goods sold in Savers’ stores come from charities’ collection bins, at-home pickups scheduled by telemarketers paid by Savers or a nonprofit partner, and special fundraising drives. And from the in-store drop-offs Savers now favors. Potential donors are targeted with radio and TV ads, direct mail appeals, postcards and brochures.

Charity-watchers say Savers and stores like it are quietly reaping a bonanza on donated goods, giving back minimally to charities while spouting slogans like “Donating to Value Village is a great way to Donate to Charity.”

Savers’ for-profit status “needs to be disclosed at the point of donation,” said Daniel Borochoff, president of the American Institute of Philanthropy and charitywatch.org.

Savers’ nonprofit competitors are pointed in their criticism.

“It would not be deceptive if Savers stated clearly on its doors that they were collecting on behalf of certain charities and let you know whatever percentage that amounted to,” said Michael Meyer, a vice president of Goodwill Industries International. “Now … the presentation is creating enough grayness that it’s not clear to the consumer.”

Disclosure of payments not required

Although most states do not require for-profit thrift stores to disclose how much they pay charities, InvestigateWest obtained contracts between Savers and charities filed with state officials in Washington and documents from Minnesota describing prices Savers paid charities there.

InvestigateWest also analyzed information gathered by California on Savers stores doing business with two Silicon Valley charities. Taken together, they show that Savers’ partners are receiving only a small fraction of the sale price of the donated merchandise. Interviews with more than a dozen former and current employees corroborate these records.

The smallest percentages of revenue paid to charities over the last 15 years by Savers, according to the California records, came in 2001 when Big Brothers, Big Sisters of East Bay, in Oakland, received .02 percent of the revenue. The same year Hope Rehabilitation Services in Santa Clara received just .87 percent of Savers’ revenue, California public records state.

Photo: Worker pushes cart of donated goods into a Value Village store in Bellingham,Washington.
A worker pushes donated goods into the Value Village store in Bellingham, Washington. Paul Joseph Brown for InvestigateWest

The most recent California records, from 2013, state that Savers is sending between 4 percent and 17 percent of revenue to charities.

Overall, Savers says it paid $200 million to charities in 2014. If the $1.2 billion in annual revenue that Moody’s estimates Savers made for the year ending in April 2015 is accurate, that works out to Savers keeping roughly 83 cents of every dollar it takes in, while charities get 17 percent. Hoovers estimates Savers’ annual revenues at $2.4 billion. That would mean about 8 percent of Savers’ revenue is going to charity.

Savers’ largest nonprofit competitors, which are required by federal law to report their finances to the public, spend a large majority of revenue on helping people in need. For example, even though Goodwill Industries International has been criticized for extravagant executive salaries, its 2014 audited financial statement reports that it devoted 95 percent of its revenue to programs that help the disabled and others who have difficulty securing work.

Although Savers would not respond to InvestigateWest’s questions, public records show how the firm has defended itself to government officials.

In a letter InvestigateWest obtained through the Washington Open Public Records Act, the Washington State Charities Division asked Value Village in 2002 whether it solicits, and is therefore required to register as a commercial fundraiser. Savers general counsel Bradley Whiting responded in part:

“We do not solicit for donations or contributions on behalf of any organization, nor do we donate ourselves to any organization. All merchandise obtained from the local not-for-profit entities is purchased from the entities at a commercially negotiated price, and is not tied to any subsequent sale to the public. Our relationship with the entities is strictly one of purchaser and supplier.”

Yet the price discrepancies between what Savers pays the charities and how much items earn on the sales floor are stark: A tie that Value Village might pay a nickel to buy from a charity sells for $4.99. A vintage women’s top that costs Value Village a dime sells for $9.99. A purse that Value Village gets for about a quarter retails for $12.99. A vase, which Value Village doesn’t pay anything for under the contracts InvestigateWest reviewed, goes on the sales floor for $14.99. Those figures, based on one typical contract and purchases made by InvestigateWest at a Seattle Value Village, vary from store to store and nonprofit to nonprofit, but across its operations, Savers’ business model is based on paying a few dimes per pound for clothing it sells at secondhand-retail prices — a considerable margin.

Photo: Used clothing items at a Value Village store
Items of used clothing purchased from a Value Village store in Seattle. Paul Joseph Brown / InvestigateWest

Calling itself “the thrift superstore with a community conscience,” Savers defends itself against supporters of nonprofit thrift store operators, stating that it offers medium-sized nonprofits a way to earn money even if they can’t open their own thrift stores, like behemoths of the industry, Goodwill and The Salvation Army. Indeed, some of Savers’ charity partners have done business with the chain for decades.

Savers spokeswoman Sara Gaugl told Washington State officials in a 2013 letter responding to a consumer’s complaint that the company pays nonprofits for all the items delivered, even though nearly three-quarters are not suitable for resale. The rest are “responsibly recycled,” she wrote. Much of that involves selling merchandise in developing countries.

Gaugl’s letter came in response to a complaint filed with the Washington State Attorney General’s Office by a consumer upset at what she considered false and deceptive “fundraising representations.”

The consumer’s complaint cited numerous in-store fundraising appeals and asked why the company had not registered as a commercial fundraiser. “Inside the store, there are more signs, in addition to canned announcements every few minutes plus bookmarks scattered everywhere,” the consumer wrote. She also urged the state’s attorney general to undertake an investigation of Savers.

The state Attorney General’s Office passed the complaint on to Savers and closed the matter in March 2013.

Minnesota’s Attorney General took different approach, prompted by “many complaints from consumers,” according to spokesman Ben Wogsland.

Following a year-long investigation, Minnesota Attorney General Lori Swanson sued Savers in May 2015, accusing the company of deceit by “convincing people to shop at Savers stores under the guise that Savers is or has the aura of a nonprofit or benevolent organization, such that their purchases will benefit a charity.”

The suit sought to compel the company to be more forthcoming with consumers and donors. “Examples abound of Savers’ attempts to blur its mission and identity with that of charities,” it said.

The lawsuit was settled in June, with Savers agreeing to pay $1.8 million to charities and provide more transparency to donors and shoppers. It did not acknowledge any wrongdoing.

Swanson in May notified other states’ attorneys general of her findings.

So far none has taken action.

Some who have worked at Value Village understand the criticisms.

‘The main focus … is about making a profit’

“You see some big poster with a big Guatemalan baby face on it, and think that’s what it is about,” said Catherine Brophy, who worked her way up from cashier to assistant manager at a Value Village outside Seattle. In reality, says Brophy, “The main focus of Value Village is about making a profit. It’s all about ‘what are the numbers?'”

Savers is a business, but is it abusing charities and hoodwinking donors? One major accusation leveled by the Minnesota attorney general is that Savers pays its partners nothing for household appliances, recreational equipment, bric-a-brac and other so-called “hard goods.”

An InvestigateWest review of eight contracts between Savers and charities in Washington state found that Savers appears to pay nothing for certain donated items. The charities’ donations are required by the contracts to be weighed and paid for but the housewares and so forth are “included in the cloth price.” Translation: Charities are required by contract to bring in the hard goods. They just don’t get paid for them. Several former Savers employees and an executive at a former Savers charity partner confirmed this information to InvestigateWest.

Yet Savers’ marketing frequently blurs the distinction:

On the “Donate” page of the Savers website: “Every donation of gently used clothing and items you make supports a nonprofit in your community.”

On brochures distributed at retail stores: “We partner with local nonprofits and pay them for all the goods donated at our stores.”

Savers’ practices are well-known among charity watchers and those in the resale business themselves.

“Savers and other for-profit stores should be clearly articulating the amount that is actually going to the charity and clearly telling donors where the rest is going,” said Kris Kewitsch, director of the Minnesota-based Charities Review Council.

But the company has resisted a legal requirement to do that in its home state of Washington.

At least six times since 1987 authorities in Savers’ home state of Washington told the company to register as a commercial fundraiser under a state law meant to protect the public from deceptive fundraising. Commercial fundraisers must report how much they raise for charity and what percentage they keep for themselves.

Finally, in November 2014, Savers conceded. It is now registered as a commercial fundraiser in Washington, and is required to report how much it is giving to charities. But the company has not yet revealed what proportion of its revenues go to charity.

In Minnesota, it took the attorney general’s lawsuit to get Savers to promise to disclose the percentage of a donation’s value that actually reaches the charity, including differences for in-store donations. Under the settlement, Savers will also file annual reports with the state outlining the value of donations, expenses and payments to charities; certify that donations solicited on behalf of a particular charity actually benefit that charity; and for the first time, be prohibited from not paying for non-clothing goods collected by charities.

Overestimated tax deductions?

For Savers’ donors elsewhere, an equal dose of transparency may still be hard to come by. Critics charge that how Savers’ collects donations encourages donors to overestimate the value of their charitable contribution.

InvestigateWest documented several instances in which Savers stores gave donors the impression the entire value of the goods is deductible.

“Please insert what you feel is fair market value of the merchandise,” said a receipt for Savers’ donors in Kansas City. A Seattle-area store distributes receipts with similar wording.

Many tax professionals interpret IRS rules on charitable donations as allowing donors to deduct “fair market value” based on sale prices of comparable items for donations to thrift stores if the store is directly run by a charity, or if they know what portion of their donation actually goes to a connected charity.

The problem, however: as long as the charities and thrift store operators fail to disclose that only a portion of one’s donation is really deductible, donors can’t assign a fair estimate, tax experts and charity watchers say.

In a report that predated filing suit against Savers, the Minnesota Attorney General’s Office criticized Savers for misleading donors, resulting in their “claiming tax deductions for donated goods for which the charities receive no payment.”

Rebecca Sherrell, of the Washington Charities Program, advises consumers who get a phone call asking for donations for charity to ask what percentage actually goes to the charity

“I hope this Minnesota lawsuit opens the eyes of the donating public,” she said.

 

 

Robert McClure contributed to this report.

InvestigateWest is a nonprofit news agency based in Seattle. This reporting project was supported by the Fund for Investigative Journalism and by InvestigateWest donors. Find out more at www.invw.org.

Communication to TckTckTck Partner: Friendship Ambassadors Foundation, Inc. – Feb. 21st, 2010

As of March 15th, 2010, we have received no response.

From: Canadians for Action on Climate Change [mailto:canadiansforactiononclimatechange@bell.net]
Sent: February-21-10 3:42 PM
To: ‘friendlyam@faf.org’
Cc: ‘GlobalComplianceResearch@gmail.com’
Subject: TckTckTck Concerns | Time Sensitive – Your Response is Requested

Dear Friendship Ambassadors Foundation, Inc.,

We are writing to you because we are concerned about the corporate connections, and about the weak demands in the TckTckTck campaign. We are conducting a survey related to these aspects of the campaign. We will be posting the results of our survey to the web, as well as issuing a media release. We will be issuing the press release on March 15th, 2010. For this reason could your organization please respond no later than February 28th, 2010?  If we do not receive a response by this time we will state that your organization did not comment.

Corporate connections of TckTckTck

We note your organization is listed in as a partner or ally of the TckTckTck campaign initiative. We are very alarmed to learn various details about the campaign. The trademark TckTckTck was registered, on November 30, 2009, by the EURO RSCG firm, a subsidiary of Havas Worldwide, a public relations firm. Partners of this campaign include multinational corporations. Two of these are Electricity of France (EDF)  which now uses the TckTckTck logo, in TV commercials. EDF, the world’s leading nuclear power utility, operates a French nuclear fleet consisting of 58 reactors spread over 19 different sites. Havas also lists GDF Suez which affirms that there is a nuclear revival. With 45 years of involvement in the nuclear industry, GDF SUEZ confirms its intention to take an active part in developing a new generation of nuclear power worldwide.

In the Havas press release (attached) it also states “Havas Worldwide incorporates the EURO RSCG” whose clients include Novartis and Adventis – both biotech industries in genetic engineering and biofuel.  Both Nuclear and Biofuel are deemed to be ‘solutions’ that are equally bad, if not worse than the problem they are intended to solve.  Through your association with the TckTckTck campaign, your organization has created intentionally or unintentionally the perception that your organization is supportive of false solutions such as nuclear and biofuel.

When challenged over the inappropriateness of associating NGO partners with the corporate sector, (see EYES WIDE SHUT | TckTckTck exposé) the TckTckTck.org campaign organizer Jason Mogus claimed the two campaigns are different.  His argument is not convincing when one sees the press release issued in September of 2009 (screenshot attached). It clearly states that the North American TckTckTck.org is Havas Worldwide.  In the September 2009 press release the last paragraph states: “Havas Worldwide Web Site: http://tcktcktck.org”.  There is further information about this in an article by ‘Peace, Earth & Justice News’. See the news article here.

One of your partners listed is at tcktcktck.org is the ‘Corporate Leaders Group on Climate Change’.  Signatories: can be found here. Of interest is the fact that on this page the multinational corporations ‘business verdict’ share your tcktcktck postCOP15 catch phrase ‘not done yet’.  This is perhaps one of the most truthful statements coming out of the entire tcktcktck campaign.  Partners in this group include Shell, Coca-Cola and RBC.  RBC is the number one financier of the most destructive project on the planet – the tar sands.  Over 1,000 corporate entities make up this TckTckTck partner group.

Furthermore, two of the same creators & partners (Havas & Euro RSCG) of TckTckTck were also initial partners of the infamous Hopenhagen campaign which was labeled a massive greenwash by the likes of Naomi Klein and others during COP15. (Farbman is reluctant to discuss what led to Ogilvy’s predicament or why previously enthusiastic partners were no longer involved.  See article here)

Many of us oppose, at least in principle if not vocally, the consumption of small community business into behemoth sized mega-corps.  We fear this is a growing trend with our NGOs.  We feel that we must work together to demand an end to this new strain of globalization which undermines and threatens our entire movement.

The entire TckTckTck campaign has been created in partnership with major multinational corporations.  These are the same multinational corporations that activists and legitimate grassroots organizations all over the world challenge on a daily basis.  People are devoting and risking their very lives defending themselves, their children and their environment from exploitation by these corporations in the name of corporate profit.  To have the largest climate change campaign on the planet formed, funded and shaped by the same corporate interests destroying our planet is a grave injustice to those already suffering.  It destroys all of our credibility, undermines true climate justice and erodes public trust.

Weak Targets advanced by TckTckTck

SIGNIFICANT OMISSIONS IN TCKTCKTCK http://tcktcktck.org DEMANDSIn the TckTckTck (http://tcktcktck.org) campaign for COP15, the organizers, allies and partners were calling for developed states to reduce developed country emissions by at least 40% by 2020. While most developed and developing states were calling for developed states to use 1990 as a baseline, the TckTckTck campaign did not have a baseline. Consequently what they were calling for was way below what developing states were demanding. How could an NGO campaign have a percentage reduction without a base-line date? In the TckTckTck campaign demands it was stated: “Reduce developed country emissions by at least 40% by 2020”. Is that from 2009 levels? or Canadian 2006 levels, or US 2005 levels?  It is far from what most of the developing states wanted, at least 45% from 1990 levels. Apart for calling for stabilization by 2015, the tcktcktck campaign had no commitment for subsequent years, such as calling the reduction of global emissions by at least 95% from 1990 levels by 2050. The TckTckTck campaign was silent on a 2050 commitment. The Key issues at COP15 were i) the need for a common baseline such as 1990, and the need for developed states to commit to high percentage reduction of greenhouse gases from the 1990 baseline, and ii) the urgent demand to not have the temperature rise exceed 1degree above preindustrialized levels and to return to no more than 300ppm. The tcktcktck campaign seriously undermined the necessary, bold targets as advanced by many of the developing states.   The TckTckTck (http://tcktcktck.org) list over 220 NGOs. We ask for your response on the following questions:

1)     Was your NGO aware that the brand “TckTckTck” has deep corporate ties?

2)     If so, how do you understand this relationship?

3)     Do you see yourselves as part of a campaign alongside “corporate partners” such as nuclear energy, genetic engineering, biofuels, aviation, automotive and other problematic sectors?

4)     If so, do you see how this creates confusion?

5)     In a release from Havas Worldwide it states “the idea behind TckTckTck was to create a movement…rather than a campaign, but a movement with a deadline. …the objective of the campaign was to make it become a movement that consumers, advertisers and the media would use and exploit.”

Were you aware that your NGO’s name and credibility would be used as a commodity in this way? (and continues to be used)

6) Do you intend to remain a partner of TckTckTck even though there are corporate ties?

7) Would you like to be removed from the list of partners of TckTckTck?

If yes to number 7;

To be removed from the list, contact laura.comer@tcktcktck.org.

8) Would your organization endorse the proposed ‘Post Cop15 Declaration’ that unequivocally supports the needs of the developing states.  It can be read here.

There are further questions related to privacy of the fifteen million people who signed on to it. There is an absolute breach of trust.  Who has collected such vital information on citizens with concern for environmental issues is anyone’s guess.  Trusting individuals disclosed personal information with no idea the campaign was aligned with corporate interests.  This is a separate and distinct issue altogether.  It is most likely that of privacy violations which warrant further investigation.

We wish that it be clear that we send this message in solidarity – that we have grave concerns with this “coalition”.  We do not wish to be patronizing but only elaborate on the concerns we share in the hope that you will share our concerns and come to the conclusion others have reached – that such a campaign is no longer the right place for any organization who believes in real climate justice to invest energies. If we say nothing – then our silence lends us as being complicit.  Therefore, we feel that must ask of all our allies to be accountable for their actions.  If we remain silent – we effectively breach the trust of those we claim to represent – the billions suffering at the hands of exploitation in the name of profits.  Let us be clear – we do not condone such a campaign and will speak out against it.

We hope that this communiqué will bring about debate that can strengthen our common understanding of the threats and opportunities for true climate justice. Our first priority is the planet, and this can only be worthwhile if it is another strand in unmasking the lies surrounding “climate politics” that threaten us with climate injustice.

Sincerely,

Canadians for Action on Climate Change | Cory Morningstar

Joan Russow | Global Compliance Research Project | www.climatechangecopenhage.org | For further information:  see Joan Russow , TckTckTck Hoodwinked NGOs, www.Pej.org)

Pacific Indigenous Peoples Environment Coalition | Aotearoa [New Zealand] | Sandy Gauntlett

Please send response to canadiansforactiononclimatechange@bell.net

The responses will be posted on the websites.

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