ATLANTA – On a sunny afternoon before Halloween, shoppers at Value Village Atlanta cruise the aisles, browsing for bargains. They hope to find a beaded gown befitting a Bride of Dracula or a fringed Elvis jumpsuit.
Billed as a "Treasure Hunter's Paradise," the popular thrift store sits in the corner of the old Moreland Shopping Center. A sandwich board solicits donations to the American Kidney Fund, along with more signage for the charity in the windows.
But consumers and donors could be unaware that, unlike many thrift stores, sales from their secondhand goods go to a profitable business and not a charity.
The growth of for-profit thrift stores like Value Village Atlanta is expanding nationwide as many Americans use the extra time at home during the pandemic to clean out their closets, while others turn to thrift stores as they tighten their belts.
The surge in secondhand shopping opens opportunities for the public to be misled about how much money these for-profit retailers are making off the charities they brag about benefiting, according to charity watchdogs and regulators, as well as government records and other information gathered by InvestigateWest of the for-profit thrift store industry.
"They pay a very, very small percentage to the charities, while giving people a very different impression," said Adele Meyer, executive director of the Association for Resale Professionals, the leading trade organization for secondhand stores. "It's not clear to the public who's benefiting."
In November 2019, a Washington state Superior Court judge ruled that TVI Inc., also known as Savers, the largest for-profit thrift retailer in the world, had been deceiving consumers for years. A series of articles by InvestigateWest in 2015 exposed the practices of the Washington-based for-profit thrift chain, leading to actions by regulators in California, Illinois and Washington.
The company, which operates stores called Savers and Value Village, was sued by the Washington state Attorney General in 2017. The state charged the company with misleading consumers and donors into believing that all types of donations and purchases benefited charity, creating the impression that the company itself was a charity.
"Despite the fact that no portion of an in-store purchase benefits a charity partner, Value Village nevertheless advertises that store purchases benefit charities," according to Washington state's court filings.
And this pattern is being copied by other for-profit thrift-store chains around the nation.
Value for whom?
And the size of the store's charitable contributions versus its revenues are not disclosed to the public. No signs alert shoppers or donors at the store that it is a for-profit corporation.
"Everything donated goes 100% to the American Kidney Services. And of everything sold, 95% goes to American Kidney Services," said a manager of Value Village Atlanta, when asked how much of the store's proceeds go to charity. The store itself is "all nonprofit," she told a reporter who visited incognito in October 2018. A second journalist heard much the same when he visited the same store nearly a year later.
American Kidney Services' mission, according to its IRS Form 990, is to "provide support to kidney disease sufferers through contributions to the American Kidney Fund, primarily through the sale of used clothing and household items donated by the general public." The charity receives a failing score by nonprofit watchdog Charity Navigator.
American Kidney Services sent 18% of its revenues to the national American Kidney Fund in 2017, according to calculations based on its nonprofit 2017 tax return. The percentage is not revealed on the brightly colored donation bins dotting Atlanta streets.As with most other for-profit thrift stores and associated charities contacted by InvestigateWest for this article, American Kidney Services and Value Village Atlanta refused to be interviewed or provide relevant documentation.
InvestigateWest's efforts to get information to more fully convey the position of the Value Village Atlanta and American Kidney Services, including numerous phone calls and emails to both entities, culminated with Kate Stutzman Harper, a spokeswoman for both entities, telling InvestigateWest that any further contact with the company or the charity would be reported to the local police as harassment.
The pitch to donors
A former telemarketer for a different retail chain, Carolina Value Village (at one time, but no longer affiliated with Value Village Atlanta), said that most solicited consumers are led to believe their donation is going entirely to charity, National Kidney Services, said Tina Quizon, whose minimum-wage job was to dispatch donation pickups from the Value Village offices in Charlotte, North Carolina.
"Donors are giving out of the kindness of their hearts and have no idea who they're giving to," Quizon told InvestigateWest. "And people are giving nice stuff, too."
Quizon's complaint to the state about workplace conditions, as well as consumer deception, became the subject of a local TV exposé on Charlotte's WSOC in November 2018, in which reporter Paul Boyd concluded: "The money trail between the three organizations [charities NKS and NKF and the Carolina Value Village thrift stores] lacks transparency." National Kidney Services also receives a failing score by Charity Navigator.
Carolina Value Village filed for bankruptcy in February 2019 but was still operating its six stores in the greater Charlotte area last month (September 2020).
Maria Stedry, an attorney for the charity National Kidney Services, with the Atlanta law firm Schulten, Ward, Turner and Weiss, told InvestigateWest in November 2019 that, while she did not represent the thrift stores, she did not think they'd provide further information about their financial arrangements or portions going to charity. "It's their privilege to keep it confidential," Stedry said.
The law firm is listed as a registered agent for many for-profit thrift stores, recycling companies, and their charities, in Georgia, North Carolina, Texas, Ohio and elsewhere.
Quizon, who left the company in August 2018, says hundreds of potential donors she talked to on her five-hour shifts likely thought that all of their donation was going to charity. She said that the company's approved sales pitch never mentioned a for-profit company being involved.
InvestigateWest also found that for-profit thrift stores give consumers confused signals about their for-profit status. At stores InvestigateWest visited and contacted, even some store employees were, at best, themselves confused.
At the Carolina Value Village, a person answering the phone declared her store to be a nonprofit. A receptionist for Tennessee's Southern Thrift Stores said those stores are charities. And when asked if the store was a nonprofit, a staffer at City Thrift in Lilburn, Georgia, answered, "I guess so." A sales clerk at a City Thrift in Memphis asked about the portion of sales going to charity, said, "It all goes to the veterans."
Some of these stores might use marketing to convey an aura of charity. For example, America's Thrift Stores currently advertises, "Your donations and the resulting in-store purchases contribute to make wishes come true for Alabama children with life-threatening medical conditions." Today, Make a Wish Alabama is paid a bulk rate but does not see a percentage of sales, according to the organization's representatives.
King's Home, a Christian-based organization in Alabama, was the main charity partner of America's Thrift Stores until 2017.
"People just don't know! They think the charities are making so much more than they really are. They even make it sound like a whole lot [in their marketing]," said Lew Burdette, King's Home president.
King's Home runs 22 shelters serving youth, women, and kids seeking refuge from domestic violence, homelessness, and other circumstances. Shortly after severing relations with America's Thrift, King's Home started its own chain of three thrift stores on a strictly nonprofit model, and Burdette reports they're off to a good start.
America's Thrift Stores did not return requests for comment.
Impact on other charities
"You can rest assured that your contributions are being put to good use because all of the proceeds from these [donated] items go directly to the National Kidney Foundation and its efforts to reduce the prevalence of chronic kidney disease in the United States," advertises one National Kidney Services website.
"Such language is misleading to the public because it leads one to believe that any dollars that are raised through your donation would go directly to the nonprofit. Yet there's money being made that is not going to the nonprofit from your donation," said Kris Kewitsch, of the Minnesota-based Charities Review Council.
"They're not being transparent by not telling the public what the real arrangement is," she added. "There's no clarity on the relationship between the stores and the nonprofit."
Occasionally, savvy consumers catch on.
An acquaintance who had managed a for-profit thrift store told Rose Ackley of Columbus, Ohio, about the business model. Later Ackley got a call from someone claiming to represent the National Kidney Foundation, a noted charity. She agreed to donate several bags of accumulated goods.
When the truck rolled up to her door, it said "Ohio Thrift," which is part of the for-profit chain Ackley's acquaintance warned her about. She refused to make the donation.
That was 2007. Today Ackley continues to refuse to shop at the store as a matter of principle.
"If Goodwill and Salvation Army and other nonprofit stores had that money, a lot of people would be taken care of," she said in an interview in 2019. "They help a lot of people."
For-profit thrift stores like Value Village Atlanta and Carolina Value Village look superficially like Goodwill and Salvation Army, standards of the American secondhand market.
By contrast, these nonprofit stores usually return nearly all of their revenues to charitable causes after paying operating expenses. St. Vincent De Paul reports in its federal records that it returns 90% to its charitable mission. Goodwill returns 83%. Nonprofits are by law responsible for insuring that their assets go to charity and for filing detailed tax returns, which are open to public view.
The average donation to Goodwill—a few bags of goods—is worth about $45 or $50 to the thrift shop, according to Mark Kahrs, executive vice president of retail operations at Goodwill in St. Louis.
"That donation of your stuff is really worth something to a nonprofit," Kahrs said. "You wouldn't just write a $50 check without knowing it would really help someone."
Pound-for-pound, a donation to a nonprofit goes much further, said Greg Rue, manager of thrift businesses for ARC's Value Village, a Minnesota nonprofit with several stores. "If you brought in a pair of jeans as a donation to us, we might put it out on a rack for $5 or $10. So, we'd get a $5 or $10 profit that would come back to us. That same pair of jeans donated to a for-profit thrift store would also sell for $5 or $10 but the for-profit would give the charity far, far less… probably only pennies for that pair of jeans."
Consumers can also deduct the fair-market value of their donation, though little of that value goes to charity, according to tax expert Philip Hackney, a professor at the University of Pittsburgh School of Law and a former attorney for the chief counsel to the Internal Revenue Service.
"The for-profit has an opportunity to make a real profit off the way the tax code is written now," Hackney told InvestigateWest. "I think there's a legitimate question about whether these charities are operating exclusively for charitable purposes… [if they're] providing the for-profit most of their take."
America's Thrift Stores is a private equity-owned, for-profit company that operates 18 stores in Alabama, Georgia, Louisiana, Mississippi and Tennessee, and according to its own website, pays Make-A-Wish Alabama 3.5 cents per pound for clothing donated by the nonprofit, with a minimum annual guarantee of $650,000.
America's Thrift Stores partnering charity, Make A Wish Foundation of Alabama, says the company does not pay the nonprofit for furniture. "This is made clear to our supporters and to America's Thrift Stores donors through this website and our communication with external audiences," said Tracy Smith, President and CEO of Make A Wish Foundation of Alabama.
Yet on its website, the thrift store directly solicits donations of "chairs, sofas, couches, loveseats, recliners, foot stools, storage dressers, armoires, bookcases, cabinets, entertainment centers, dining tables, kitchen tables, coffee tables, end tables, computer tables, nightstands and patio sets."
Smaller nonprofit thrift stores competing with for-profits object to such business practices.
Tanya Mahrous Tobias, director and co-founder of Second Life Atlanta, a nonprofit thrift store dedicated to raising funds for animal rescues, feels that many charity shops like her own, which make up a large part of the Association of Resale Professionals' membership, face unfair competition.
"We have to spend more money to keep our name top of mind because we don't have fleets of trucks driving around the neighborhood or donation bins all over the place," she said. "It's misleading to the public for [for-profit thrift stores] to say they're donating to certain charities and truly helping significantly," noting that "nonprofit stores send much larger proceeds [from their profits] to charity."
With most of the companies, public information does not mention what actually goes to charities. That's because in most states there are few or no disclosure requirements. California is an exception, where records show that charities doing business with for-profit thrift stores are typically receiving significantly less than what charities make running their own thrift stores.
California state records show, for example, that in 2018, for-profit thrift stores purchasing donations from charities paid about 16% of their revenues to charities; those that received a fee or commission from charities received about 7.5% on average.
None of the 10 for-profit thrift store chains contacted by InvestigateWest agreed to provide financial statements showing their benefits to charities. However, in some cases, nonprofits have received amounts less than 3% of the for-profit stores' revenues, as disclosed in contracts obtained by the Minnesota Attorney General for the Savers for-profit thrift chain, the nation's largest.
"People are being misled into thinking that they're giving to charity when there's little charity being served," said Daniel Borochoff, founder and board director of CharityWatch in Chicago, which monitors charity fundraising practices nationwide.
The thrift is in
Today, there are at least 500 for-profit thrift stores, owned by about 20 regional branded chains, operating in the United States and Canada, according to an InvestigateWest count.
With shopping malls and retail shops rapidly shutting down nationwide, thrift stores represent a bright spot among the generally declining brick-and-mortar retail industry.
Sales of secondhand goods are booming, growing about 3% each year, faster than conventional retail. And market researchers project this multibillion-dollar industry will grow exponentially: The business research firm IbisWorld found sales of $20.5 billion at 84,960 used goods stores in the United States in 2019, with online reselling also growing 13.7% each year.
"Thrift shopping is really trendy right now," says Michael Becerra, marketing director for Sunshine Thrift Stores, based in Tampa. "We get a very diverse group with a lot of young people in college, or recent graduates, young families and parents, as well as low-income families who shop here because it's the only way they're affording shopping."
Add to this mix "treasure-hunters and resellers looking for hidden gems at decent prices—a little bit of everything," he says.
Still, as consumers head in droves to thrift for Halloween costumes, a leading national advocate for fundraising transparency said people should watch for misrepresentation, in both shopping and making donations.
"Being for profit is perfectly legal, but misrepresenting a business as a charity is not," said Bennett Weiner, of the Better Business Bureau's Wise Giving Alliance.
This story was supported in part by a grant from the Fund for Investigative Journalism.