Goodwill - Austin, Texas

Monday 4th November 2024

Throughout my trip people have been putting me in touch with other great people along the way, and one of them was James Donohue, Senior Director (Supply chain) at Goodwill in Austin.

Goodwill is a national brand and a household name. I’d go so far as to suggest that every American knows what who they are but after my time with James, I’d suggest that possibly they don’t know everything that they do. The impact of this organisation (especially of the Austin ‘chapter’) is staggering. James’s understanding of reuse retail and the challenges and solutions to products and materials is also really impressive.

This last visit on my tour really was ‘large-scale’ reuse.

There are 150 chapters nationwide. Each operated independently and all quite different. They can run however they want, but they do also learn from each other and share best practice.  Later, this sparks a conversation about the importance of understating local need, trends and differences, and having the autonomy for them to react to those are very important.  What works in part of America, is not necessarily going to work in another.

There are three chapters in Texas, and the Central Austin chapter that I visited has 35 stores.

Their website describes the impact of the central Austin chapter under three bold headings:

·      Economic Impact - $427M ploughed back into the local economy. $75M of this is revenue from their 35 stores.

·      Education and career growth – 9153 people supported including those with disabilities, limited education, criminal backgrounds, and housing instability. 2107 people placed into jobs.

·      Environmental Responsibility – Preventing 80% of what they are donated from landfill equating to more than 85M lb (38.5 thousand metric tonnes) from landfill. This actually increased to 93MlBs in 2023 but isn’t on their website yet.

I met James at one of their facilities in Austin.  The building is 120,000 sqft in total and houses offices and training suites as well as their central sorting and one of their outlet stores. It’s so big I couldn’t fit it into the picture – this is certainly Texas!

There are 2 outlets in the city, and this one takes in $5M per year in revenue.  60% of that is from textiles, the rest is homewares, shoes, and books.  The outlet store portion of the building is 18000 sqft. The operation is a sight to behold.

Large plastic bins on wheels are brought in 6 at a time. People queue up but they are not allowed to start rummaging until all 6 are in place and they are told they can start – then there are black Friday style sprints to the tables. 

All of their stores operate on 4-week rotation, but the outlet stores operate on 1 hour rotation(!).  They go through 1000 tables per day. Whatever doesn’t sell here is then taken to the back and packed up for recycling - It’s had every chance to sell for reuse.

Clothing is priced by weight at $1.59 per pound which is around 2 items, so each item brings in 60 cents. In stores each item takes an average of $5 so although the outlets give better income than recycling, the emphasis is very much on sales through stores.

Overall, 80% of everything that is donated is reused either through the stores or via outlet stores.

As we watch, James explains all kinds of things around the product mix, and the operation. There is a deep understanding, built up over a long period of time, on their customer base, who is shopping there vs at the regular stores, how people shop, what they are looking for and what items work well here. It’s really impressive.

He pre-empts all my questions too – who’s shopping there? The answer is a mixture of people: some from nearby Mexico coming across with very specific shopping lists to take back, either for their families or for selling at markets across the border; local people just looking for a bargain; or vintage dealers looking for a gem.

To be clear, those gems that people are looking for are mistakes. The sorting and filtering process is very slick and has multiple catch points. If something makes it through to those bins, then somebody has found the 1 in a thousand that makes it through by accident! The accident might be a branded piece of clothing or, he says, a piece of luggage that has money or jewellery hidden in a pocket.

Market focus

One of my big takeaways from this trip is the level of market focus the organisations have and how it is separated by product and material stream. At Goodwill, each product stream has a strict tried and tested pathway designed to maximise income.

·      Books for example are offered for sale through a hierarchy of online first, then stores, then outlets, then recycled.

·      They also have a partnership with Dell whereby older computers are sent to them (for a small kickback under WEEE legislation) to be deconstructed for plastic and metals recycling.  Newer models will be resold in stores.

·      James also talks me through the finely tuned process for textiles collating and sorting, which has been developed to maximise income and also to maximise reuse. Each item gets its’ best chance of finding a new home but ultimately it will then go for recycling if it doesn’t find one.

Part of James’s role is to ensure there are end markets for the products that don’t sell, with a rule that each product/material stream needs to have at least two options.

The Central Austin chapter sell textiles for recycling as mixed bales. The Phoenix chapter are the only ones (in the country?) that grade before sale, as they have the facilities and presumably the resource to do so. James is keeping a keen eye on how new technology could overtake the current labour-intensive process and enable them to grade in the future.  Currently, they have to sell, for a lower price, to a third party to do that grading.  The trialling of this would need some investment but interestingly they’ve found in the past that grants for that kind of innovation have come from the workforce development side of their organisation (creating more opportunities etc) rather than the environmental.

Ecommerce also brings in a high income ($9M) using a team of 45 people covering all stores. Items are separated at the store then pooled for online sale (e.g. books, IT equipment, high quality jewellery).

Sales tools

They have a very good handle on what their different stores bring to the overall – just like charity retail in the UK, some bring in higher quality donations, and some are busier in sales. They move product and set targets accordingly.  This is the conversation that leads me be taken to the ‘Gucci Goodwill’ in west Austin.

They use a good better best system in this store, however some stores in other areas of the U.S. use a simplified two-tier system in response to workforce needs. Higher turnover of staff or staff with additional needs are less able to learn a more detailed system. 

This store is currently taking in $1.6M in income, although compared to others, is not their highest earning store. James spoke about how they are starting to see more nuanced seasonal trends in a way they didn’t before. It’s something they are having to get used to, but it struck me that this is a sign that consumers are starting to shop second hand in the same way that they shop ‘regular’ retail and that’s something to be applauded.

It was great to hear how they used all the retail sales tools we advocate for through Revolve and to see their focus on right product, right market, rotate stock through stores, and use of space management to understand and improve sales.  They know exactly how many items should go on their rails.

Their rule of thumb is that 50% of items put out in stores should sell in the 4 week period, if the number is higher than that, then the price was probably too low, if it’s lower then there’s not enough stock out (or not restocked fast enough). It’s important to note that these rules might not be universal. They have been set over a long period of time of understanding their market for their products, particular to how they sell.

The take-away message here is definitely one of understanding markets and customers and responding to data. For example, they know the value of an average donation in this area is $55, so when sales targets are set they are also tracked back to then set the targets for number of donations.

They also set targets for recycling which should account for no more than 10% of overall income. If it is more than that then it’s a sign the stores aren’t selling enough.  All of this is also tracked through a bespoke stock management/EPOS system that James access through his phone. More great stats are forthcoming, like how 67% of sales are items in their first week on the rail.  Use of data to maximise sales, even in a large and well-established organisation like this is often still manager and skills dependant but when it’s done on a regular basis it pays off.  Constant training, reminders, and a buddy system are key to consistency.  I loved the term ‘use your adventure’ that James used to describe when managers and retail working go off grid!

From here, we go to their largest store - a 25000 sqft unit in a busy area. Although impressive, James says that it’s too big.  It’s hard to keep stocked and difficult to get the space right. Per square foot, it’s not making more than smaller stores so of course the next question is – what’s the sweet spot? He reckons it’s around 15,000 sq ft. Enough space to have the volume, manageable enough to keep stocked and overheads balance income well enough to maximise profits.  This is, of course, very particular to them, in Austin, and with the product mix that they stock.

Although this store is not their best performer, it has still generated a whopping $2.4M in revenue this year so far (Jan – Oct). $750k of that was on small pick up lines at the till which is mostly bought in toiletries there for the purpose of generating a bit more income.

I asked about their biggest challenges and any worries into the future.  Their biggest challenges are stock related: 1) getting enough stock and 2) making the most of the stock they do get. While this isn’t a big worry yet, the likes of amazon and Walmart entering the resale space is certainly one to watch

Community Wealth Building

From their impact report at the top, you can see there is a huge amount of community benefit and community wealth building.  I ask James to what extend he thinks this plays into their marketing and how they are perceived. One of their key messages is that 89c in the dollar goes into their mission, so everyone knows that the money they make goes to a good cause and most people understand that their focus is workforce development including providing professional certifications, training, lifeskills and ultimately to support people getting their lives back on track. Often this can be people coming out of prison, infact many people don’t know that they operate an adult charter school across six campuses with several of these within prisons to grow skills.

The stores also support the development of microbusinesses in various ways. Not just those buying items to resell both at flea markets or high end vintage shops, but also some pop up activity in the bigger stores too.  These pop up events also serve to bring in additional and different footfall and help the message that although Goodwill are a large national organisation, they are locally and community focussed.

There are more pictures from all three Goodwill locations in this Flikr allbum