Reference no: EM131248852

Goodwill Industries International, Inc. ¹⁰

"Every time you donate to Goodwill, you give someone the power to change his or her life by getting a job. . .Who knew the shirt you wore last year could turn into a job for someone?" - Helping! Magazine, a publication of Goodwill Industries International Inc., Winter 1998

COMPANY BACKGROUND

Goodwill Industries of Central Texas was founded in 1958 to help people with disabilities lead productive lives. The startup was composed of a staff of four who managed a small retail operation and a Vocational Services Center. Today, Goodwill Industries generates $20 million in gross revenue with 11 retail stores, 25 donation sites, four departments, and 500 employees during peak employment. Sales have continued to rise as the organization has experienced a 20 percent growth in revenue during 1996 and 1997. Figure 14.3presents a graph of revenue and head-count growth.

Goodwill Industries of Central Texas is a nonprofit organization that is independently run and operated, but is affiliated with Goodwill Industries International Inc. (GIII), an organization that helps individual Goodwills with resource issues, national marketing campaigns, executive search information, and federal legislative lobbying. Currently, there are 184 Goodwills in North America and 237 Goodwills throughout the world-each focused on the same mission.

DONATIONS TO DOLLARS

Goodwill Industries operates primarily through the generosity of people and businesses in the local community. The Donated Goods department generates the greatest source of its revenue. The organization relies heavily on donations of used clothing, housewares, electronics, sporting goods, and any other sellable items in order to generate the revenue necessary to provide its services. Indeed, the sale of donated goods is expected to generate about $12 million in 1998, while the total budget for the organization in 1998 is $18 million. Figure 14.4displays actual 1997 revenue by source, a distribution typical of the past several years.

THE CHALLENGE AHEAD

Executive management recognizes the emergence of an increasingly competitive marketplace in the thrift arena. This fact is forcing the organization to change the way it does business. Recently there has been increasing pressure for the stores to perform better and better each year despite much stiffer competition for employees and donations. As a result, some retail locations failed to meet store revenue goals. To compound the problem, employee turnover at Goodwill reached as high as 160 percent in some stores during 1997, and local unemployment rates were near 2.5 percent. The mission of Goodwill is to help people find meaningful employment, but when a person is hired as an employee of Retail Operations, the organization tries to retain that person to help create a stable and highly qualified workforce.

THE COMPETITION

Goodwill is faced with competition on two fronts-competition for donations and competition for the sale of those donations. Until a few years ago, Goodwill Industries had little competition for its primary raw material-donated used goods. People donated to Goodwill because there was no other outlet except the trash pile. The Salvation Army emerged as a competitor, but for a long time the Salvation Army and Goodwill were the only shows in town. That began to change, however, with the emergence and popularity of consignment stores and "mom and pop" thrift stores. People began to have more choices

as to where to donate or sell their used items. These small operations not only eat up potential donations, but also they increase the competition for sales as well. The thrift dollar has become much more competitive in the late 1990s.
There is also an emerging threat from for-profit thrift (FPT) stores, such as Thrift Town, that actively solicit used goods from the same population as Goodwill. Thrift Town is a subsidiary of TGV, a publicly held company whose business plan calls for international expansion by the end of the decade. TGV has completed extensive market research to determine where local nonprofits are weak and is moving into those areas as part of its growth strategy.
Despite the increase in local competition, however, the retail operations of Goodwill Industries International, Inc., grew by 20 percent in 1997. Two new stores were opened and significant expansions were started on two others in 1997. Goodwill Industries International, Inc., has an explicit strategy to expand its operations by opening and operating new locations throughout the 15-county territory for which it is responsible. A 20 percent growth in revenue is expected each of the next three years.

WHAT HAS SUSTAINED GROWTH?

Goodwill has developed a unique strategy for competing in the broader local retail market. It has chosen not to compete head-to-head with other retailers for the traditional holiday (i.e., Christmas season) spending dollar. Instead, it has chosen to create a niche for itself by marketing Halloween costumes and decorations. Stores are decorated in Halloween themes and employees are encouraged to come to work in costumes. About 45 percent of the annual advertising budget is geared toward Halloween promotions. This strategy seems to be working, because October accounts for almost 30 percent of retail revenue for the year. On the other hand, this also means that a bad financial Halloween could mean a bad year for the organization.
Goodwill Industries has relied on its ability to open stores in high-traffic locations that are close to the population that donates to their stores and shops in them. There is no formal process for searching for new locations. The decision is left up to the management of the retail operations after visiting potential locations. Goodwill recently built its first store from the ground up in a developing suburban community. This was a significant shift from a long-standing philosophy of leasing or buying properties that had a history of being productive.

Finally, Goodwill has tried to polish its image with the public by trying to look more like a department store than like a thrift shop. The stores have purchased new fixtures and spruced up the exteriors with new signs and paint. Greater care is being taken to ensure that dressing rooms are cleaned regularly and that donation drop-off sites look appealing and clean. The transportation department has recently painted its trucks with the Goodwill logo and the phrase "those jeans you donated just got someone a job."

CUSTOMER ISSUES

A frequent criticism from the public is the difficulty they have in donating to the organization. At one time Goodwill offered a donation pickup service but stopped doing it because of too much difficulty coordinating pickups at homes. The organization also is concerned with the amount of "trash" that the home pickup workers had to deal with. At present, donors must transport to the nearest donation site. This policy went into effect in 1995 but people are still unaware of the change, possibly because they have infrequent contact with Goodwill. Most home pickups were usually for furniture or garage sale
remnants that may only bring that donor into contact with Goodwill every five or six years.
Another area of customer concern is Goodwill's retail policy of "all sales are final." Customers complain that they may purchase an item that works during testing at a store but fails to operate at home. The "all sales final" policy means that it is impossible to get a refund, but the manager is empowered to offer a store exchange. These exchanges rarely occur. Part of the reason for the policy is that it is difficult to prove that the items being returned were previously purchased from Goodwill.

Questions

1. Who are Goodwill's customers and how have their demographics changed over time?

2. How should the introduction of for-profit thrifts affect Goodwill's decisions about the role of customer service?

3. How can Goodwill differentiate itself from the competition?

4. Visit https://shopgoodwill.com/where Goodwill auctions items of special interest and discuss why this online store has great profit potential.