An FAQ Guide To Opening A Successful Nonprofit Thrift Store

Picture a shop where people can buy affordable treasures while funding a meaningful mission. Nonprofit thrift stores aren’t just about shopping — they’re about turning in-kind donations into real change for the community.

From collecting donations to creating a thriving community space, opening a nonprofit thrift store requires thoughtful planning. In this FAQ guide, we’ll explore business strategies like sourcing inventory and creating effective pricing strategies, giving you the tools to create a space that truly serves your community and your cause.

Why should we open a nonprofit thrift store?

A nonprofit thrift store offers a unique way to generate consistent revenue while advancing your organization’s mission. This is especially crucial during times of economic uncertainty or declining donor trust.

Beyond funding, opening a thrift store fosters community engagement. It provides affordable items to local residents and new avenues for donors to give. Depending on how you’ll staff your thrift store, you may also create job training and volunteer opportunities.

Take Goodwill, for example. This nonprofit operates retail stores worldwide. It’s well-known for providing job training, education, and opportunities to individuals who face employment barriers, such as people who have disabilities or who were previously incarcerated.

For a localized example, check out Friends of the Library, which runs a used bookstore to provide funding to the Tuscaloosa Public Library. People donate books, magazines, CDs, DVDs, and records, which the store sells for between $0.50 and $4. Volunteers staff the store, and all proceeds benefit the library.

How do I establish a nonprofit thrift store?

Start by defining how the store will support your mission. Funds from selling goods can be reinvested into your nonprofit’s programs and services. Or, the goods you sell can directly further your mission, like how each Habitat for Humanity ReStore sells discounted furniture, appliances, and building materials to make homeownership more affordable.

Next, you’ll need to take care of some important legal steps to open your store, such as the following:

Trademark your store’s name to prevent others from using it.
Obtain your employer identification number (EIN).
Apply for 501(c)(3) tax-exempt status with the IRS. For established nonprofits, confirm that your existing status allows for operating a thrift store as a means of generating income while maintaining compliance with IRS rules. In either case, consult a tax professional.
Obtain your general business license, sales permit, wholesale license (if you’ll purchase inventory in bulk), and zoning permits.
Get the appropriate insurance, such as general liability insurance, property insurance, and workers’ compensation insurance.

From here, you’ll need to secure funding to open your store and hire staff members, such as a store manager, inventory manager, donation coordinator, and sales associates. Consult a lawyer to ensure you comply with all relevant laws at this stage.

Where can we get our thrift store’s inventory?

You can acquire your inventory using a variety of techniques. A few sourcing strategies include:

Donations: Accept gently used or new items from local community members and businesses.
Consignment: Sell community members’ items at your store, pay the original owner, and take a portion of the profits.
Wholesalers: These businesses buy goods in bulk from manufacturers and then sell them in smaller quantities at a lower price. You can stock up on items from them and still make a profit.
Flea Markets and Garage Sales: Check out local flea markets and yard sales to find a unique assortment of items at low prices.

When requesting donations, communicate clear policies on acceptable and non-acceptable items. For example, you might not accept broken appliances or ripped/stained clothing. Additionally, make it easy for community members to donate items by setting regular pickup or dropoff hours.

You might even work with local businesses to set up collection bins in their storefronts. Double the Donation explains that philanthropic-minded companies often help nonprofits by running donation drives. Publish a wishlist on your website to communicate what to collect.

Before putting any items on the sales floor, make sure they’re in sellable condition. Items needing minor repairs, cleaning, or refurbishing can be profitable with a little extra effort.

What should we include in donation tax receipts?

When accepting donated items, provide donors with tax receipts. Not only are sufficient receipts necessary for tax deductions, but they also foster donor trust. Receipts should include:

Your organization’s name, EIN, and contact info
Donor info, such as their name, postal address, and email address
Donation details, including the date and description (not value) of their non-cash contribution
Impact statement (optional, but emphasizes donors’ impact)
IRS Disclosure statement saying that no goods or services were provided in exchange for the donation and that the donor is responsible for assessing the value of donated items

Your point of sale (POS) software can streamline this process. For instance, staff may easily customize receipts by selecting donated items from a list and adding donor information. A self-service kiosk may also allow donors to generate their own tax receipts for dropoff donations.

How do we manage our thrift store’s inventory?

Managing your thrift store’s inventory well creates a great shopping experience. Here’s how to keep your inventory fresh, relevant, and under control:

Sort items regularly. Sort through donations and categorize items by type, quality, and season. This helps maintain an organized sales floor.
Rotate inventory. Regularly rotate stock to keep offerings fresh and relevant. Feature items that align with current times of the year, such as winter coats during colder months.
Handle unsold items responsibly. Develop a plan for unsold goods. For instance, you might hold clearance sales to move stagnant inventory and partner with recycling organizations to discard unsellable items sustainably.
Track popular items. Routinely assess which items sell best and ensure you’re sourcing more of those goods. For example, if furniture is in high demand, keep these items stocked.

The best POS systems for thrift stores streamline inventory management. You’ll be able to track inventory and get an overview of what’s in or out of stock. Your shelves will stay full, and customers can buy the products they want!

How should we price items?

Effective pricing keeps items affordable for shoppers while bringing in the funds you need. Price too high, and customers might leave empty-handed; price too low, and you could miss out on funds for your cause. Plus, properly priced inventory moves steadily, ensuring that fresh items are always available and reducing the risk of unsold inventory piling up.

ThriftCart’s thrift store pricing guide covers these factors to consider:

Condition and Quality: High-quality, well-maintained items should be priced higher than lower-quality or poor-condition items.
Brand and Rarity: Items from popular brands or rare pieces can be priced higher than similar items due to their perceived value or exclusivity.
Seasonality and Demand: Items in high demand or relevant to the current season should be priced higher since customers are more likely to purchase them at higher rates.
Pricing Research: Research local retailers and other thrift stores to ensure your prices are competitive and aligned with market standards.
Profit Margins: Set prices that cover the costs of storage, staffing, and operations, ensuring that your thrift store generates a profit.

You can also use different pricing models. For instance, fixed pricing involves having a set price for a product — no discounts or bargaining involved. Variable pricing means prices will change based on demand, such as mittens being priced higher in the winter.

Meanwhile, discounting can fuel sales if you have a consistent strategy. For example, color-coded discounting involves using specific colors to label items, with each color corresponding to a predefined discount percentage.

Your POS system should streamline pricing, allowing your thrift store to easily implement discounts, set consistent prices for items, or adjust costs based on factors like demand and condition.

Nonprofit thrift stores are more than just a place for affordable finds; they’re a way for community members to give back while promoting sustainability. Every sale funds your mission, making a difference in people’s lives.

If you’re planning to open a nonprofit thrift store, start by defining how it will support your mission, and let that purpose guide your decisions as you build up your operations.

Author: Kyle Payton is the general manager of ThriftCart, an all-in-one point-of-sale product assisting nonprofits and small businesses in navigating the complexities of retail.