Overview of Savers
Savers is a privately held thrift store chain that operates over 300 stores across the United States, Canada, and Australia. The company was founded in 1954 in San Francisco by William Yusko and Morris A. Amitai under the name Value Village. In 1990, the name was changed to Savers Inc. Today, Savers continues to be headquartered in Bellevue, Washington and has grown to become one of the largest for-profit thrift store chains in North America.
Business Model
Savers’ business model primarily involves purchasing and reselling donated secondhand goods. Savers buys used clothing, accessories, furniture, electronics, books, toys, and household items from individuals who donate them. Savers then processes, prices, and resells the donated merchandise at its retail thrift stores.
This model provides inventory for Savers’ 300+ thrift stores across the United States, Canada, and Australia at a low cost. By reselling the donated goods, Savers generates revenue. The company claims this model also benefits local nonprofit organizations, which receive a portion of the Savers’ revenue based on the poundage of donations collected in their area.
Sourcing Inventory
Savers sources the majority of its retail inventory from charitable donations made directly to Savers stores or to the nonprofit organizations Savers partners with. Savers has agreements in place with over 120 nonprofit organizations to purchase donated goods from them (Savers – Wikipedia). This provides a steady stream of donated clothing, accessories, electronics, furniture, books and other household items.
In addition to sourcing from donations, Savers supplements its inventory by purchasing new and used goods from wholesalers and liquidators. This helps ensure a consistent selection of merchandise across all retail locations (Savers: Second Hand Used Clothing Thrift & Vintage Store). By sourcing inventory from both donations and wholesale purchases, Savers is able to regularly rotate its product selection and meet the needs of its diverse customer base.
Pricing Goods
Savers uses a proprietary pricing model to determine the prices of donated goods sold in its stores. According to sources, Savers considers several factors when pricing items, including condition, brand name, product category, and supply and demand.
The condition of an item is one of the biggest factors in its pricing. Items that are new or gently used are priced higher than items that show more wear. Savers employees inspect each donated item and grade its condition before pricing.
Brand name also plays a role. Items from designer brands or popular labels will be priced higher than generic or store brands. However, the impact of brand name depends on the category – designer clothing may fetch higher prices but generic toys often don’t.
Product category is important because some types of goods, like electronics and furniture, tend to sell for more than books or household items. Trends and seasonal demand also impact pricing – winter coats will be priced higher in the fall than the spring.
Finally, factors like inventory levels, sales velocity, and profit goals influence pricing. Items in high demand may be marked up, while slow-moving products are discounted to spur sales. Prices are set to achieve Savers’ profit margins after accounting for operating expenses.
In the end, Savers aims for optimal prices that move inventory quickly while generating strong profits. Their unique grading and pricing model allows them to maximize revenues from donated goods.
Generating Revenue
The majority of Savers’ revenue comes from in-store sales of donated goods at its retail thrift stores. The company operates over 300 thrift stores across the United States, Canada, and Australia under brands like Savers, Value Village, Unique Thrift Store, Village Discount Outlet, and Valu Thrift (Savers Value Village Revenue 2020-2023). Customers can browse a wide selection of clothing, accessories, household goods, books, media, and other items priced at a fraction of traditional retail. Savers generates revenue by reselling donated merchandise at a markup. The average price of goods sold is estimated to be around $5.
Savers supplements retail sales by selling bulk quantities of lower quality donations to wholesale liquidators. These goods are often exported and resold overseas. The company also generates a small portion of revenue through recycling programs that salvage unwanted textiles and items into raw materials. However, the vast majority of Savers’ $1.2 billion in annual revenue is derived from retail sales at its thrift stores across North America and Australia.
Profit Margins
Savers Value Village profit margins are in line with typical profit margins in the retail thrift industry. According to Macrotrends, Savers Value Village’s net profit margin as of September 30, 2023 is 2.4%.
Savers makes the majority of its profits from selling donated used goods. According to Stock Analysis, Savers has a gross margin of 34.95% and an operating margin of 10.18%. The most profitable categories tend to be clothing, shoes, books, housewares, and small electronics.
Profits are higher on small, lightweight goods that are easier to manage, store, and ship. Bulky furniture and large appliances have lower profit margins due to higher operating costs. Savers maximizes profits by pricing goods based on local demand and selectively sending higher value inventory to locations where it will sell for more.
Operating Costs
Savers has substantial operating costs associated with running its retail thrift stores across the United States and Canada. Some of the major operating costs include:
Real Estate: Savers needs to lease or purchase retail spaces for its thrift stores in various communities. Real estate costs include rent, property taxes, maintenance, and utilities for its retail locations. Savers operates over 300 thrift stores, so its total real estate costs are significant.
Staffing: To operate its stores, Savers needs to employ retail staff including cashiers, stockers, managers, and more. With thousands of retail employees, staffing is one of Savers’ largest operating costs.
Logistics: Savers incurs transportation and logistics costs to collect donated goods, process them at distribution centers, and transport them to retail stores for sale. The company operates a fleet of trucks and contracts with logistics companies to handle this supply chain.
In addition to real estate, staffing, and logistics, Savers has costs related to marketing, IT, corporate overhead, and other operational expenses required to run its large retail business. Careful management of operating costs is key to preserving Savers’ profit margins.
Charitable Contributions
Savers donates a portion of its profits to nonprofits as part of its charitable mission. According to the Savers website, the company has given over $1.5 billion in funding to its nonprofit partners since it was founded in 1954.
Savers states that supporting community programs is a core part of its identity. The company partners with several nonprofit organizations to fund community initiatives focused on employment, training, education, and more. Some of Savers’ nonprofit partners include Easterseals, Big Brothers Big Sisters, Make-A-Wish Foundation, and Disabled American Veterans (DAV).
While the amount varies, Savers generally donates around 70-90% of its profits to charity each year. In 2021, the company reported donating $145 million to its nonprofit partners, which was about 87% of its net income for the year. The remaining profits are used to grow and strengthen Savers’ retail operations.
Savers touts its community contributions and status as a purpose-driven business. Its charitable focus has helped the company stand out in the crowded thrift store landscape. However, Savers has faced some criticism over whether it could and should be donating even more to charity given its status as a nonprofit.
Overall, charitable giving is a core tenet of Savers’ operations. Donating a large portion of profits enables Savers to fund many community programs through its nonprofit partners.
Sources:
https://agapepress.org/is-savers-a-good-place-to-donate/
https://mfwv.ckproductions.co.uk
Recent Performance
Savers has seen steady sales growth and profitability in recent years. According to a commercial property transactional brochure from FG Commercial, Savers had sales of £79.6 million in 2019, up from £69.7 million in 2018. Net profit also rose from £10.3 million to £12.1 million over the same period.
The company’s EBITDA (earnings before interest, taxes, depreciation and amortization) was £14.8 million in 2019. Savers has maintained strong profit margins, with EBITDA as a percentage of revenue at around 18-19% in recent years.
Savers continues to generate robust cash flow from operations. In 2019, its operating cash flow was £12.9 million. The steady sales and profit growth at Savers reflects the company’s effective business model of reselling donated goods.
Sources: FG Commercial Transactional Brochure
Future Outlook
As one of the largest thrift store chains in North America, Savers has significant opportunities for continued expansion and growth. The secondhand retail market is projected to grow steadily in the coming years as more consumers embrace sustainable fashion and shopping. According to a report, the global secondhand market is expected to reach $82 billion by 2026.
Savers plans to open more retail locations to reach new geographic areas and capture more of this growing market. However, the company faces some challenges. Sourcing enough quality donated merchandise to meet demand can be difficult. Savers also competes with other national thrift chains like Goodwill and Salvation Army. The proliferation of online resale platforms like ThredUp and Poshmark provides more options for selling and buying secondhand goods.
To stay competitive, Savers will likely focus on enhancing the in-store shopping experience, improving merchandising, and developing its ecommerce capabilities. Continued charitable giving also helps differentiate the Savers brand. Overall, Savers is well-positioned to grow but must adapt to trends in reuse and rise of online resale.
