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Value Village, Savers lead thrift store growth

By Mark Seavy

The early bird catches the worm at Value Village, a thrift chain operating in 31 states.

Shopping at a thrift store once meant sifting through dark and dingy racks and shelves. But in recent years these stores have cleaned up — not only their images but at the cash register, and secondhand merchandise has grown into a $12 billion-a-year industry.

And while many thrift store operators remain small business despite the burgeoning market, TVI’s Value Village and its sister company, Savers, are emerging as leaders, with plans by TVI to add 117 stores to the 179 already operating in the United States, Australia and Canada. The Bellevue, Wash.-based chain has rolled up nearly $300 million in annual sales in a business in which the average transaction is $9 and nonprofit organizations are a major beneficiary.

The firm operates 97 stores in the United States — 31 under the Value Village name in Washington, Oregon and Alaska; 66 under the Savers brand in 23 states — 77 in Canada under the Village Des Valeurs name and five in Australia under Value Village.

Fighting against a “cut-rate’’ image, Value Village and Savers feature clean and bright 20,000-square-foot outlets that mix together row upon row of secondhand clothes with a smattering of books, toys, small appliances and the occasional family heirloom.

“It’s not as much an income thing as it is a lifestyle,’’ said Walter Scott, the designated agent who handles real estate for Value Village, referring to the chain’s customers who frequently spend 45 minutes to an hour poring over merchandise. “Most people aren’t going to the stores for a specific item, but just to see what they have.’’

What the stores typically have may vary week to week or day to day depending on the items that the nonprofit organizations deliver to the chain’s doors five days a week. A Levi’s denim jacket or a skirt with a Mickey Mouse applique may be sold for less than $5 one week, while childrens books and assorted knickknacks are available for less than a $1 the next. The merchandise in the outlets themselves vary from one location to the next. Those near college campuses, for example, might be stocked with philosophical or political treatises while those in the suburbs put added emphasis on children’s books, Scott said.

“We tend to focus on clothes because you can pack more value in a rack of apparel than on shelves, which tend to be smaller, but we also stock our stores based on where they are located,’’ Scott said.

And while the outlets are strikingly similar to department stores in layout and design, the bottom line is vastly different. Value Village signs contracts with nonprofit groups in the regions in which they operate to deliver merchandise picked up from local residents. The nonprofits receive payment based on the volume of goods they provide, which can frequently account for as much as 50% of their annual budgets. For example, in the past year the Community Service for the Blind in Seattle realized gross revenues of $1.9 million from its dealings with Value Village, said June Mansfield, president and CEO of the organization, which employs 65 people picking up and delivering merchandise in addition to soliciting donations.

Between them, Value Village and Savers work with 25 nonprofit organizations, Scott said, and last year they paid out a combined total of $100 million to those nonprofits.

Once a Value Village or Savers store receives a delivery, 18 to 20 people process the prospective merchandise. The chain keeps products on its vast racks for four to five weeks before slashing prices 50% or more as it moves to clear the way for new arrivals. That means the chain turns over its merchandise nine or more times a year, with items that aren’t bought usually packaged and sent to either Third World countries or material wholesalers, Scott said.

“We’re just a wholesaler to them so the relationship is very clean from that perspective, and we negotiate a price every year about how much bulk merchandise they’re going to buy,’’ said Mansfield, whose organization serves 4,000 to 5,000 people in the Seattle area and supplies goods to four Value Village stores. “There is no cross relationship, which is different from the way a lot of these operations run. Many thrift operations are just using the name of the charity and then they give them some small amount. I can’t make this much holding an auction or getting a grant from the United Way or another organization. It’s been a godsend for us.’’

It’s also been beneficial for Value Village, which got its start when William Ellison launched the concept in 1965, shortly after arriving in Seattle from San Francisco, where he had previously operated a thrift store for 11 years.

Ellison’s son, Thomas, has since taken over the reins and plans to build the chain into a national power in the strip centers that it calls home. Value Village and Savers stores frequently share shopping center space with chains that appeal to a similar customer, such as Jo-Ann Fabrics, Payless ShoeSource, Marshalls, Fashion Bug and Toys ‘R’ Us. The chain pulls 53% of its customers from a radius of five miles or more and another 39% from within one to four miles, Scott said.

“The principal medium [of promotion] for us has been word of mouth and the profit margins just don’t justify TV advertising,’’ Scott said.

The test of Value Village’s strategy will likely come in the next four years when it plans to open 117 stores, starting with 23 in 2001, Scott said. In 2001, Value Village will add eight to 10 stores in Canada and another three in Australia, where it’s concentrated in the Melbourne area, Scott said.

By 2004, the chain will have tightened its focus on the Midwest and the Northeast in the United States, he said. Traditionally resale businesses have been hard to organize nationally because stores buy goods piecemeal from local sellers who bring in castoffs. But Value Village’s ties to local nonprofit organizations put it in good stead, Scott said.

“We have a continuous and huge flow of merchandise because of our relationships with the nonprofit organizations, and that will help us as we expand since many of the groups also are tied to together nationally,’’ Scott said.