Habitat for Humanity Philadelphia’s ReStore offers a unique and significant opportunity for the organization to increase revenue and, in turn, build and repair more homes for Philadelphians living in poverty. Despite a strong business model and success in other cities, the local ReStore had struggled financially. Determined to diagnose the problem and turn the fledgling business around, Habitat enlisted professional counsel on retail management and real estate and determined that the store’s location was dramatically hindering its potential.
“We knew it was a great idea, but we hadn’t given it the best chance to succeed.”
Corinne O’Connell, Associate Executive Director
Habitat for Humanity Philadelphia’s second-hand shop, called ReStore, seemed to have everything going for it. It sold donated building supplies and home goods to the public at affordable prices. It had a large, affordable location. And it had a noble purpose: to provide revenue for Habitat for Humanity’s mission to build and repair homes for people living in poverty.
The store’s concept was hugely successful nationally: 850 ReStores across the US generated $89 million in net profits in 2013, covering the costs of 898 Habitat homes. “It’s Five Below meets Home Depot,” said Corinne O’Connell, Habitat Philadelphia’s Associate Executive Director, referring to the youth-oriented store whose entire stock sells for $5 or less, and the home improvement warehouse giant.
But the performance of the store in Kensington was disappointing. It was breaking even, but not driving the kind of transformation and growth that they knew it could. Habitat regrouped and took a hard look at their business. They made adjustments to their model and team and business improved slightly. Last year it grossed more than $415,000, but the amount still paled in comparison to ReStores elsewhere. Customers were so few that merchandise had to be sold at rock bottom prices to keep inventory moving.
Undeterred, Habitat enlisted the counsel of deeply experienced retail management and real estate professionals. To them, the problem was obvious and unavoidable. “Location, location, location,” O’Connell said. The ReStore was in an old warehouse tucked in a dense pocket of Kensington, surrounded by streets packed with rowhouses. Even for customers who were looking for it, the store was difficult to find. With no other retail on their tiny street, walk-in foot traffic was virtually non-existent.
For The Barra Foundation’s Catalyst Fund, relocation was not a particularly inventive solution. However, innovation often requires iteration. Habitat was able to clearly diagnose the shortcomings of this early stage enterprise and demonstrate its significant potential. “We knew it was a great idea, but we hadn’t given it the best chance to succeed. This is our opportunity to try again,” said O’Connell.
The extensive relocation search led to 2318 Washington Avenue in South Philadelphia, a wide commercial corridor which is easily accessible and heavily trafficked. Nearby businesses sell tile, lighting, building supplies and other home-related merchandise, which attracts the perfect clientele: individuals who are remodeling or redecorating. O’Connell estimated that the new store location would double sales. So far, they are right on track: the first two weeks of sales topped $120,000.
The revenue from ReStore is particularly beneficial because it offers unrestricted dollars and can be applied where needed, unlike government and foundation grants which often are designated for specific purposes. Not to mention that “there are only so many philanthropic dollars out there,” O’Connell said. The fact that ReStore will be self-sustaining makes it an appealing project for funders, and potentially other investors.
Barra funding supported the relocation and relaunch of ReStore, Habitat for Humanity Philadelphia’s retail operation. If successful, income from the business will dramatically increase Habitat’s positive impact on the lives of low-income Philadelphians.