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Goodwill Industries faces financial difficulties in mountains of trash.

When you build your retail business on the kindness of strangers, you can never be sure what you’re going to get.

Two types of people donate the items that Davis Memorial Goodwill Industries—the local branch of Goodwill Industries International—sells in its stores. There are the ones who bring in the good stuff: nice, clean clothes, slightly worn shoes, maybe some functional children’s toys. And then there are the others: the people who make their drop-offs at midnight, under cover of darkness, bearing unwanted gifts of used mattresses, mildewy sweaters, and ancient textbooks. To them, Goodwill isn’t just a charity—it’s a dumping ground, a place to unload junk and maybe score a tidy tax deduction. In other words, it’s a hell of a deal.

But all that trash is threatening the retail business of Goodwill, a century-old charitable powerhouse. So all those families looking for affordable clothing and furnishings, as well as the hipsters searching for the perfect polyester blouse, may soon have fewer options.

Inside Goodwill’s cavernous 92,000-square-foot headquarters in Northeast, hourly employees work conveyer belts as they would assembly lines, immersed in the unending task of sorting through the castoffs of the people. More than 50,000 pieces of clothing, along with countless other items, come through the facility every week. The goods are deemed excellent (which usually means they have a designer label), decent (which requires no tears or mildew), or beyond use (tattered, badly stained, generally revolting). The good stuff gets sorted and sent back out to the various stores, and the rejected clothes get bundled into 1,100-pound cubes that are sold overseas for about 10 cents per well-compacted pound.

And then there’s the junk, which is dropped into a huge refuse bin that always seems to be full. “About a third of the stuff that comes in here is—God love the donor—but it’s trash, so our trash bill approaches a half a million bucks a year,” says Goodwill Chief Executive Officer David C. Becker. “It’s a constant frustration for us. The reality is it costs just as much for us to get rid of that set of bad snow tires as it does the guy that’s got them in the garage.”

And trash isn’t the only problem. The company also incurs huge transportation costs from hauling its merchandise between stores and has found its rents skyrocketing in recent years. While Davis Memorial Goodwill Industries’ retail business has grown at about 3 percent annually over the past five years, its expenses have gone up 10 percent annually during that same period. Couple this with increased competition from big-box retailers such as Wal-Mart and other secondhand stores and you are left with the oddest of creatures: a charity that gets its inventory for free but has managed, for the past few years, to lose money.

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In 2000, Goodwill lost more than $858,000, despite the fact that its other core business, a janitorial service, brought in $8 million, approximately 40 percent of the organization’s total revenue. The local charity is now in the process of closing two stores, in Bowie, Md., and Woodbridge, Va., and it is hinting that its headquarters, at 2200 South Dakota Ave. NE, could be next. “We are looking at how we can utilize this facility,” says Becker.

Becker downplays the Woodbridge and Bowie closings, saying that they represent a temporary contraction allowing for a business overhaul—not a sign that Goodwill’s retail operation is doomed.

“This is an evolution of things,” he says. “As we try to right-size the retail program, we certainly can’t have it drag down the other parts of the organization.”

According to Director of Communications Joe Davis, Goodwill is fed up with a system that relies heavily on transportation and a central facility to process goods. Instead, Goodwill is emulating the airline business by moving to a small-hub-and-spoke model, complete with a smattering of smaller collection centers and no central facility. The approach is expected to cut costs and make the operation profitable again.

“The cost of doing business has gone up,” says Davis. “Combine that with the fact that people are spending less in the stores, and something has to be done.”

Goodwill’s 2000 tax form claims more than $5 million in debt. And in January, Becker met with a group of volunteers to announce that the charity would be discontinuing its annual book sale, which last year yielded $345,000 in profit. Why would Goodwill put an end to such a rainmaker?

Two of the volunteers in attendance report that Becker suggested that the headquarters building wouldn’t be around long enough to organize the sale.

Responds Becker: “We knew we were going to be decentralized and were going to reduce collection volume,” with regard to the book sale decision. However, he says, “there has been no decision made at this time about selling the headquarters.”

Either way, the store closings are a blow to a charity that has been able “to provide support for a charitable endeavor off of people’s discards,” Becker says. It’s extremely rare, he points out, that anyone makes a “sacrificial” gift to Goodwill.

“No one’s even driven in and said ‘I just bought this brand new Lexus, and I want to see it go to Goodwill so it can help people with barriers to employment,’” Becker says. “What we usually get is stuff that people don’t want or they’ve used up and are ready to

pass on.”

Just as Goodwill helps the rich with tax write-offs, it provides job training and employment to those who have had trouble finding steady employment, such as third-generation welfare recipients, at-risk teens, and ex-convicts. The Goodwill constituency, says Davis, is those who “find it difficult to land a good job and get going on the straight and narrow because of one or two mistakes in the past.”

But the idealized notion of a community-centered Goodwill Industries appears to be dying. The company may be shifting away from the money-draining retail business in favor of its janitorial and other operations, including a car buy-back program. In Detroit, where the local Goodwill no longer runs stores, a similar transformation has already occurred.

Although the job-training programs continue uninterrupted, the days of tax-deductible donations and low-cost shopping at Goodwill may soon be a memory, destroyed by a combination of spiraling costs and increased competition. Soon, all those late-night donors may finally have to find something better to do with their trash.

“What do people think we do with all that stuff they bring us?” asks Davis. “If it’s junk, they should take it to a landfill.” CP