Despite tough times, retailers are giving more to charity

ByJayne O'donnell, Usa Today
December 23, 2008, 11:48 PM

— -- Double-digit sales declines notwithstanding, retailers have shown this is the season of giving after all.

Often-empty sales floors have made some stores look a bit like charity cases themselves lately. The pre-Christmas discounting was at levels not seen in decades, and store closings have become chillingly commonplace. But retailers have been pulling out all the stops to be charitable.

Turns out, it's a smart business move, along with a socially responsible one. More than 75% of 1,100 consumers polled in August said companies should still support social or environmental causes and non-profit organizations during an economic downturn. In the survey, by Opinion Research for cause-marketing company Cone, respondents said businesses should give as much as ever — or more.

"There's an expectation that companies better pay up," says Marian Salzman, a trends expert and chief marketing officer at Porter Novelli Worldwide. Consumers "want the retailers and brands to be accountable to the community but feel broke themselves."

The Chronicle of Philanthropy's annual report on corporate giving, out in August, looked at charitable giving by the top 150 companies in the Fortune 500. Of 11 retailers on the list that provided information, Target, Wal-Mart, Home Depot and Costco said they planned to increase giving this year, and the others said theirs would remain the same.

"There's no formula that says when profits are up, giving is up and when profits are down, giving is down," says Margaret Coady, director of the Committee Encouraging Corporate Philanthropy. "There are many factors that determine giving, including the commitment that companies have to communities and non-profit partners."

A few factors are making retailers more charity-focused:

•Retail charitable giving and cause marketing is increasingly resonating with consumers. Even as they cut back on their own spending, consumers increasingly say they are more inclined to buy cause-related products or support retailers who help the needy. When asked if they had to choose between two gifts priced the same and of similar quality, 77% of 1,070 people polled said they'd pick the one supporting a cause, according to a November 2007 survey by Opinion Research for Cone.

The gifts sold at Things Remembered that include a $2 donation to the Make-A-Wish Foundation are among the stores' top sellers. Boosting the sales: the story of Elysia Bryan, who in 1997 made a wish before she died of cancer that she could give her family and friends personalized gifts saying, "Thank you, I love you, and always remember me." That led to a program that has raised more than $5.5 million since 1998 and helped 750 kids.

•Big-box retailers still have the most work to do when it comes to creating goodwill in their communities. While many welcome the arrival of a deep discounter or other type of megastore in their area, others lament that they drive out smaller local businesses. That's led companies including Wal-Mart and Target to home in on the issues and charities that matter most in the communities they do business in.

"People don't love big-box retailers. They're so impersonal and disconnected," says Ken Nisch, chairman of retail brand and design firm JGA. But their community efforts help soften the image.

•With the consumer spending slowdown, retailers are using charitable ways to draw customers into stores. Macy's promised to donate $1 (up to $1 million) to the Make-A-Wish Foundation for every child who dropped off a letter to Santa. Tuesday, Macy's presented the foundation with a $1 million check. Kohl's displayed stuffed Curious George dolls by the doors that sold for $5, and the net profit went to charity. Target donated part of the purchase price of items in a cause-related holiday collection to charity.

Target has given 5% of its income each year since 1942 to charitable causes, mostly education. Since early November, Wal-Mart has announced eight initiatives funding hunger and projects including international disaster relief.

But it is Kroger, a retailer in the low-profit-margin grocery business, that gave the highest percentage of its pretax profit to charity of any major retailer on The Chronicle of Philanthropy's list. The 6.9% of 2006 pretax profits Kroger gave to charity in 2007 is more than three times that of Wal-Mart. Target donated the second-largest percentage of its pretax profit, or 3.8%. The Chronicle's list combines foundation and corporate charitable giving of cash and products but does not include donations encouraged by the retailer but made by employees or customers.

Kroger focuses most of its charitable giving on hunger relief and local issues that customers say are important to them — and believes it pays off.

"Our customers have told us that it's one of the reasons they go to us over one of our competitors," says spokeswoman Meghan Glynn. "What we do to support communities is very relevant to them."

Laysha Ward, president of community relations at Target, says education is one of its customers' top priorities, which has made it one of the discounter's. Target lets customers who use its store credit cards designate one or more schools they would like 1% of their purchases to go to.

Much of that money and Target's other educational giving has gone toward renovating and upgrading elementary school libraries. Target employees help select the schools, typically those where up to 75% of students are below the poverty level, then design and do library renovations.

Target has also donated millions to the arts, social services and the United Way. Target's giving, says Cone Executive Vice President Alison DaSilva, is "the gold standard."

"Almost all of our clients ask us to benchmark them against Target," she says.

Mixing charity with shopping may be the ultimate win-win-win. Stores sell more products and improve their images, charities get donations and free publicity, and people get a charitable nudge many appreciate.

"People want to do good, but they don't always know how to do good, and they don't always want to spend the time to figure it out on their own," says Michael Stone, CEO of The Beanstalk Group, which specializes in brand licensing for corporate and non-profit clients.

The millions who walk through stores every day are a charity fundraiser's dream come true. Wal-Mart stores alone have 120 million visitors a week. "To get those eyeballs on a worthy cause would just be incredible," says Stone.

The percentage of people who think it's acceptable for companies to involve a cause in their marketing has increased from 66% in 1993 to 85% last year, Cone says. Almost 80% of people say they'd switch from one brand to another if the other brand is associated with a good cause, and the price and quality are about the same, up from 66% in 1993.

Cone tested such responses in actual shopping this year, when it split 182 consumers into two groups and showed some a magazine with generic retail advertising and the other cause-related retail ads. When they went shopping after viewing the ads, all of the brands associated with a cause sold better than the others. One brand of shampoo linked to a cause saw 74% higher sales, and a toothpaste brand was up 28% with a cause-related ad.

Macy's hopes cause marketing makes people like the company better, too.

"Our corporation is truly extremely supportive of cause-marketing initiatives. It supports the DNA of what this brand is all about," says Martine Reardon, executive vice president of marketing at Macy's.

She compares it with the way kind people win friends: "If you see someone out there doing something nice, you think that's what they're like, so you want to get to know that person."

John King of Southport, N.C., says he feels better about a retailer that supports charities and is more inclined to shop there. And he feels even more strongly if they stop. He and his family no longer shop at Target because the company banned Salvation Army bell ringers from the front of their stores four years ago. At the time, several Christian groups called for a boycott of Target.

Target says it doesn't allow any solicitors and highlights the $2 million it is donating to Salvation Army this year for its libraries, and other efforts, including toy drives.

Still, some find requests for donations outside stores or from cashiers wearying, while others are skeptical.

"I give to charities of my choosing that I have investigated, and I know that all the money I send goes to the charity," says Ray Tyc of Montgomery, Ala. "I'm not so sure about that with the retailers."

DaSilva says Cone's research has shown that "consumers are not all created equal regarding receptivity," but the millions raised from consumers show it's worth a try.

"Consumers are struggling to pay their own bills, but their friends and families are getting laid off, and they almost can't help but feel a sense of compassion," says DaSilva.

"Companies who recognize this mind-set of consumers will gain a competitive advantage."

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