Davis, who has over 10 years’ experience at Aldi, is also focused on bringing a “mainstream retail” focus on the customer experience to the charity chain, through staff training, an e-commerce offering and new store formats. Here he shares what really happens after customers drop off unwanted items at Salvos Stores, and why the future of fashion is circular.

Inside Retail Weekly: There’s been a lot of focus on the fashion industry’s waste problem in recent years. Can you share what that has meant for Salvos Stores?

Matt Davis: Most people would know that over half our business is textiles, and most people would know through watching the War on Waste that Australia has a huge problem with textiles going to landfill. The statistics tell us that on average a person throws out 23 kilograms of textiles each year, which is a crazy number. And while Australians are incredibly generous in donating items to Salvos Stores, we know a huge amount is still going to landfill.

The reason for that is there’s a misconception among the public and the industry that charities don’t want more textiles, but actually, they do want more textiles. There are two things we’re doing about that. One is we’re educating the public around responsible donating – giving things that you’d give to a friend, washing it, bringing it into stores during trading hours, not leaving it out the front, where it can get rained on. That’s the longer-tail piece we’re working on.

The other thing we’re doing is working with other mainstream retail partners to create a take-back scheme. That’s what the campaign will be about later in the year, about how we can work together as a broader retail fashion industry to make it easier for people to return their unwanted items. Take-back schemes have been successful in other markets like Europe and North America, and we think they can be here too, because customers are telling us they want a solution.

Around 44 per cent of people believe the pre-owned business model is more relevant this year than last. Particularly younger consumers are saying they want brands to be more ethical and sustainable, so all brands are looking for ways to deal with products after they’ve been sold. Of course, they’re looking at how they can source and manufacture it ethically, and now they’re looking at what they need to do post-purchase.

We’re going to collaborate with brands and mainstream retailers to facilitate a campaign around that. So you might be able to drop off unwanted items at a number of different Australia retailers – certainly the charity stores – so we can decrease the volume of product that otherwise would have gone to landfill.

IRW: What’s your understanding about why the retailers that are participating in this scheme decided to partner with Salvos Stores rather than launch their own take-back program, as H&M has for instance?

MD: The good news is we’re speaking. Wind the clock back a couple of years and we weren’t. We’re attending the same sorts of forums – we’re participating in the Circular Fashion Conference this week – and we’re hearing a couple of things.

Brands have told us they thought they had to solve the problem on their own because they thought we didn’t want more [textiles], and when we say we absolutely do [want more], they say it’s really helpful. We’re busting the myth that charities don’t want more textiles – that’s a myth.  

The other thing we hear from brands is that they’re unsure if their business models can run schemes on their own, so they’re looking for partners, and we’re trying to send a message to the market that we’re here to help that. A simple example might be that Retailer A wants to run a set of take-back schemes, and instead of running it through their own business, they create an incentive for customers to drop those items off with a charitable retailer like Salvos Stores.

That’s one way to do it; another way to do it is to create a drop-off point in their stores like H&M has done, and we work together with them and other logistics partners behind the scenes to make that work. We’ve had great feedback from Australia Post, for example, on their commitment to the circular economy, and they’ve been facilitating a lot of dialogue in this space over the past few years.

To sum it up, the feedback we get is that retailers know their customers want more of this type of behaviour, they’re pleased they don’t have to do it on their own and they’re looking for ways to partner and make it easy for their customers too.

IRW: I think you’re right that there’s a lot of misinformation about charities being overwhelmed by donations. I read a number of articles on that topic after Marie Kondo’s Tidying Up series debuted earlier this year. Can you shed some light on what actually happens behind the scenes at Salvos Stores after someone drops off old clothing?

MD: In regards to Marie Kondo, all the charities reported high levels of donations over the Christmas period, which was fantastic. On average, stores in the urban areas got an increase in donations of between 20 and 30 per cent for the month of January, which we were very grateful for. The challenge with the donation seasonality is that it very much has a curve to it. In the warmer months, when people are on holiday, we do tend to get overwhelmed, and when people drop stuff off out of hours, it does create a waste issue.

If they do it during trading hours, we can use our normal value chains. And the way it works is that once an item enters a store, provided the store isn’t completely overwhelmed and has to just send stuff straight back to the warehouse, the team will sort through every item in-store. And the team is trained to decide if it’s shop-worthy. No rips, stains, pilling, etc. And they’re trained to decide if it’s something their local customers are after. And if so, they’ll pop it on a hanger, put a price on it and put it out on the shop floor.

So for those items that aren’t suitable for the shop floor, there are a number of different destinations they go. We have a percentage of items that are sorted and kept aside for winter, a percentage that are kept aside for a future summer season, a percentage that are set aside for transfer to other locations. For instance, Kew [Victoria] gets the most incredible donations, and we try to keep absolutely everything [that’s donated there], so if Dandenong [Victoria] needs something, we can transfer it there, even if Kew can’t sell it.

And then there’s an exit process, where we work with a number of partners where items are exported to a sorting facility overseas, and in that facility they go through another sorting process. The majority of that product is effectively sold on a commercial basis to other micro-retailers around the world in developing economies that don’t have sophisticated retail markets. For example, if you walk around the streets of Port Moresby, one of the first things you’ll notice is there are no shops. There are market stalls, and a lot of the fashion items sold in Port Moresby come from charities in Australia. That’s a cheap economic development-type alternative that developing economies have. And if you talk to people in those places, that’s a valuable way for them to access affordable fashion and sustain the local economy.

For items that aren’t suitable for that, there’s a percentage of textiles that are turned into industrial rags. So if you work in an industrial workshop and are polishing cars, or cleaning up grease, a lot of materials make it into that process. And an emergent area is waste to energy. So for the items that aren’t suitable for resale or rags, they enter a waste-to-energy stream, where they’re mixed with other materials that have an energy value, and they’re turned into bricks and used to run concrete plants, for instance. This is an emergent area of technology in Australia as well, and while it’s very low in the hierarchy, it is a waste-avoidance strategy.

So the actual percentage of textiles that go into landfill from Salvos Stores is very, very low after all the various processes are taken into account.

IRW: When you talk about circular fashion, there seems to be a lot of interest in the possibility of breaking down used clothing into fibres that can be used to create new items. Is that potentially a threat for Salvos Stores, since those used items would be diverted from donations?

MD: We’re very encouraged that the technology for this is starting to emerge globally. It’s not really in Australia yet, but from a global perspective, it’s a really encouraging trend because it gives us more alternatives. We’re partnering with an organisation to trial some development around that. And what we’re trying to do is do both. It’s not an ‘either/or’, it’s an ‘and’.

From a waste hierarchy point of view, the best way to avoid using virgin materials is reuse. So the idea that if you need a jumper, you go and purchase it from an op shop, you’re not buying a virgin product. So the avoidance or reuse principle is the highest in the hierarchy, and I think charities play a vital role in providing options for customers rather than having to go and buy something brand new.

And here’s an interesting stat for you. While we’re seeing fashion retail in Australia continue to decline – we’re seeing one retailer after another close at the moment – our fashion category has grown by about 7 per cent a year for the last five years. So that tells you that the trend around reuse is taking hold in Australia, and customers see it as a viable alternative.

What we hope to see in future is when that’s not an option, or when the item has been reused so many times it’s not wearable any more, it goes into a value chain that enables the fibres to be separated and remade into virgin garments, and you’ll probably be familiar with Adidas’ announcement that they’re looking to make their entire range from recycled materials.

IRW: Besides changing consumer behaviour, what if any changes have Salvos Stores made to contribute to the growth of the fashion category?

MD: There are lots of reasons for that [growth]. From a customer feedback point of view, customers are telling us they appreciate that stores are clean, they’re well lit, they’ve got good customer service. They expect more from op shops now than they used to, and we’re getting great feedback that we’re moving with the times, and that we’re not the ‘stinky old op shop’ they may have avoided in the past. It is interesting to see that in the furniture category, for example, because it’s so easy now for people to just take a photo and post it online. So we’re seeing furniture declining, but fashion growing.

I think the customer experience is absolutely improving, and we do hear customers say things like, ‘I’m just sick of seeing the same thing at every single retailer, I want something different.’

IRW: What are some of the ways that you talk about the in-store experience at Salvos Stores? What kind of experience are you looking to offer and what are you doing to provide that?

MD: I’ve been at Salvos Stores now for about three years, and coming out of mainstream retail, my big message for our team is about putting the customer at the centre of everything we do. We’ve been on a cultural journey to shift from being production-focused to being customer-focused. So that means being attuned to where our pricing is at – we’ve received a lot of feedback that the op shops have become too expensive over the years, and so we’re now cheaper today than we were two years ago in terms of our average unit price. We’re listening to the challenges around pricing. Discount department stores have really driven the price down of a lot of entry-point items, like T-shirts for $3.

Convenience is another huge one. We offer longer trading hours during summer, and we’re now upgrading our stores in terms of air conditioning and parking and range. Instead of having a tiny little op shop, our stores now tend to be a bit bigger to accommodate more of the categories we operate in. Our digital offer has improved dramatically. We now have a loyalty card with over 200,000 members, which has been really well received. We have a fully operational e-commerce hub selling a range of collectables and new products operating out of our Melbourne warehouse, which we relaunched before Christmas and which we’re looking to scale up. So, [we have] all the things that other retailers would say are important to providing a good customer experience.

IRW: I have to admit, I didn’t know about the loyalty card and e-commerce site. Are you doing things like email marketing?

MD: We try to be really careful with the way we engage with customers. It’s a social contract, isn’t it? We have to understand that we’re offering a community service, and so while we do have a customer database and communicate with our customers, we tend to try to use it more as an information space. So, where does the money go? What impact does it have? What stores are opening nearby? What offers have we got? As opposed to buy more, buy more, buy more!

IRW: Given that Salvos Stores has a mix of paid and volunteer staff, does that present any challenges in terms of providing a consistent in-store experience? Are you able to administer training across all the people who work in Salvos Stores?

MD: That’s a significant and ongoing challenge. Salvos Stores nationally have 10,000 volunteers. That’s an enormous group of people to engage, motivate, train and develop. We do offer quite a wide range of support tools to that group to help them offer that experience. We’ve done some surveys internally around how best to do that, and the single biggest factor was empowering our store manager and providing them with tools that they need to genuinely lead.

Eighteen months ago, we made a significant investment into a program we called LEAD, which was about helping our store managers transition from trying to do everything themselves to being leaders who can delegate and support their team in the store, so the customer might be at the centre. That’s seen us get really great results in terms of engagement and in terms of our volunteers and other paid members knowing what to do and where to focus their time. It’s still a journey, we’ve got a long way to go, but we’re investing in that space at the moment, and we’re getting at it.

IRW: I’m curious to hear what message you might have for retailers, especially because you probably see what might not be working or resonating with customers.  

MD: My one thing at this juncture in terms of where the conversation is at would be if you’re thinking of taking a more sustainable approach to your products after they’re sold, is basically give me a call. We can help you do that.

In a broader sense, I think my insight would be that customers in Australia are now ready to see retailers taking a more responsible approach to sustainability. It’s becoming mainstream; now’s the time to take some action. And because it’s hard and messy and in some cases expensive and challenging to business models, we have to work together to solve those issues.