Retail Operations Maximizing Nonprofit Revenue

June 2, 2015       Mark Hrywna      

Morris Vogel would bet that for its size, the Lower East Side Tenement Museum’s shop probably generates more revenue per square foot than any museum retail location in New York City. At less than 1,500 square feet, the museum shop is bright thanks to floor-to-ceiling windows that look out from the corner of its open storefront at Orchard and Delancey streets in Manhattan.

Gross revenue for the operation has grown anywhere from 9 to 15 percent each year since eclipsing $1 million in 2012. Museum sales usually comprise about 12 to 15 percent of the organization’s overall revenue. A projected $1.55 million in sales this year would equate to more than $1,000 of revenue per square foot. Vogel, the president and CEO since 2008, estimates that as much as 70 percent of the museum’s almost $9-million operating budget is from earned income, including admissions.

Tours at the Tenement cost $25 per person, the same as its larger brethren the Museum of Modern Art (MOMA) and the Metropolitan Museum of Art. “It’s a high price but we turn people away, so there’s a lot of demand for what we have to offer,” Vogel said. The museum projects 215,000 visitors this year — 20 percent more than three years ago — and even turns away thousands more each year. “We understand what brings people to our museum, the kind of curiosity, and give them literature that allows them to follow up on it,” Vogel said.

The 27-year-old museum relocated its shop to a larger space in 2011, though Vogel said both the shop and visitor center were too small the day that they opened. That’s why the museum is in the midst of a $20-million capital campaign to expand, with a timeline for completion sometime in 2017. The new space will be able to serve 50,000 more visitors per year.

“Major museums are doing all kinds of things, both electronically as well as classic media. But, they’re just much more strategic about what they’re doing, those that have huge websites, good websites, where you can order museum goods, or they’re marketing themselves to donors,” said Sandra Mottner, Ph.D., associate dean and director of the Center of Innovation in Education at Western Washington University’s College of Business and Economics in Bellingham, Wash. She’s done research on nonprofit retail operations.

“It’s a more professional endeavor, run with more business-like practices than might have been in the past. It’s a little less ad hoc and more serious,” she said.

“I like what we’ve seen in Goodwill stores, which have really stepped up what they’re doing, and appealing to more markets,” said Mottner. “One of the things I’ve noticed in just the way the merchandise is kept and organized, and the methods in handling customers, it’s more like a for-profit retailer, and the methods of getting and handling customers.”

While the Tenement Museum gets larger, managers at Goodwill are aiming to get stores smaller.

The biggest difference Goodwill is seeing is the move by people back to cities and urban centers. “As you get out across the country, there’s much more emphasized movement of the population to metropolitan areas than rural,” said Michael Meyer, vice president of marketing and donated goods retail, Goodwill Industries International in Bethesda, Md..

Goodwill is looking at boutiques, smaller footprints of 1,500 to 2,000 square feet, probably in a more upscale neighborhood to attract new shoppers, or in close proximity to a university, where it can pull on trends of younger populations.

The traditional Goodwill store is 10,000 to 15,000 square feet, which includes the donation processing part of the operation, with about 8,000 to 12,000 square feet for the sales floor.

“We’re still figuring it out. The challenge is if you move into an urban environment, real estate gets more expensive. A general retail market can get away with that, though it’s a challenge for them, urbanizing that footprint,” Meyer said.

Goodwill has close to 3,200 stores, including boutiques, nationwide and 1,200 to 1,500 donation centers.

The Tenement Museum shop is packed with books on the immigrant experience and other exhibit-related tomes. “We’re really an immigration museum. We talk about people who made New York, so we try to choose things for the shop that are New York-centric,” said Mary Kate Cowell, director of the store.

The Tenement Museum sells “an awful lot of books for where books are in the retail environment now,” Cowell said. People could buy these books online for less but they buy at the museum for full price because they feel good about it and about the museum’s mission, she said.

“We pull from some of the residents and history that happened inside our building, that people can explore,” Cowell said. A visitor might ask why a certain item is in the gift shop and that opens an opportunity for staff to explain that it was “the pretzel woman,” or a Yiddish opera star who once lived there. Why the fortune telling items in the shop? A fortune teller once lived in the five-story tenement.

Cookbooks fit the narrative and the mission and are among the best sellers. “People always ask where to eat in the neighborhood, and food is always a conversation topic. Nobody feels weird about talking about food,” Cowell said. Among the best sellers is 97 Orchard Street: An Edible History of Five Families in One New York Tenement, which examines the culinary history of residents in the building.

The vast majority of items are mission related, but the gift part, “we push a little farther,” Cowell said. “As a shop in the neighborhood, that’s why we sell so much kids’ stuff,” she said, with people coming in any given Saturday to buy gifts for a child’s birthday party. “It’s a platform to get a little creative and stretch it a little bit.”

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