By Michelene Ough
An Ottawa thrift store is taking drastic financial action to keep its head above water.
Store officials at Neighbourhood Services recently drafted a letter to their creditors stating intent to file for bankruptcy. The store at 987 Wellington St., is the main branch in a small chain of local non-profit thrift shops.
Contrary to earlier reports published, the store has not declared bankruptcy, nor is it planning to go out of business. Ian Fraser, president of Neighbourhood Services, describes the letter as a way of bringing financial action to a temporary standstill.
“The letter was our way of letting our creditors know their patience with us wasn’t going to do them in the eye,” said Fraser. “Once the letter is accepted, everyone is treated the same, so it gives us some time and reassures [all the creditors] they’ll get paid,” added Fraser. “It also prevents them from acting to get repaid immediately.”
The store possesses sufficient assets to pay off its debts, Fraser pointed out. The problem is a lack of available cash funds.
Neighbourhood Services has been struggling to balance its books for some time, a problem Fraser blames on two main factors: cutbacks to social assistance payments, since welfare recipients make up the bulk of the store’s customer base, and a growing competition in the thrift store industry.
Jennifer Way is a regular customer at the store, where she buys clothing for a Bosnian family she has “adopted.” Way said she is upset by the idea that Neighbourhood Services is in financial trouble.
“I have seen mothers here who can’t afford 25 cents for shoes for their children. This store keeps many people clothed through the winter, it’s not just any old business,” said Way.
Neighbourhood Services experienced a sharp revenue drop of about $100,000 last year, despite what Fraser called an “overall growth in interest, volume and revenues in the thrift shop industry.
“Ten years ago, there were three second-hand distributors in this area: the Salvation Army, St. Vincent De Paul and ourselves. Now we have for-profit operators who have moved into the area, places like Value Village, and it’s affecting our business.”
Bob Nazar, manager of Value Village in Gloucester, said his store has not experienced financial losses since it opened in 1994.
Value Village runs a for-profit business, although each store is associated with at least one local charity. The store operates on a much larger scale than many thrift shops. According to Nazar, his Value Village store saved a total of 150 tonnes of second-hand merchandise from going into landfills last year.
When asked if he thought Value Village might be taking business away from smaller second-hand stores, Nazar said he had no idea.
“Businesses are opening every day and closing every day. Can we really be blamed for how other businesses are doing?”
The building that houses the main branch of Neighbourhood Services is now up for sale. Fraser expects it to sell in a few months’ time, enabling the store to pay off its debts and, hopefully, to stay open for business.
“It’s possible whoever buys the building will want to lease it back to us. Ideally, we’ll be staying right here.”