In-kind donations – peculiarities and challenges of product philanthropy

Nonprofit marketing supports the achievement of performance-related and procurement-related objectives (Bruhn, 2012). To many NPO, the procurement environment (input side) is often more important or at least as important as the output side or delivery/sales environment (Gmür, 2016; Lichtsteiner et al., 2020). Procurement marketing refers to the extension of the sales-oriented marketing concept to the area of procurement. Fundraising (as a form of it) is of great importance for many NPO, since the output of services and the inflow of resources are often decoupled (Lichtsteiner & Purtschert, 2014). As all resource development by NPO involves “selling” to their manifold resource providers (Young, 2007), fundraising can be understood as a special form of (procurement) marketing. Bottlenecks (regarding the procurement of resources) are to be overcome through consistent donor/supporter orientation and the targeted use of (fundraising) instruments (Gahrmann, 2012; Haibach, 2019; Haibach & Kreuzer, 2004; Urselmann, 2018). Literally, fundraising means raising capital. Although the focus is usually on raising funds/cash, the term is often used more broadly, so that in addition to money it also includes material resources, rights and information as well as work and services (Haibach, 2019) from various resource providers such as individuals, companies, but also public institutions or foundations (Urselmann, 2018).

NPO need resources to fulfil their missions, to pay for rents, equipment, salaries, training, program or project costs as well as for ensuring good governance (Breeze et al., 2023). Regardless of whether a nonprofit wants to raise monetary or in-kind resources, professional fundraising is vital given the often fierce competition for resources. In line with a general planning framework and grounded on a comprehensive fundraising audit (incl. SWOT analysis, market analysis, etc.), NPO should develop fundraising objectives, plan key strategies and design tactical plans for achieving their targets. Fundraising objectives must be integrated into the NPO´s goal system and formulated based on its vision/mission as the overarching organizational objective. When setting (marketing and fundraising) goals, it is also essential to pay attention to the (partly conflicting) interests of NPO´s multiple internal and external stakeholders as well as to observe ethical standards of practice as nowadays stipulated in codes of professional fundraising ethics (Gahrmann, 2012; Sargeant & Shang, 2017). In addition to the central income-generation targets for the benefit of the good cause (incl. ensuring financial stability and achieving growth), a series of other (both short- and long-term) “sub-objectives” are common fundraising goals: building awareness and increasing visibility for the cause and the organization´s good work, building a positive image, brand and unique profile, creating/increasing stakeholder satisfaction, motivation and involvement, attracting new supporters as well as building donor loyalty as an expression of long-term engagement and relations (Feldmann, 2011; Gahrmann, 2012; Sargeant & Shang, 2017; Warwick, 2000). The latter aspect indicates that fundraising and relationship marketing are closely linked. The aim is to build and intensify long-term and trusting relationships, especially with “attractive” supporters (Bruhn, 2012; Haibach, 2019; Helmig & Boenigk, 2020; Urselmann, 2018). In relationship fundraising (according to Burnett, 2002), the focus and types of donations are broad and include cash as well as gifts-in-kind and time donations (Helmig & Boenigk, 2020). Urselmann (2018) also emphasizes that not only financial resources are crucial in fundraising, but that the provision of goods and services – as forms of “non-cash assistance” – can be beneficial for both NPO and donors.

To convey their value to society and their impact on beneficiaries by both informative facts and touching stories, NPO can choose from different ways of communication with their heterogenous stakeholders. Likewise, many different forms of fundraising can be implemented to reach their target audiences and engage supporters via various options, channels, media or instruments like, among others, direct mail, telemarketing, word of mouth, face-to-face solicitation (also during donor/stakeholder visits), special events, or new digital tools and networking sites like, for instance, podcasts or social media (Feldmann, 2011; Haibach & Kreuzer, 2004; Riedi, 2011; Sargeant & Shang, 2017). These can be suitable for acquiring different kinds of NPO´s diverse income sources as classified in the following subsection.

Before section 3 “In-kind donations – Literature review, classification and definition” goes into detail about gifts-in-kind, these are located or integrated in the funding/resource mix of NPO that regularly base their mission-driven activities on an uncertain mix of funding sources. Figure 1 provides an overview of the multitude of heterogeneous sources of income and includes in-kind resources as non-cash assistance.

Common sources of income for NPO comprise self-generated income including membership fees, income from asset and wealth management, and (sales) revenues. The latter includes, on the one hand, proceeds from the sale of (mission-related) products/services to individual customers/clients (e.g., deductibles or income from product sale), but also income from service contracts with public financiers (as NPO-government relations are commonly regulated by performance-based contracts (PBC); cf. Greiling & Stötzer, 2015). On the other hand, many NPO also generate income in commercial service areas to cross-finance their mission-oriented tasks. Such revenue from commercial activities can come from, for instance, events or the operation of museum shops or thrift stores. In addition, income from sponsoring also should be mentioned. The second group of income sources focuses on external credit financing through both short-term loans (e.g., overdrafts) and long-term loans (like a real estate loan), although this form of financing generally is less important in NPO than in PO. The third group (grants) usually is of high relevance. It includes both public grants (such as lump-sum subsidies or non-repayable public grants from government agencies at all federal levels) and private philanthropic support from individual donors, foundations, and corporations. It is typical for grants or donations that the resource provider is not identical to the beneficiary. Such support can be monetary (like public grants or cash donations), but also includes non-cash assistance like donations of time (volunteering) and gifts-in-kind (Andeßner, 2004; Anheier, 2014; Helmig & Boenigk, 2020; Littich & Schober, 2013; Pernsteiner & Andeßner, 2019; Young, 2017).

Non-cash giving or assistance subsumes several forms of support: product donations (material goods), but also services and voluntary work (time donations). Such non-cash philanthropic contributions help NPO to save expenses, provided they can use them sensibly for their service provision (Gahrmann, 2012; Pernsteiner & Andeßner, 2019). Thus, in-kind donations are also referred to as financial surrogates (Blümle, 2005; Blümle & Schauer, 2002). In sum, non-cash giving is heterogeneous and includes product giving, services and time donations (volunteering) by more than one support group: individuals (individual giving), companies (corporate giving), foundations (foundation giving) or by state institutions (public giving) (Anheier, 2014; Gahrmann, 2012; Helmig & Boenigk, 2020).

Our literature analysis has two foci: we conducted an in-depth review of the comprehensive German-language literature on nonprofit management and fundraising, and we analysed the international literature in a relatively broad and interdisciplinary way in order to draw a first picture of the still fragmentary state of knowledge on in-kind giving. The analysis of standard works on NPO and nonprofit management in the German-speaking countries¹ (e.g., Simsa et al., 2013; Lichtsteiner & Purtschert, 2014; Helmig & Boenigk, 2020; Lichtsteiner et al., 2020; Meyer et al., 2022a) shows that non-cash giving is primarily addressed in terms of voluntary work whereas product donations are only marginally dealt with, if at all. Even if you search the German fundraising literature (cf., e.g., Bangert, 2011; Busse, 2012; Fundraising Akademie, 2016; Urselmann, 2018; Haibach, 2019; Urselmann, 2020), you hardly come across any (detailed) information on the subject of in-kind giving. For example, Haibach (2019) only refers to gifts-in-kind (from PO) a few times. However, she briefly addresses selected challenges that such goods often entail for NPO: useless donations and valuation and tax law problems. Blümle and Schauer (2002) as well as Blümle (2005) also highlight valuation-related issues and Kreh (2016) warns of legal (tax) pitfalls, which is why tax advice is recommended.

Urselmann (2018) mentions in-kind donations several times, but briefly. He states that convenient disposal options for goods such as old mobile phones or clothes offer individual donors an additional benefit. He also explains that product giving is usually more attractive for companies because the value of the goods is higher for the NPO than the production costs of the company, which can also save disposal costs. From the NPO’s point of view, they can either use gifts-in-kind directly for their mission-oriented work or use them for sales or at raffles. Even a temporary use of resources (like free rental of crockery or decoration for an event) or (online and offline) infrastructure (e.g., sales and communication channels of a PO) can save expenses and reduce costs. The short article of Andrews and Budde (2008) addresses pros and cons: goods in kind offer advantages since their collection and transfer/use enable low-threshold contact with stakeholders. Besides, donors can often donate goods without hardship. At the same time, however, they are associated with (usually high personnel, logistical and infrastructure-related) costs. If NPO want to do in-kind donation marketing (charity recycling), then they have to take into account new product developments, (the sometimes strong) competition from commercial collectors/recyclers (esp. of old clothes) and legal conditions (such as environmental and waste-specific laws and regulations). Kreh (2016) also highlights the increased effort compared to cash donations. Nevertheless, product philanthropy is valuable for NPO, especially since many people and companies are often more willing to donate goods than money.

The practice-oriented publication by Gromberg (2007) also seems worth mentioning, as it is probably the only (but non-scientific) book on the subject in the German-speaking world to date. It contains many practical examples that also illustrate common problems (e.g., too many, wrong or unusable product donations, or time-consuming collection, sorting and transport). The author’s division into application fields also seems practical. A distinction is made as to whether the donations are collected once as an individual item or repeatedly in bulk, and for what purpose: for the needy (to alleviate their distress), for personal use (by the NPO) or for recycling/resale (Gromberg, 2007).

During the first phase of our review of the international scientific literature, it became apparent that there is hardly any comprehensive work on in-kind donations in general. This is not really surprising, because in view of the heterogeneity of gifts-in-kind and the corresponding complexity of the topic, a synthesis is not an easy undertaking. In addition to a few short articles in practice-oriented journals that mainly dealt with accounting, valuation and planning issues (cf. Brenner, 2013; Hellenius & Rudbeck, 2003; Lafferty & Browning, 1993), we found an informative contribution by Gray (2007). He gives an overview on the topic including many examples of gifts-in-kind, typical recipients and purposes. Besides, he briefly addresses intermediaries (which can help reduce transaction costs) and highlights that NPO need some competencies for efficiently collecting and managing goods (like, e.g., storage capacity or pick-up and delivery capabilities). The few other identified works mainly focused on corporate product philanthropy, thus on the perspective of corporate donors and their motivations for in-kind giving (which include altruistic motives, but also strategic or instrumental ones based on a corporate social responsibility (CSR) commitment and pragmatic considerations such as reducing disposal/dumping costs). The papers also address some possible constraints (like, e.g., a lack of intermediary services) and challenges related to processing, storing, and transporting product donations as well as to measuring the value and impact of gifts-in-kind (cf. Gazley & Abner, 2014; Lee, 2015; Ross & McGiverin-Bohan, 2012).

At second glance, however, we were able to identify even more relevant works by deliberately broadening the research focus in terms of different types of product donations and fields of application as well as disciplines. By synthesizing the results of this second review phase, we can derive some strands of literature and research. For instance, we were able to identify several papers on used clothing (cf., e.g., Ha-Brookshire & Hodges, 2009; Persson & Hinton, 2023), on in-kind giving in disaster response (Islam, 2013; Islam et al., 2013) as well as in education settings like academic libraries (Canevari de Paredes, 2006), on organ donations (Ojo et al., 2004), on blood donations (Healy, 2000; Hyde et al., 2022), human milk donations (Oreg & Appe, 2022), and on food aid/donations with a focus on food banks (Baglioni et al., 2017). This last example is part of what is perhaps the broadest strand we have identified and that we term charity recycling and retail. In addition to food banks and soup kitchens, this group or strand also includes social cafés, coffee shops or restaurants as well as social markets (see subsection 4.2.2.). In charity retail, second-hand markets, venues or outlets like flea markets (cf. Sherry, 1990; Stötzer et al., 2020; Tranberg Hansen & Le Zotte, 2019) as well as charity shops (also named thrift stores or sometimes nonprofit stores) are further important areas of application for non-cash philanthropic contributions. Such shops have already attracted comparatively much scientific attention (cf., e.g., Chattoe, 2000; Horne, 2000; Horne & Maddrell, 2002; Montgomery & Mitchell, 2014; Parsons, 2002; Parsons & Broadbridge, 2004; Shearer & Carpentier, 2015).

All donations (cash, in-kind, and time) represent asymmetrical exchange relations in which the resource providers are not offered a market-adequate remuneration for their support. When it comes to giving in terms of philanthropic contributions, various gratifications and motives play a role (cf. Andeßner, 2004). Thus, there is no direct consideration or remuneration for (voluntarily granted) cash or non-cash giving (Neumayr, 2022). Table 1 provides an overview of the types of donations and in particular illustrates the variety of non-cash philanthropic contributions as financial surrogates with a special focus on in-kind donations.

In a narrow sense, in-kind donations comprise various (mobile and immobile) material goods as product donations, while in a broader sense in-kind giving also includes special forms such as living matter (e.g., blood donations) and intangible (service or usage) rights.² Financial surrogates like know-how and relationships/networks are not included due to their character as derivative resources. Overall, in-kind contributions are an important source of resources for many NPO, but their processing often is challenging. Before the next section looks more closely at such challenges, we finally present the comprehensive definition developed for this paper:

In-kind donations are non-cash philanthropic contributions made available to NPO by individuals, companies or other supporters without direct and market-based compensation. In a narrow sense, gifts-in-kind include both movable and immovable material goods or property of various kinds. These comprise (legally) tradable consumables and durable goods (e.g., food, clothing, jewelry, sports equipment or real estate). In-kind donations in a broader sense also include the voluntary provision of living matter (e.g., blood, plasma and organ donations) as well as intangible contributions such as (usage and service) rights. Such financial surrogates support the work of NPO as they help them to accomplish their mission and reduce expenses. On the one hand, NPO can use them directly for their own needs and/or to directly support their beneficiaries. On the other hand, in-kind giving can also indirectly promote good causes if NPO use them for (re)sale and thereby generate income.

We present insights into real experiences of NPO dealing with gifts-in-kind in the form of three anonymized case vignettes (see 4.2.) that are based on several service-learning projects. Service learning enables students to apply the theoretical knowledge of their university education to practical problems of selected community partners. The aim is not only to acquire technical or specialist know-how, but also social skills and problem-oriented practical experience (Spraul, 2009). Since 2013, students repeatedly carried out such project-based work in several seminars at two tertiary educational institutions in Austria. As part of their seminar papers and project or bachelor theses, they conducted fundraising analyses and developed fundraising concepts for regionally based NPO as cooperation/community partners. In some projects, a special focus was placed on (the challenges related to) in-kind donations. In terms of methods, these service-learning projects were based on interviews with NPO managers and employees, visits on site, partly also on individual experiences as a volunteer, as well as on the analysis of both internal documents and external communication content (with a special focus on fundraising activities).

The case selection intended a diversity of practical examples, i.e. that the organizations differ as much as possible in their activities, service provision and use of resources, so that the vignettes can illustrate which types of gifts-in-kind are (or can be) used in different fields of activity and what challenges (with a focus on product, place and promotion in terms of the marketing mix) are associated with them. Finally, we selected three NPO as examples: first, a regional animal welfare organization that collects both durable and consumable goods for direct use, but also for sale (since this NPO regularly organizes flea markets where they sell product donations). The second case deals with social (super)markets that provide food for people in need or at risk of poverty. They mainly collect food/consumer goods and sell them at low prices. Third, we present an employment initiative for long-term unemployed persons in socio-economic companies. Mostly in workshops, they repair goods like durable commodities which are thus recycled and sold (in second-hand shops).

The practical insights demonstrate that many fields of product philanthropy can be considered best practice examples of “lived” sustainability (since they pursue and achieve goals belonging to all three pillars of sustainability; cf. Purvis et al., 2019 on the origins of the three-pillar conception of economic, environmental and social sustainability) and can support the necessary transition to circular economy. The three case vignettes also make it clear that in-kind donations are not only an attractive add-on, but an indispensable source of resources for the analysed NPO. But non-cash contributions can also be a valuable option for many other NPO, especially since resource competition is often intense and a balanced, broad mix of sources of income can (help) secure the existence of NPO (cf. Blümle & Schauer, 2002; von Schnurbein, 2017). However, both our service-learning insights and the literature review point out various (general as well as context (product and/or case) specific) challenges that are (or can be) linked to product donations. Table 2 summarizes these limitations or potential pitfalls that NPO should take into account and reflect upon before engaging in charity recycling and/or retail.

In view of the high level of effort associated with the acquisition, handling/processing and use of in-kind donations, NPO should consciously take their time when making the fundamental decision as to whether they want to engage in charity recycling/retail or not. The outlined challenges (incl. resource requirements) should be weighed against their internal conditions: Does the NPO have the necessary competencies to meet these challenges and are there sufficient internal resources? And if not yet, can the identified lack of resources/skills be remedied? Are there intermediary services that simplify processes and reduce transaction costs (cf. Gray, 2007), and last but not least does the NPO have sufficient (both episodic and especially regular, reliable) voluntary support?

NPO should also think carefully about which goods they really need and can use or recycle, the effort involved (e.g., because it is a perishable good that needs to be refrigerated, or a durable good that needs storage space) and they should be aware that “[s]ome gifts are simply not worth taking” (Bryce, 2017, p. 202). In addition, market analyses could also show what opportunities certain product types can offer, and the development of an adequate marketing plan and fundraising strategy as well as the formulation of “smart” fundraising objectives⁷ is recommended. Targeted communication (esp. target group-oriented calls and promotion activities) could help to avoid wrong or junk donations (that are broken or unusable or associated with disposal costs and potential liabilities). In order to raise enough and the right donations, NPO should appeal to both altruistic and instrumental (self-interest) motives of corporate, individual, but also public donors.⁸ Furthermore, not only is it crucial to understand your supporters and their motivations, but also to make it easy for them to give (Feldmann, 2011). Thus, we highly recommend meeting donors’ needs for easy disposal options, as cumbersome or inconvenient donation logistics are a barrier to giving. For example, NPO could use a drop-off and/or pick-up system like the “bag drop” system mentioned by Mitchell et al. (2009): NPO deliver empty bags to households (often at times when cleaning is common, such as after gift-giving holidays) and collect them later (when they are full).

With regard to legal issues, it is necessary for NPO to either build up the required know-how internally or to obtain it externally (through legal or tax advice). In view of the dynamically changing environment with numerous crises, it is advisable for NPO to maintain sensitivity and openness in order to perceive new trends in good time. They should also invest in their ability to adapt and learn, so that they are not overwhelmed by new developments (like, e.g., new digitally organized forms of collecting and processing goods), but can use them as an opportunity. Besides, NPO could use digital/social media more intensively for emphasizing to their stakeholders the importance of certain in-kind donations for supporting their work and mission (instead of selling items on platforms such as eBay or Willhaben). Especially in times of high inflation rates, when many people (want or need to) pay more attention to their household finances, NPO should raise (internal and external) awareness of the fact that gifts-in-kind can be a feasible and useful form of support. In addition, using their social capital can drive NPO´s (in-kind) fundraising. The often high and passionate commitment of (esp. long-standing) supporters (be they volunteers or employees, loyal sponsors, clients/customers, corporate partners or other people/institutions who care about the cause and represent “multipliers”) should be preserved and could be used to raise awareness and to get others involved (cf. Feldmann, 2011; Haibach & Kreuzer, 2004) in form of both in-kind giving and other ways of support. Overall, it might be easier for NPO in affluent societies that are characterized by a current zeitgeist in favour of sustainability and CSR, to further develop this source of resources and to successfully use product philanthropy for their mission-related work.