Thursday, November 05, 2020

The Value of Donated Goods - Just a Fun Exercise

 It was irritating when I used to itemise donations for my taxes to encounter the drop-down of method for determining value.  Replacement value? Appraisal? Consignment? We stopped itemising clothes a few years ago after learning that their value is now negligible except for highly desirable items in relatively good condition., but it was a yearly struggle.

I think along similar lines when I go down to Massachusetts to pack expiring food on a box truck every Friday, to be distributed to about 400 folks at local food charity Saturday. The hard plastic bins are about 2' x 3', and hold 32 boxes of 6 English Muffins, or 12bags of 8 bagels, or 12 8"square cakes each. The primary item is bread, however, with racks of 10-12 loaves of restaurant sandwich or restaurant French Toast bread or the many retail sandwich loafs. 

(As an aside, we try to push the healthier breads at least a little, but the poor seem to prefer plain white very strongly.  The lovely young health-conscious church women are always excited when one of the recipients goes for organic *6-grain breads and start looking to make sure they are amply supplied, with many earnest smiles and a brief exchange about the superiority of these breads. A bond is formed and encouragement given, which may be as important as the food. But it's a rear-guard action. The regulars in line have learned by experience that the restaurant breads hold together better for spreading and toasting - they don't ask whether the nutrition is better. Those who work providing food for the poor, whether sold or given, have opinions about why they have these preferences for cheaper, tastier, more-sugary, and less-nourishing items, and I have mine, but that's another story.)

Each stack on wheels is 12 high, and we get 20 racks on the truck. We usually stuff some other things in the corners, but I'm keeping it simple here. 240 racks, holding 10-30, usually around a dozen, items each. Call it 300 retail items a week donated by Bimbo, which is one of those companies that own a lot of brands, to Food For Children.

What's the value of that? Maximum value would be the retail cost, $4-7 each. So, $15K? Per week? One could make that argument.  For a person at a charity to purchase those items down the street, that's what it would cost. Though the minimum value would be just above $0.  The pig farmers come on Mondays and Thursdays to pick up this stuff for (almost) free, and that's their only other customer.  This stuff is expiring, they can't sell it. As we are finishing up what we have picked out of the 40 stacks as best for our needs, Manny from the warehouse is lining up the stacks of remainders to go out in the dumpster.  They used to be able to send it somewhere-or-other to be turned into breadcrumbs, but no longer. If we don't put it on our truck, it is in the dumpster a half-hour later. 

Well, that's quite a range, $0-15K. But I can back away from both extremes, so let's follow that. That bag of bagels may be worth $7 retail, but if I gave that nice Bulgarian man $7 he wight spend it on something else.  Even if it were $7 store credit, or even $7 bagel credit, he might make another choice. He might want plain instead of blueberry, but blueberry is what we've got. The expiration date likely doesn't matter as much to him as to the supermarket, but it has some meaning. So what's the depreciation, 30%? 50%? 70%? Let's start at 30.

Coming up from the bottom, those loaves of bread are going into actual sandwiches for Nicole at school or with PB&J made on her own on the weekend, so they aren't worth $0, because the kid has to eat something. That the value of the Corn Toastie (mm, Corn Toasties.  Those are hardly ever left over) will become zero in a half hour does not mean it has zero value now. It's food. People will eat it and it will free up $ to spend on fuel, or rent, or unpopular things like weed or cigarettes. They don't have to spend that $5 on pizza crust, the basis for a fairly cheap meal with tom sauce and some mozzarella. And if they grab a cinnamon-swirl bread or a birthday cake, those are treats that reduce guilt for not being able to get nice things for your boy. Put some candles in it and you've got a party. What numbers do we assign? 50% of retail seems high.  10% seems low.  Looking at our top-down numbers above, 70% is clearly crazy. Even 50 is a stretch, but maybe...

10% is probably low, 50% is probably high, so 30% of retail seems right. Alternative ways of looking at the problem are encouraged.

*There is an arms race here, with bakers going for 8-grain, 12-grain, and even 20-grain breads.  I'm sorry, that's just showing off.  There's no increasing value there.


Sam L. said...

You're a good man, Charlie Brown.

Douglas2 said...

I've had to occasionally write donation acknowledgements for someone's tax records, and assessing the value is minefield.

My wife and I have become noted for finding bargains at Goodwill and Salvation Army thrift stores. Our technique is just to visit such stores often - and most of the time we leave with nothing.

But this frequent thrift-store shopping does have a huge downward-pressure on what we consider to be fair prices for secondhand goods, as we watch stuff get shelved, sit their weeks, get marked down, and then end up in the regional clearance center. If it doesn't sell at $5.99, one can't really say that the value is $5.99 or more.

In distant past as a hi-fi hobbyist, I wouldn't pay more than half actual retail for a recent good-condition item with original packaging. There were specialist classified publications that I used for buy and sell as I started, and upgraded, and upgraded again. One think that Craigslist, Facebook Marketplace, and Ebay have done is to make this stuff actually worth much more than 50%, but only if it is (like the clothing in your example) recent, popular, and sought after.

Douglas2 said...

I'll note that when I've decided in tight times to stretch my budget and go with the quality item, it retains excess monetary value in my view forever.

I've had nearly identical mid-range mens suits, one acquired at retail when needed at short-notice and one at goodwill and then fitted by a friendly theatrical costume designer. The full-price ones tend to stay in the back of my closet in case I ever get back to that size again in my life, the Goodwill ones when torn, worn, or stained I tend to think "well, I really got my $16 dollars worth out of this one, I guess I can toss it!" (I note that I don't even factor in the pay to the seamstress . . .)