Should Non-Profits Compete with For Profits?

Some time ago I found an excuse to bring together my passion for antiquarian books and my passion for CR in a post ‘Why Running a Company is Like Owning and Old Book”.

I wasn’t expecting another intersection between the two, but on my recent trip to the UK I became aware of an ongoing dispute between antiquarian & used booksellers and Oxfam UK “a global movement of people working with others to overcome poverty and suffering.” Oxfam is a particularly well known institution in the UK especially through its extensive chain of street front stores that sell donated second hand goods – clothes, toys, books, music etc.

Oxfam has set up stores that specialize in used and antiquarian books – in fact a couple of years ago I bought a 150 year old hand colored nature book from the Oxfam in St Albans! Many for-profit used and antiquarian book stores dispute the fairness of having to compete with a non-profit organization that had the benefits of volunteer staff, tax breaks and donated books. The book trade pays their staff, pays tax on profits, and has to buy the books they resell. But on the other hand, Oxfam gives its profits to good causes.

As a CR practitioner I am committed to the importance of the market as a critical component to creating wealth. I am also committed to fair competition. I believe that there is a critical role for philanthropy and for non-profits to provide services and support disadvantaged populations. And I applaud social entrepreneurship; a non-profit using the market place to create profit that supports their operations.

But is it fair for a for-profit to have to compete with a non-profit? You could argue that if people want to donate their time and books to Oxfam, then it is bad luck to the for-profit – that’s the market. But what if that ultimately means wealthy individuals with time to volunteer may put less wealthy booksellers out of business? What if it means a volunteer who is unemployed is putting a paid worker in a bookshop out of work?

One could argue that is justified if the cause is someone in dire poverty, but should philanthropy undermine the very profit based economy that supported in it the first place?

I don’t really have an answer for this one, but I think it is an important dilemma to recognize and perhaps someone else does have a better answer.

I myself will buy my occasional purchases from whoever offers meets my needs best. If I have books to sell or donate – I guess if I am completely honest, it will depend on what my financial status is at that time.

For more insights, The Guardian did a piece on this last year.  Even The New York Times picked up the story although they chose to put it in the framework of a fading component of quaint British culture!

  1. Comments 6

  2. Jessica Stannard-Friel 8:00 am on September 21, 2010

    In the US, I believe that nonprofits operating for-profit businesses are required to pay unrelated business income taxes. That is, if they are operating a business that is not (in the IRS's words) "substantially related to furthering the exempt purpose of the organization". It is my understanding that this is set up specifically to address the concern you raise - that for-profits are disadvantaged relative to nonprofit competitors. That said, that only addresses unequal tax burdens. As you point out, nonprofits may operate with donated labor, products or raw materials, etc., dramatically lowering their costs and allowing them to undercut for-profit competitors. It's an interesting issue. Jeff Trexler sometimes writes about this sort of stuff at

  3. Lynne Marie 12:07 pm on November 4, 2012

    Very interesting subject for me. After 5 yr hiatus following a 25 yr marathon running a very successful design manufacturing business from kitchen table ideas to global market ...I am starting up a new venture... Have just learned that an entity (nonprofit org) who appears to be a government initiative , but isnt, is rolling across the nation gathering momentum via volunteer support. I have just noticed how they monetize their efforts. One button on their web site takes you shopping to a separate site. I may become a competitor... Looks to me, "the cynic" that their business plan morphed into using nonprofit designation as a clever and possibly deceptive marketing strategy. Ironically their mission is to support entrepreneurs. Yet I along with my know how and savings am reconsidering this new investment into our local community. What is a person to do... Should I create a nonprofit and roll my venture in the same way? Is this the new normal? If so then I' m out.

  4. RWB 8:23 pm on June 21, 2013

    Lets envision a kind of business that will help people be heard better because businesses often distracted from have too many masters and too many different actors they take money from. This business would be a non-profit that was taxed like a for-profit (as US code can enable.) This business would essentially only listen to its formal end customers by only taking money from them. It would serve revenue on a per second of attention basis to for-profit content creators and service providers or provide the services itself. Basically, when people use the system, stuff they look at that is stored on the system servers is going to be paid. In order to make this system a true level playing field and be consistent with end user interests, no product placement or canalizing attention or premium anything would be allowed- sponsorship and all that stuff would be permanently gone because its not in line with serving one master (the public interest) through listening only to end customers. The system would provide ad free, sponsor free search and trending(i.e., Verbase,) also total privacy with everything on an opt in basis. Everything would be black boxed and firewalled and impossible to disaggregate but the data (with input provided on an opt in basis) would be provided for free and without restriction as a service with the request that people list content and accept payment Free creation tools would be provided to listers (paid out of subscriber base.) In some cases money could be held in escrow accounts awaiting pay out. Content listing would be an automated generic affair. There would also be no negotiating and no acceptance of agency or limited time listings but also no exclusive arrangements or attaching property. There is simply the expectation that all listings that met some threshold of user attention would be paid the the generic attention rate minus the cost of serving and development. The goal is to provided everything ( complete set of all content types/services) all the time everywhere for one flat rate subscription. But again, no sponsorship or even advertising even to spread the word- simply use word of mouth- don't want the influence of marketing businesses and the sponsor bias. Private bonds based on wanting to support the rock solid charter could be acceptable for start up as could crowd funding but probably not ongoing municipal monies as they are too subject to strings and powerful private interests. Charter would forbid board members to sit on for-profits boards. Listeners could vote the board members but charter would have many specifications on board qualifications and requirements for demonstrated compatible ideology This approach to things recognizes that money is coercive speech and sponsorship, far from being simple commercial speech, in practice often amounts to hard censorship. That sponsorship is often a process of A paying B to exploit C by the involuntary taking of time and attention where it should be at least voluntary and where all monies derived thereof clearly belong to C. Such an approach takes out middle men who profit from pitting parties against one another and better aligns the interests of buyers and sellers as reduces product cost and improves product diversity and quality. A demonstration of the magnitude of the potential reversal is the possibility that high quality product information found by an end user at the end of a sponsor/ad free search would literally be paid a the generic attention rate. Such an approach is still compatible with internal analytics and even preference statements that would improve actual product search and even enable automatic shopping. Such an approach removes the incentives that undermine already weak political representation- it take the money and coercion out of the elite filter. It is compatible with neutrality and a sustainable internet, sponsorship and cable models are not. It recognizes that Google is now serving spam, sponsors can pay to filter competitors and viewpoints by being allowed to directly adjust SEO. 1. Recognize that search should make sponsorship and its huge costs obsolete 2. Automate out middlemen who have a huge conflict of interest cost- provide money to those who contribute. 3. No more taking money on both ends to pit people against each other End user consortium or user consortium or customer consortium

  5. RWB 7:59 am on June 22, 2013

    Forgot a crucial aspect. Such a business would be able to lose revenue without radical consequences. It wouldn't be taking any investment revenue, because again that would be taking money from a source other than end customers diluting their voice. A loss of money might come from a loss of subscribers. Which might adjust the pay out rate on content and services. But the crucial thing is that such a business can do things in the interest of end users that involve a reductions in revenue without all the blame. For contrast a company like Microsoft can't and its offerings become ever diluted as its revenue lust competes with its product quality and this holds even takes over a market and it hollows out products until they have no quality. It holds in present capitalist nations where the inflation bias (meant to spread opportunity or credit) creates a psychology where reduction in GDP isn't really an option. So for instance once a government allows fraud and no value added practices to puff up GDP (to for instances look competitive on a GDP basis) it can't just wipe out it out over night without pandemonium over negative numbers. It couldn't for instance convert a usurious US health care industry with its massive conflicts of interest to single payer without a huge hold in its GDP. Back to a firm like Microsoft. To be competitive now against leaner competitors it needs to shrink revenue but it can't. The type of business being suggested has no such limitation. Making it more likely to make better decisions and be a more stable longer lasting business.

  6. Im Tony 6:15 pm on August 11, 2013

    IT DOES NOT MATTER,... if "you" or "I" believe they should or not. Who/what ever can offer, a product of equal or higher quality, for less, is where "WE" as consumers will decide, with "OUR" money,...regardless of anything. My individual opinions are important and worth considering, only as part of a whole, because "MY" money will not make or break a business, (or it's practices) but, "OUR" money can, and will. Understanding the reasons why a business makes a less expensive, product is very important, me. To others it's absolutely critical, and completely irrelavant to someone else. "WE" as consumers will decide, what business practices are "fair", or anything else worth considering for businesses. I have enough (albeit little) faith in people, to decide what is good for us all, mainly because, I know that I'm a genuinely a good person, and would not purchase a less expensive product, if I felt the business that offered it had done so using what I belive to be bad business practices. In my opinion, the most important thing in business, is freedom. The freedom of NO LIMITS in starting a business, and keeping it that way is ultra-critical. DECIDING, what business stays or goes should, and always be in the "hands of the consumers", or in other words,... Only the "invisible hand" of the FREE MARKET is wise enough to decide.

  7. KevinMoss 11:38 am on August 12, 2013

    Thanks all for your comments continuing way after I published the original post. Lynne Marie, I think you raise an additional issue of the possibly misleading nature of some non-profit that might be considered by all to be charitable in purpose. I guess it is up to someone engaging with a non-profit, whether buying something from them or just making a donation, to decide if they think the particular cause is one they support. Im Tony, I believe that there is critical a role for law and government to regulate the invisible hand of the consumer both to avoid bad people exploiting the vulnerable and even assuming most if not all people are good at heart, to avoid the tragedy of the commons.

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