Retail Round Up

Most of us are used to being asked to make a dollar donation when checking out from major retail stores like Walmart or PetSmart. And we’re likely to do so, at least every now and then. 

But how often have you been asked to round up the sale to the next dollar and donate the difference? 

That’s called retail round up – a charity checkout donation method that’s become more popular over the last few years.

What is retail round up?

Retail round up is a point-of-sale charity fundraising method. A customer is asked to round up their sale total to the next dollar or another preferred sum, and then donate the difference to a charity. 

Physical retail stores ask for round up donations at checkout. Online brands can ask for donations at checkout or provide an in-cart round up option.

Online store round ups can be more flexible, sometimes giving customers their choice of charity or allowing the consumer to round up to any amount they choose.

Round up charity promotions can be evergreen, seasonal, or one-off campaigns.

How does it work?

Brands can raise money for charity by soliciting donations from customers during the checkout process. Sometimes they ask them to round up the total. Other times they ask customers to donate a specific sum. Brands can also offer to give a percentage of the sale to a cause.

In-store retailers implement this with checkout payment solutions. Brands selling online can use an app integration or API connection.

This retail fundraising method is known as a charitable sales promotion or commercial co-venture. It’s regulated in several states. A business that solicits, promotes, underwrites, sponsors, arranges, or facilitates donations on behalf of a charity becomes a commercial co-venturer.

Retailers and charities in regulated states may need to enter into a written agreement or contractual joint venture arrangement.

Round up donations are tax-deductible for consumers and should appear on their receipts. Retailers offering round up donations must transfer the donation to the charity and meet certain compliance obligations. Retailers aren’t allowed to claim a customer’s retail round up as income or their own tax-deductible donation.

This fundraising method is incredibly convenient for customers. All they have to do is say yes or no to adding a few cents to their total. Shoppers in physical stores often use it just to avoid coin shortages. Consumers shopping online can tick to support a favorite charity and customize their donation.

Things can be a little more complicated on the business end due to various legal and tax requirements. However, an inclusive solution like DailyKarma features done-for-you co-venturing and compliance.

The Retail Round Up Impact 

Round up donations are a psychologically powerful fundraising tactic. Point-of-sale donations are convenient and people are more likely to give to charity through a retail round up than through other point-of-sale solicitations.

Marketing researchers Katie Kelting, Stefanie Robinson, and Richard J. Lutz looked into this with a few experiments.

One experiment separated participants into three groups with 41 people each.

  • The first group was told they had a bill of $23.01 and asked to donate one dollar. 39.02% said yes.
  • The second group was told they had a bill of $23.01 and asked to round up to $24 and donate the difference. 63.41% said yes.
  • The third group was told they had a bill of $23.97 and asked for a round up donation. 75.61% said yes.

The researchers ran another experiment giving participants three options that would all add up to donating 50 cents.

  • Group one was asked to donate 50 cents. 31.25% agreed to donate.
  • Group two was asked to round up from $23.50 to $24. 61.76% of these participants rounded up to donate.
  • Group three was asked to round up from $23.50 to $24 and informed that this would equal 50 cents. 72.72% of these participants donated.

The researchers did a third experiment to evaluate how this would work in the real world. They partnered with a zoo already running a point-of-sale dollar donation program at its cafeteria. During the experiment, the zoo switched to asking diners if they’d like to round up their purchase.

45% agreed to round up, versus 18% who would previously agree to donate a dollar. The zoo was able to raise 21% more when using the round up strategy than it did when asking for donations.

21% more is a significant difference – especially when considering that a round up option was used in isolation. In real life, companies are free to combine retail round up with other fundraising methods and maximize donations.

Why is it so powerful?

Most people are very willing to make a point-of-sale charity donation, whether they’re asked at a store’s register or during a digital purchase. A survey of charitable giving in 2021 found that 86% of respondents had donated through an in-store or online checkout.

Researchers Kelting, Robinson, and Lutz suggest that asking customers to round up to the next dollar and donate the difference seems to reduce the perceived pain of donating. This factor works even if the donation amount is identical and remains consistent when looking at requests with low to high donations.

Another study delved into checkout charity and roundup donations. Researchers Adrienne W. Sudbury and Christian A. Vossler determined that these solicitation methods take advantage of two factors: impulse giving and the loose change effect.  

Sudbury and Vossler suggest that customers are likely to give on impulse at checkout because point-of-sale donations catch them by surprise, don’t allow them to avoid a request, and ask them to contribute a relatively small amount towards a known organization.

Charity checkouts are effective in general and round-up donations can be even more so because this request then leverages the “loose change effect” – a phenomenon that sees individuals willing to donate if doing so means they’ll have less loose change on hand. 

Sudbury and Vossler specified something else to take note of. People might end up giving more when asked for a fixed donation, but they are likelier to give when asked to round things up.

An article in the Stanford Social Innovation Review notes that impulse giving utilizes our brain’s inclination to make mental shortcuts. It specifies certain deliberate marketing techniques and donation solicitation methods that can nudge people into giving. These include appealing through fast, easy ways for people to immediately give small amounts. Charity solicitations should provide spotlight social norms, offer feedback, spotlight different attributes, and cater to donor identities.

Retail round up donations are likely tapping into this economic behavioral phenomenon while offering social rewards. This is a socially engaging fundraising method that motivates all stakeholders to participate.

Brands promoting prosocial round up donations and other forms of giving encourage their employees, customers, and community members to donate and support the charity.

The Rise of the Round Up

Companies are fairly used to leveraging point-of-sale campaigns. Charity checkout fundraising has been in use for around three decades. In that time, retailers raised around $4.9 billion through this method. $605 million was raised in 2020 alone and the numbers are still on an upwards trend. This increase shows consumer trust and an eagerness to participate in social good campaigns.

Round up giving still represents a small portion of annual charitable donations. But brands have been rapidly adopting these fundraising mechanisms. In 2016, only 16% of brands offered it and only 38% offered it in 2018.

Retail round up is now the second most popular way to request donations. 56% of brands requesting donations ask for a dollar, 47% offer a round up, 45% ask for five dollars, 23% leave it open-ended, and 22% ask for three dollars. Plus, many give customers multiple options.

Gathering the equivalent of small change adds up to quite a bit. Brands are raising anywhere from tens of thousands to millions of dollars with retail round up donations – depending on their customer base. 

Engage for Good’s 2021 Charity Checkout Whitepaper listed retail round up results from some of America’s largest companies. In 2020, Walmart raised $5.4 million for charity solely through retail round up solicitation. And Macy’s raised $7 million for Meals on Wheels America from point-of-sale donations, with $1.7 million of that coming from online.

It’s expected to see continued growth for in-store and digital use.

Running round up campaigns for charity

Round-up campaigns aren’t just for generic or big-box retailers. Smaller brands are effectively leveraging this in their physical stores and online platforms.

Harney & Sons Fine Teas uses DailyKarma’s Shop for Good to raise money for charity with an ongoing retail round up program. Its donation program lets customers round up at checkout and choose a custom donation amount. Harney & Sons further incentivizes customers by matching their donations.

So far, Harney & Sons has raised over $45,000 for non-profits, with donations coming from over 42,000 charitable customers.

That’s the power of charity checkout.

Around $1.07 per donation isn’t a lot of money for a customer to give but every dollar and cent adds up and plenty of people are willing to donate their spare change to a worthy cause.

Would you like your store to raise money for a worthy cause? DailyKarma can make that happen.

Go beyond product & price with purpose & impact.

Turn the social causes you care about most, into engaging ecommerce experiences that deliver meaningful impact and measurable business results.

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