A Guide to Nonprofit Merchandising & Product Sales
Updated: 6 days ago
This is a guest blog.
If you lead fundraising at a nonprofit, you're likely looking for ways to diversify revenue in order to protect your finances during times of economic pressure. Nonprofit merchandising and product sales are a popular way to secure extra funding, but you might find yourself weighing whether branded totes, apparel, or cause-specific goods are worth the staff time and setup involved.
Done well, merchandising goes beyond a simple retail transaction. By strategically blending ecommerce, community engagement, and digital fundraising, you’ll give your supporters a new, tangible way to support a cause they already believe in. This guide addresses the legal questions around product sales, walks through the process, and lays out tactical tips for maximizing revenue.
Can Nonprofits Legally Sell Products?
Yes, nonprofits can sell products, but with a caveat: you must save any income you generate in a restricted reserve or reinvest it in your mission rather than distributing it as profit. You should also sell products that are aligned with your mission (e.g., a branded, reusable water bottle that supports an environmental group's efforts to reduce plastic waste).
Selling products that are unrelated to your mission can trigger tax considerations, and you may need to:
Track unrelated business income tax (UBIT): This tax can reduce the profit you keep from unrelated sales, so it's worth weighing whether a product genuinely aligns with your mission before you add it to your catalog. A nonprofit tax professional can help you make that call.
File a Form 990-T (if sales exceed $1,000): If unrelated sales generate more than $1,000 in gross income in a year, you'll need to file this alongside your standard Form 990. Remember to check local sales tax rules, as nonprofit exemptions vary by state and locality.
This may sound daunting, but it’s worth navigating these processes to diversify your income streams. Having extra revenue on hand pays beyond the balance sheet, allowing you to plan further ahead, bolster your emergency fund, and do more for your community. For example, you can fund immediate relief after a natural disaster rather than have to scramble to raise money in response.
How Merchandising Strengthens Nonprofit Fundraising
Merchandising and product sales support your fundraising efforts in a few key ways:
Generating funding: Product sales create an additional recurring, non-restricted revenue stream that your organization can use however it sees fit. Because you can set merchandise campaigns to run continuously in the background, you will also have something concrete to point to when a foundation or major donor asks how you're diversifying revenue beyond their support.
Expanding brand visibility: Every time supporters use one of your tote bags, t-shirts, or travel mugs in public, it serves as a form of free, ongoing marketing. A community food bank selling branded tote bags to supporters, for instance, gets more mileage out of totes carried through the grocery store or farmers market than it would from comparable spending on digital ads.
Deepening relationships with supporters: Treat merchandise as a donor recognition tool as much as a sales channel. Sending a complimentary branded item to a milestone donor, a longtime volunteer, or a first-time giver signals that you noticed their specific contribution, boosting retention more than a standard thank-you email.
How To Run A Nonprofit Merchandise Campaign
A standard nonprofit merchandise campaign generally moves through these four phases:
Phase 1: Planning and strategy development.
Set a clear goal for the campaign (e.g., funding a specific program) and design items that reflect your mission. Draft a promotional timeline that lines up with key dates on your fundraising calendar, and decide early who owns day-to-day logistics so nothing falls through the cracks.
Phase 2: Select and design products.
Brainstorm across categories like apparel, accessories, stationery, or something more specific to your cause, then narrow the list down to what your supporters will actually want to use. Invest in custom products with polished, on-brand design.
Phase 3: Set up your online shop.
Customize your shop landing page with your logo, mission statement, and clear product listings to build credibility. A trustworthy shop reassures first-time buyers that their purchase will support a legitimate cause, resulting in more sales.
Phase 4: Promote the products.
Set specific promotional goals, decide which audience segments you're targeting, and choose the channels where they already spend time. AGP suggests setting SMART goals that are specific, measurable, achievable, relevant, and time-bound, allowing you to develop a clear roadmap for your promotional efforts. Then, build content around the story behind each product, monitor performance during the campaign, and analyze results against your original goal.
Rather than treating these four phases as a one-time checklist, run them as a loop. The reporting you do at the end of phase four should feed directly back into how you plan the goals and product mix for your next campaign. For example, if last quarter's data shows your reusable totes outsold everything else in your catalog, let that insight guide which products make the cut the next time you kick off phase one.
Tactical Tips For Driving Nonprofit Merchandise Sales
Beyond the four phases of running a campaign, you can take tactical steps to boost your nonprofit's merchandise sales. Keep these in mind as you plan your campaign:
Choose a platform built for nonprofits:
Prioritize print-on-demand providers offering nonprofit-specific fee structures and compliance support over general consumer tools. These platforms tend to include features designed to drive additional donations and build trust with supporters.
Determine fair product pricing:
Take a look at your financial data and similar nonprofit stores to understand what you can afford and what supporters will consider reasonable. Prices should be high enough to cover production costs and generate a meaningful margin, but not so high that the markup feels at odds with your mission.
Enable donations at checkout:
Add an optional donation line item during checkout so generous supporters can give more without having to seek out your standard donation form.
Consider shipping logistics:
Decide whether fulfillment will stay in-house or move to a platform that handles printing, packing, and shipping. Many organizations opt for a print-on-demand service that handles the logistics, allowing their team to stay focused on mission-critical activities.
Revisit your approach on a regular basis (quarterly or annually), rather than waiting until sales dip. Small pricing or platform tweaks tend to compound over several campaigns, making it easy to miss if you only check in when something has already gone wrong.
Nonprofit merchandising is one of the clearest ways to diversify revenue beyond grants and one-time appeals. Pair it with a clear marketing and promotion plan and careful attention to legal and financial considerations, and a well-run merchandise line becomes one more durable thread in how your organization funds its work and builds community.
