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Cash flow may be tighter than a pair of spandex pants these days, but shoppers are still scouring the racks for name brands. But, instead of heading to Bloomingdale’s (STOCK QUOTE: M) for the latest season’s fashions, they’re looking to thrift stores for last year’s leftovers.

Sales are up at resale shops nationwide. Goodwill has seen a 6% increase in retail sales for the first seven months of 2008 versus the same period in 2007. And according to the National Association of Resale & Thrift Shops, 62.5% of its members reported higher sales in August.

"People simply love a bargain," says Lauren Lawson, spokesperson for Goodwill Industries International, which has more than 2,200 shops in North America. "People know that they can find quality items at affordable prices and stay within their budget. They can shop Goodwill and look just as good as the person who spent $100 elsewhere."

Bobbie Potts of Park Forest, Ill. donated and shopped at her local thrift stores so frequently after going on disability leave from her factory job, one of them hired her as an employee. She volunteers at the other, called One More Thing Thrift Store, without pay.

"After shopping there all the time, I realized the proceeds go to help battered women and children," Potts says. "That made me want to help the program out. It is a way of me being able to give back."

And the perks aren't bad either. "One of the benefits of working there is they allow us to see the donated items first," she adds. "We still have to pay for it, but we get a 25% discount." She once purchased a Coach (STOCK QUOTE: COH) purse for $7. "The original Coach, not a knock-off," she assures.

Shopping might be up, but according to the Salvation Army, donations are down by 20% this year. But donations aren’t down everywhere. Goodwill reports donations are up 10% in 2008.

"The recent economic downturn has meant that people are keeping their gently used items longer so we are seeing fewer donations to our thrift and family stores," said Major George Hood, spokesperson for the Salvation Army. "This means that we have fewer items to sell and therefore less funding for our life-changing programs."

Whether donations are up or down, stores are always working on ways to increase their donations.

The Salvation Army announced Tuesday that it’s partnering with Stein Mart stores for a "Give & Receive" event October 2 - 4. Shoppers will receive a 20% off coupon to be used at Stein Mart stores for each item donated (up to four items).

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And Savers, a for-profit thrift store, is offering 20% discounts on items in its store to anyone who donates gently used Halloween costumes during the month of October.

"We pay our non-profit alliances for all donations we receive, whether they are donated directly to the non-profit or directly to our stores," says Sheri Marzolf, Savers VP of Marketing for the Bellevue, Wa. based Savers.

“For many people, once they realize they can support the non-profit by donating either direct to them or to the store, it simply becomes a matter of convenience."

Donation Do’s and Don’ts

So just what should you be donating? When it comes to gently used items, experts say you may want to give as much thought to where you donate your items as you do when you donate money to charity.

Not all thrift stores are charities, and some give as little as 5% of proceeds to the affiliated non-profit. Give to a cause you support, and make sure the charity makes the most of your donations. Goodwill, for example, puts 84% of its revenues into its career services program.

Check the Better Business Bureau, to find a trustworthy charity.

When cleaning out your closet or garage, give some thought to your donations. "Our shoppers are looking for quality second-hand goods, and disposing of items we can't sell costs a lot of money. Every dollar we spend disposing of unusable donations is a dollar we cannot spend on our services to the community," says a Goodwill spokesperson.

Donors don’t need to wash clothing to prepare the donation in advance, but thrift stores do appreciate receiving clean clothing when possible.

Package goods in clean bags and boxes, which makes loading and unloading easier for both the donor and store team members.

Finally, keep an eye out for special donation drives! Thrift stores occasionally run promotions where donors receive store coupons in exchange for their donations, giving you a monetary bonus too.