People hand something over the counter and it disappears. Reasonably enough, they want to know whether it helped anyone. Here is the actual path, including the part most charities do not talk about.
What happens first?
Items are checked and sorted. Anything that does not meet the new and near-new standard cannot go on the floor, which is exactly why the standard exists.
Who buys it?
The public. The Goodwill Shop is a retail shop, not a distribution point, and the people shopping there are ordinary customers.
Where does the money go?
Into House of Sadaqa programs. The shop is a social enterprise owned by the charity, so the margin funds family support rather than an external owner.
Do the goods themselves go to families in need?
The shop is a retail operation. House of Sadaqa runs separate programs that get essentials directly to families, and those have their own intake. The shop's contribution is funding.
What happens to donations that cannot be sold?
They cost the charity money to dispose of. That is the honest reason for the condition standard, and why a donation that fails it is worse than no donation at all.
How is this different from a commercial op shop chain?
Some second-hand retail is privately owned and returns profit to shareholders. This one is owned by the charity whose programs it funds.
If it is new or near-new, it converts almost directly into support for a local family. The Goodwill Shop.