Never a day goes by that we are not bombarded by the talk of the web, internet sales, or Amazon! From WalMart telling their vendors not to buy web services from Amazon to Nike now changing a long standing refusal to sell its products to Amazon, there has been a railing of all ecommerce based on what the giants are doing. But of more interest to me is the success of the bottom layer of the retail “food chain”: T.J. Maxx, dollar Stores, and Big Lots, Menards and other perceived value merchants in their categories. A front page article in W.S.J. on 6/21/17 on T.J. Maxx’s phenomenal success by adhering to a simple philosophy that under the right circumstances, people still like to shop in stores! Home Goods has had 33 straight quarters on increased sales on stores open a year. Their annual sales exceed the combined total of Nordstroms and JC Penny. With a market value of seven times Macy’s Inc. this is a big deal. Their growth plan envisions 5600 stores worldwide! What fuels this is their reliance on old fashioned merchandising instincts by buyers who have been with the company for decades. Their ability to bring recognizable value, to items at low prices the consumer recognizes, is the secret to their success. TJX is known as an off price retailer because it offers brand name goods at 20% to 60% off regular retail. The company takes an average of 25 days to sell its merchandise which is a quarter of the time a Kohls or Macys do with theirs. It is somewhat of the “treasure hunting” philosophy that aids the success of Costco. People are driven to buy now as it will be gone tomorrow. We do not have to chronical the struggles of regular retailers and particularly chain and department outlets. TJX is a beneficiary of the troubles of these giants. Suppliers have to eat large quantities of unsold goods by department stores which leads to bargains for TJ Maxx and Marshalls.
The company employs more than 1000 buyers who buy from more than 18,000 apparel and other goods from around the world. Each buyer controls millions of dollars and has the authority to make deals on the spot as opposed to department stores which can take weeks or months to review and approve orders. Once purchases are made the merchandise is rushed to stores where a “Door to Floor in 24” mantra exists. This stream of new goods arriving almost daily is a lure to keep shopper’s interest piqued. Obviously, their success has caused Macy’s, Backstage, Saks off 5th and Nordstrom to be expanded. The sales at T.J. Maxx and Marshalls is almost double per square foot as traditional department and chain stores. Because large chains are hidebound to traditional name brands, their merchandise policy requires months and years to develop. A similar story in USA Today about Dollar Store segment reinforces the thought that customers just like to save money and get wide choices of merchandise.
The startling facet of their growth is its almost total absence from internet sales. Retail Consultants feel that it is difficult to sell inexpensive apparel online with 40% return rates. That same conundrum strikes me when I hear that most online mattress sellers and Wayfair just tell their customer to donate a product that they don’t like rather than pay return shipping. To build in that margin seems to be a loser as a long term strategy both to the merchant and his suppliers. The reason this whole subject tweaks my interest is who is getting the promotional furniture buyer in today’s market? I’ve seen a metamorphosis from the hundreds of small credit houses to the present where Menards, Big Lots, and Rent to Own chains, and inner city ethnic furniture stores are doing a larger and larger share of low to low middle home furnishing business. Some salient exceptions to the traditional retailers vacating promotional good are: AFW in Denver, F.F.O throughout mid-south, NFM and to some extent the promotional areas of Ashley Home stores.
Is the young consumer and the vast working class buyer having trouble finding merchandise they can afford after rising rents, car leases, more bills for devices and phone bills etc, eat up a family income that is rising very slowly. Is there a place for outlet or clearance department stores in your present operation. With competition from the off price furniture outlets, can you count of the “Holiday Pro-motion sales” to keep market share? There is much worry about losing business to internet competition, but the TJX success in soft good retailing make me want to make sure we are not missing that in lower priced home furnishings