TJX Cos., parent company of T.J. Maxx, Marshalls, and HomeGoods, is like the cool kid who doesn’t really care how cool you think she is. Like any cool kid, the off-price retailer has legions of followers and, increasingly, imitators.
The followers are the customers. Last year, Moody’s Investors Service released a report noting stellar performance by off-price retailers T.J. Maxx, Ross, and Burlington, and predicted steady growth of 6% to 8% for them in the next five years — quite above the 4% predicted for the rest of retail.
And those leaders, according to the report "Off-Price Apparel and Home Retailers to Remain One of Leading Retail Groups,” have few supply constraints to inhibit their growth.
"Off-price retailers have become too big to ignore for most large vendors, including high-end brands that don't want to be associated with bargains," Moody’s VP and senior credit officer Scott Tuhy said in September. "Their willingness to address high-end stores' brand concerns has led to deeper and broader relationships, while at the same time the quality of their merchandise has improved.”
And the imitators? Big name department stores (who are investing more and more in their off-price stores) and flash-sales (who’ve tried and recently faltered in their approach to buying and selling excess apparel, footwear, and accessories inventory).
Macy’s was just the latest department store to join the fray, announcing last month that it is piloting off-price “Backstage” stores that will sell returns, out-of-season merchandise, and possibly some specially made goods.
How T.J. Maxx is different
Although department stores’ off-price stores are also doing well, they aren’t enjoying the healthy stability of T.J. Maxx. And they have a major problem that T.J. Maxx doesn’t: Being a flagship brand that's easily undermined by lower-quality merchandise or even bargain-basement prices, says Columbia University business school professor Mark Cohen, a retail veteran.
“T.J. Maxx already has this customer,” he told Retail Dive. “But when Saks and Nordstrom and Macy’s get really aggressive in their outlets, they create a problem in their regular business.”
We don't know much, really, about the retailer's methods. The company’s CEO, Carol Meyrowitz, is an industry veteran from a retail family who has been with the company for some 30 years. She also notoriously keeps information about the retailer’s approach and plans close to the vest.
Last year, Fortune magazine's Beth Kowitt took a few months to present an exhaustive look at the company, talking to vendors, observers, and others on and off the record, and found that the retailer operates quite differently than many people realize.
While the retailer plays hardball when it comes to buying from vendors, for example, it avoids some of the cutthroat practices that have emerged at other companies. Its buyers are among the savviest in the business, the magazine found, staying on top of trends and moving inventory quickly.
In fact, T.J. Maxx seems to have a flash-fashion-esque approach to moving merchandise. “Former employees say that the stuff moves so rapidly that merchandise is often sold before TJX has paid its vendors for it,” writes Kowitt.
The company is apparently willing to give some vendors a sort of plausible deniability, according to USA Today. That is, several upscale brands like Coach, Michael Kors, Ralph Lauren, and Nanette Lepore — all brands found at T.J. Maxx — won’t speak to whether they sell to T.J. Maxx.
"We're absolutely fine with every vendor saying they don't do business with us," Meyrowitz told USA Today in a rare interview. "It's a very important part of our relationship.”
In any case, buyers at the company are highly specialized and know their stuff. High-end items are in the mix to add to the treasure-hunt allure, but all merchandise is geared to the middle-income bargain hunter. There are no storewide sales because T.J. Maxx wants to protect its brand of good deals, all the time.
Add to that T.J. Maxx’s unique real estate situation. Stores are found mainly at out-of-the way strip malls, untethered to traditional malls or downtown areas with expensive leases. Customers are willing to drive and park at the slightly more remote, less beautiful areas for the sake of their treasure hunt. And that’s somewhere many off-price outlets of major retailers can't go because operating at an overly downscale location could, like any sub-par merchandise or low-low prices, once again dent their flagship brand.
Indeed, T.J. Maxx aims to be in business regardless of the state of the economy — good or bad — or any one shopper’s bank account — fat or middling. That includes Kate Middleton, who was spotted shopping at a T.K.-Maxx, the company’s U.K. version, before her royal wedding a few years ago.
"The majority of the customers who try us, whether recession or not a recession, do come back," says Meyrowitz. "It's almost the 'aha.' They think, 'Why would I buy at this price when I can buy at a lot less?'"