Wednesday, August 6, 2014

What's Next for Off-Price Retailing?

Loehmann's, one of the original off-price retailers, went bankrupt last year and its logo has disappeared from shopping centers everywhere. In its heyday, New York-based Loehmann's was the go-to store for high fashion at low prices, and an early proponent of bullpen dressing rooms, which keep costs low so prices can be low. Syms, another New York area off-price retailer, is also gone. Hit or Miss, an early Massachusetts-based off-pricer, is long gone.

But T.J. Maxx is not only alive, it's thriving. It's survived tough economic times and tough competition. Beth Kowitt, writing in Fortune's latest issue, asks the question: Is T.J. Maxx the best retail store in the land?

Kowitt makes a very convincing case, and I agree with the 7 key points she lists:
  1. Shoppers are looking for "new" merchandise, not "sale" merchandise. Yes. This is a major reason for the success of Costco, Zara, and other strong retailers, not just T.J. Maxx. Store traffic is vital, and shoppers enjoy the hunt, so new inventory has to be added every few days to keep the hunt going.
  2. Give shoppers treasure to hunt for. Costco is famous for this. T.J. Maxx also stocks some special products, but not in the same product category as Costco.
  3. Know what to buy and buy advantageously. This is what made Loehmann's reputation in decades past: Its buyers knew what to offer and when to make an offer to acquire special merchandise for the treasure hunt. Fast-forward to the 21st century: T.J. Maxx has its buyers constantly searching the marketplace for the next opportune buy.
  4. Get close to suppliers and order merchandise for yourself. No, there's not enough off-price merchandise to go around. That's what the other off-price retailers discovered as they tried to expand to keep up with shopper demand. T.J. Maxx wisely makes buys for inventory purposes, not just during mid-season or off-season opportunities.
  5. Make big buys. Today's apparel manufacturers appreciate the financial possibilities of purchases made by off-price retailers. Money talks, and T.J. Maxx has the money to make important buys (see #3 and #4).
  6. Build supplier relationships. Knowing that shoppers covet brands (see #2), T.J. Maxx will work with suppliers. Of course price is carefully negotiated, but without good supplier relationships, no retailer can accomplish key points #2 and #4.
  7. Give the leadership reins to a real retailer. T.J. Maxx's CEO, Carol Meyrowitz, is a seasoned retailer with the know-how and the experience to keep the company moving forward day after day, no matter what happens to the economy and the competition.
My big question: What will T.J. Maxx do as more shoppers move to mobile and digital shopping? Part of the buzz of an off-price chain depends on bringing shoppers back to the stores week after week in the hunt for "new" things at low prices (see key point #1) and treasures (point #2). Off-price does not operate using the same retail model as Gilt Groupe, for instance. Sometimes shoppers just have to go to the store and walk the aisles in search of that special bargain.

T.J. Maxx is definitely social: It has more than 2.2 million FB likes and 28,000 Pinterest followers. And the parent company has begun addressing online retailing in some divisions. What's next?

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