LESS IS MORE
Off-price bright spot in retail desert
It’s the treasure hunt, stupid — and the low prices.
While department, discount and specialty stores of every stripe are in an arms race to increase their online revenue, one retail sector stands blissfully firm on just brick-and-mortar stores — off-price chains.
TJ Maxx, Burlington Stores and Ross Stores have all but thumbed their nose at e-commerce — and are still killing it when it comes to growing sales.
In fact, Dublin, Calif.-based Ross doesn’t even let its customers shop online. Their secret? Shoppers love hunting offprice store aisles in hopes of discovering that unexpected gem.
Off-price shoppers “like the treasure hunt,” said Richard Baum, managing partner of Consumer Growth Partners. “There are a lot of people who don’t mind going through the racks, and their stores are bright and clean,” he said.
What’s more, most of what the traditional department stores sell, shoppers can find at off-price chains for 30 to 60 percent less.
In fact, Macy’s views offprice chains as a bigger threat than Amazon, Karen Hoguet, the department store’s chief financial officer, said at an investor conference on Wednesday.
TJ Maxx has managed to grow its US revenue to $26 billion — roughly 9 percent of $300 billion in annual apparel sales in the US, without putting much effort into its online operation, according to Craig Johnson, president of Customer Growth Partners, a retail consulting firm.
The Framingham, Mass. chain, with its 1,119 stores, launched its US Web site in 2013 — and today it represents about 1 percent of its sales, according to a spokeswoman.
Burlington’s online sales are so negligible the company doesn’t even disclose them.
Sales growth at these stores is coming the oldfashioned way, in its big box stores.
While Macy’s same-store sales shrunk by 2.7 percent in the critical fourth quarter, TJ Maxx’s grew 3 percent, Ross’ grew 4 percent and Burlington’s rose 4.6 percent over the same period.
“The overlap between Macy’s and the discounters is very significant,” Baum said.
That’s because TJ Maxx and its competitors are buying directly from the same brands that the department stores are buying from. The department stores generally get their merchandise four to six weeks ahead of the discounters.
“The vendors will give the department stores a head start because they want their products to sell at full price,” Baum said.
Online shoppers can find deals on TJ Maxx as well, but the chain still makes them “hunt” for name brands.
For example, shoppers who put a specific brand, like Calvin Klein, into TJ Maxx’s search field will get this message:
“It’s the thrill of the hunt! Unfortunately, you can’t search by brand. In order to bring you amazing value on the latest fashion, it’s important that we protect our designer relationships.”