August 13, 2008
No Stopping TJX
Millions of people have their personal financial records exposed when TJX Cos. has its computer systems hacked – not a problem. The economy softens and people reign in their spending, just not at TJX.
It appears no amount of bad news is enough to keep TJX and its chains including T.J. Maxx, Marshalls, HomeGoods and A.J. Wright from rolling right along. Sales at TJX stores open at least two years increased four percent in the latest quarter with a number of divisions in North America and Europe seeing high single and low double-digit revenue increases.
The company’s CEO Carol Meyrowitz said it has benefited from being able to buy designer clothing, shoes and bedding on the cheap as department stores found themselves having to cut back on inventory and close stores.
TJX’s allure is easy to understand, according to Patrick McKeever, an analyst with MKM Partners. “You know you are getting a good deal at T.J. Maxx and Marshalls,’ Mr. McKeever told Bloomberg. “If you look at off-price retailers, like TJX… you wouldn’t know we’re in a widespread consumer slowdown.”
“In down economies, we tend to capture new customers,” said Carol Meyrowitz, chief executive at TJX. “When times improve, our history has shown that our new customers stay with us because they love our value.”
One TJX chain that has not fared so well is its Bobs Stores business. Same-store sales were off five percent and the company is exploring “strategic options” for the chain.
Discussion Questions: How has TJX continued to roll along while others, even some discounters, have struggled over the past year? What is your view in terms of the number of customers who will stay with TJX chains after the economy has come back?
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These days, frugal=chic. People who aren’t experiencing financial difficulties are cutting back, staying home, and doing their shopping in off-price outlets. Anyone who doubts this should shop in a Goodwill or Salvation Army store, if they can stand the crowds.
TJX’s stores suit the environment perfectly. And management has been smart enough to know how to respond. Viva la discount!
Not all off-price stores are doing as well as TJ Maxx. TJX has the best off-price buyers and the best deals for their intended market slice. Long ago they decided that consistent assortments weren’t worthwhile. They decided not to try pleasing everyone. The best retailers all agree: it isn’t worthwhile trying to please all audiences. Well-run stores pick the group(s) they can serve profitably and skip the rest.
The value proposition is clear–giving people with limited discretionary income access to what they perceive as high quality brand names. The appeal of that offer doesn’t go away just because the economy improves.
There is evidence on a daily basis of higher end customers “trading down” not only to TJX but to WMT as well. So this story is at least part a function of the economy.
That said, my grandfather was in the children’s wear business for over 50 years, ultimately ending up in the high-end off price sector. More than anything, he credited buying goods at the right price with the success of his business. TJX is able to do this, and as the article points out, customers trust the brand and its offering.
I work in apparel marketing for a major retailer, but MAN do I love TJX. (And it’s not a cheat…because the offering is different). I literally shop there every week–and if that seems excessive–you should know that I often encounter the same like-minded loyalists when I’m there. It has been and continues to be a good value, but the thing that drives me back is the treasure-hunt aspect of shopping there. Only off-pricers have this. The department stores are fresh about every 4 weeks, but it’s 6 pieces out of each collection. They know the way to make it “look fresh” is to switch out a few outfits on the perimeter, but the rest of the shop seems quickly stale. TJX is infused with fresh fashions every week–and it’s hundreds of pieces.
This drives some people absolutely bonkers (like my sister) who’d much rather shop at the Gap and see 12 of the same shirt neatly in a row and know for sure that they have her size.
Will TJX gain incremental shoppers in this climate? I suppose they’ll pick up a few trips here and there. But I somehow suspect that the off-price model is just fairly polarizing (which isn’t to say bad.) People like my sister who abhor the chaos aren’t going to make a drastic leap from dept/specialty. Meanwhile, people like me can’t get enough.
The quote about new shoppers seems like spin and something I would say if I had my PR hat on too. I wonder how much is really coming from new shoppers and how much is increased share of wallet from zealots like me.
Not that Payment Card Industry (PCI) Certification can prevent all instances of hacking and intentional fraudulent activity; however, I am seeing a major move by retailers in 2008 to require that any third party vendor that has access to customer data MUST be PCI Certified. This is a good step. At a minimum, this at least shows the retailer that the vendor has undergone the rigorous systems penetration and data security testing, which is required on a quarterly basis. PCI Certification is an industry best-practices standard right now, and quite possibly may become a regulatory requirement in the not-to-distant future. So, my recommendation to all retailers is to ask your vendors who have access to your customer data to show you their PCI Certification. If they are not PCI certified, you must then ask yourself if you are you willing to take the risk.
One of the keys to the TJX strategy is that it’s offering “deals” on recognizable brand names. This stands in contrast to several other value-oriented retailers (Penney and Kohl’s, for example) who have become increasingly focused on private-label and exclusive merchandise without true national-brand recognition. As more of these exclusive labels (such as American Living at JCP) reach for aspirational price points, their timing couldn’t be worse in terms of what the middle-market consumer might be looking for right now.
TJX is at the right place, at the right time, with by and large the right product and price mix. Several components needed for brand loyalty will be:
1. Visual appeal – are the stores easy to shop and browse?
2. Customer service – are the stores equipping the teams with the training needed in an off-price environment?
TJX stores are well laid out, easy to shop, offer great value, and with inventories backing up throughout the industry over the past year, the quality and appeal of their assortments has never been better.
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These days, frugal=chic. People who aren’t experiencing financial difficulties are cutting back, staying home, and doing their shopping in off-price outlets. Anyone who doubts this should shop in a Goodwill or Salvation Army store, if they can stand the crowds.
TJX’s stores suit the environment perfectly. And management has been smart enough to know how to respond. Viva la discount!
Not all off-price stores are doing as well as TJ Maxx. TJX has the best off-price buyers and the best deals for their intended market slice. Long ago they decided that consistent assortments weren’t worthwhile. They decided not to try pleasing everyone. The best retailers all agree: it isn’t worthwhile trying to please all audiences. Well-run stores pick the group(s) they can serve profitably and skip the rest.
The value proposition is clear–giving people with limited discretionary income access to what they perceive as high quality brand names. The appeal of that offer doesn’t go away just because the economy improves.
There is evidence on a daily basis of higher end customers “trading down” not only to TJX but to WMT as well. So this story is at least part a function of the economy.
That said, my grandfather was in the children’s wear business for over 50 years, ultimately ending up in the high-end off price sector. More than anything, he credited buying goods at the right price with the success of his business. TJX is able to do this, and as the article points out, customers trust the brand and its offering.
I work in apparel marketing for a major retailer, but MAN do I love TJX. (And it’s not a cheat…because the offering is different). I literally shop there every week–and if that seems excessive–you should know that I often encounter the same like-minded loyalists when I’m there. It has been and continues to be a good value, but the thing that drives me back is the treasure-hunt aspect of shopping there. Only off-pricers have this. The department stores are fresh about every 4 weeks, but it’s 6 pieces out of each collection. They know the way to make it “look fresh” is to switch out a few outfits on the perimeter, but the rest of the shop seems quickly stale. TJX is infused with fresh fashions every week–and it’s hundreds of pieces.
This drives some people absolutely bonkers (like my sister) who’d much rather shop at the Gap and see 12 of the same shirt neatly in a row and know for sure that they have her size.
Will TJX gain incremental shoppers in this climate? I suppose they’ll pick up a few trips here and there. But I somehow suspect that the off-price model is just fairly polarizing (which isn’t to say bad.) People like my sister who abhor the chaos aren’t going to make a drastic leap from dept/specialty. Meanwhile, people like me can’t get enough.
The quote about new shoppers seems like spin and something I would say if I had my PR hat on too. I wonder how much is really coming from new shoppers and how much is increased share of wallet from zealots like me.
Not that Payment Card Industry (PCI) Certification can prevent all instances of hacking and intentional fraudulent activity; however, I am seeing a major move by retailers in 2008 to require that any third party vendor that has access to customer data MUST be PCI Certified. This is a good step. At a minimum, this at least shows the retailer that the vendor has undergone the rigorous systems penetration and data security testing, which is required on a quarterly basis. PCI Certification is an industry best-practices standard right now, and quite possibly may become a regulatory requirement in the not-to-distant future. So, my recommendation to all retailers is to ask your vendors who have access to your customer data to show you their PCI Certification. If they are not PCI certified, you must then ask yourself if you are you willing to take the risk.
One of the keys to the TJX strategy is that it’s offering “deals” on recognizable brand names. This stands in contrast to several other value-oriented retailers (Penney and Kohl’s, for example) who have become increasingly focused on private-label and exclusive merchandise without true national-brand recognition. As more of these exclusive labels (such as American Living at JCP) reach for aspirational price points, their timing couldn’t be worse in terms of what the middle-market consumer might be looking for right now.
TJX is at the right place, at the right time, with by and large the right product and price mix. Several components needed for brand loyalty will be:
1. Visual appeal – are the stores easy to shop and browse?
2. Customer service – are the stores equipping the teams with the training needed in an off-price environment?
TJX stores are well laid out, easy to shop, offer great value, and with inventories backing up throughout the industry over the past year, the quality and appeal of their assortments has never been better.