Does TJX Have the Most Bulletproof Business Model in Today’s Retail Market?

Remember Filene’s? Lord & Taylor? Rich’s? Burdines? Foley’s? Marshall Field? Dayton’s? Kaufmann’s? Lazarus? Goldwater’s? Bullock’s? The Bon Marche? All relegated to the history books.

The demise of the department store has been happening for longer than many people realize. Of course, the internet has been siphoning sales from physical stores for many years now. But until I saw the graph below, I didn’t fully grasp the degree of the shift. Department stores now hold about 2% of the market for total retail sales versus the almost 10% they held in 1992. They now hold one-fifth of the market share they held 30 years ago.

While department stores were losing share, TJX Companies was growing from $9.6 billion in 2000 to $50 billion in 2022. In a recent press release, TJX’s CEO Ernie Herman said, “The third quarter is off to a very strong start and we are seeing tremendous off-price buying opportunities in the marketplace. We are in an outstanding position to continue shipping fresh and compelling merchandise to our stores and online throughout the fall and holiday selling seasons. Going forward, we continue to see excellent opportunities to grow sales and customer traffic, capture market share, and drive the profitability of our Company.” Even today, TJX is optimistic that the rest of the retail and branded world will continue to fuel its growth.

Just because TJX is doing so well compared to some of its competitors, this doesn't mean the company is to blame for the demise of other department stores. They have only themselves to thank for their slide into obscurity. But it gives pause for thought to be reminded of the several great regional stores listed above (and more) and how they disappeared in all the mergers and acquisitions of the 1990s and 2000s.

And then came the great renaming of so many regional marquees into the Macy’s moniker. The creation of a national department store chain under one brand seemed to make sense at the time. At a minimum, the presumed cost efficiencies were just too irresistible. However, plenty of shoppers in each of the regional markets were upset about losing a local favorite shopping destination.

For a while, the market share erosion was masked by the fact that department store sales continued to grow. Sales in the 1990s grew even as market share shrank.

But it’s an oversimplification to say, “Oh well, it was inevitable that e-commerce would erode physical retail.” Sure, but for any given brand or retailer, it’s a matter of degree. Here’s the sales growth profile for a few off-price retailers over a similar period:

• TJX grew from $9.6B in 2000 to $50B in 2022. That’s +$40.4B.
• Ross Stores grew from $2.7B in 2000 to $18.7B in 2022. That’s +$16B.
• Burlington grew from $3.7B in 2010 to $8.7B in 2022. That’s +$5B.

Yes, e-commerce peeled away meaningful sales volume over those years, but so did the off-pricers, and they did it almost exclusively in the physical retail channel, as the off-price retailers were slow to get into the e-commerce market. While department stores were dropping $95 billion over those years, the off-price channel was happily gobbling up at least $61 billion of those lost sales.

Again, it would be an oversimplification to say that consumers were just demanding better value from typical department stores. There had to be inventory to feed that demand, and that inventory came from the department stores and brands that were ceding market share in the process. With the simple act of selling excess inventory to the off-price market, retailers and brands were in effect feeding the beast that was eating their very soul. Season after season. Year after year.

Thirty years ago, this all seemed like an efficient — and harmless — liquidation process. Time, along with the incredible difficulty in projecting demand and managing the supply chain accordingly, has produced a level of competition that brands and retailers would never have wished upon themselves. And now department stores have one-fifth of the market share they enjoyed 30 years ago. Where does it stop? And how?

It begs the question: Does TJX have the most invincible, bulletproof business model in today’s retail market? What would cause the off-pricer to have a no-growth moment?

TJX has played the hand they’ve been dealt very skillfully. But it’s past time for retailers and brands to be smarter about aligning demand and supply. I don't think it’s healthy for retail overall for the market to keep handing TJX market share on a silver platter. Retail is in the process of reinventing itself, and department stores may or may not survive that process. This 30-year snapshot of department stores tells a sad tale. It used to be about storytelling and theater — experiential retail before it was called experiential retail. The other word for reinventing might be evolving. And evolution is not very understanding, or patient, of those that cannot adapt.