TJX discounts its way to growth

May 22, 2014

Retailing has swung to the extremes, especially since the onset of the Great Recession, as consumers gravitated to deep discounters on one end and luxury goods merchants on the other.

A clear example of the polarity in the marketplace was covered in a recent article on BuzzFeed, which showed The TJX Companies, owner of T.J. Maxx, Marshalls and Home Goods, has achieved annual sales greater than J.C. Penney, Sears, Nordstrom and Gap. TJX’s annual sales, at $27.4 billion, are not far behind Macy’s at $27.9 billion, even though the department store chain has roughly 40 percent more square footage.

"We believe our customer penetration levels in the U.S. remain below those of most department stores and the opportunity to expand our international reach is vast. We continue to target a very wide customer demographic," said TJX CEO Carol Meyrowitz in the company’s earnings call this week. "As we work to drive customer traffic, we plan to be even more aggressive with our marketing. In the second quarter, we have significant increase planned in our overall media impressions in the U.S. and U.K."

TJX is also putting increased emphasis on building customer loyalty while taking a slow but steady approach to e-commerce.

"Our TJX rewards loyalty program is another way we can attract more customers, increase shopping frequency and encourage shopping across our chain," said. Ms. Meyrowitz. "We are expanding our successful credit card loyalty program to including a non-credit card choice. We’ve seen from our test, it’s a great way to invite even more customers to join our loyalty program and have plans to roll out this new option nationwide in the U.S. in the second quarter."

Ms. Meyrowitz said the company’s e-commerce numbers were above plan in the most recent quarter. "We continue to add more categories and open more vendors. We are investing carefully as we learn more about our online including the differentiation from brick-and-mortar stores."

Does the future of retailing in the U.S. belong to discounters? Which discounters, across retail channels, do you think have the greatest opportunity for growth in the years ahead?

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8 Comments on "TJX discounts its way to growth"

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Dick Seesel
8 years 22 hours ago

The growth of TJX is part of a 50-year cycle (with no end in sight) in which the retailer offering better value and other sustainable advantages takes share away from the mid-tier retailer. First it was Sears in the ’60s and ’70s, then the national growth of discounters like Target and Walmart, then the big box specialists, and now the off-pricers. No reason to believe this trend won’t continue, with the added twist of web-only powerhouses like Amazon.

TJX is dealing with a hot hand right now, but history suggests that a new format will emerge within another ten years or so.

Ken Lonyai
8 years 21 hours ago

If you were to make a comparison of TJX brands and Amazon, the most obvious similarity would be pricing. While neither necessarily is a true low price leader, they both have a reputation/perception for discounted/competitive pricing and value. Given that the economy isn’t all that solid and that many people are still struggling, it works for both companies.

So yes, in physical retail, discounters that do it well and not just dump cheap and no-name Chinese merchandise into the market are a good fit for the mass market, now and for the near future. Macy’s isn’t going anywhere, but dollars per square foot; TJX is way outselling them.

Bill Davis
8 years 21 hours ago

Possibly, as being able to search for the lowest price is now much more readily available than at anytime in the past. Amazon is changing its prices more than 2.5 million times/day, where its competitors are far behind that.

Given TJX just moved back into eCommerce in 2013, my bet is they have a way to go here as they just aren’t as mature as others yet. And TJX’s latest quarter, showed some softness that suggests they still have their work cut out for them.

Gene Detroyer
8 years 20 hours ago

The future of retailing does not belong to discounters. It belongs to those that provide value. Real value, not faux value. This is a demographic shift, not a retailing shift. The younger demographics seem to be more aware of real value than us elders. They carry many more questions and considerable distrust of the old line traditional retailers. They also don’t have time for the games that traditional retailers play with their prices and products.

BTW — great comparison on square footage. You gotta love the business model. Does that mean that Macy’s is wasting 40% of their bricks and mortars?

W. Frank Dell II, CMC
8 years 20 hours ago

First we heard the discounters would kill the department store and that did not happen. Then we heard that membership clubs would take over the retail world and that did not happen. The United States retail market evolved without the hard discounters seen in Europe.

Discount is king of retail, just look at Walmart. Our largest retailer is a discounter, so yes, discount is driving the majority of retail. The Great Recession like the Great Depression has changed the consumer’s mindset. The only question is for how long. The middle class consumer will not go back to shopping mid-priced stores until their income increases, which is years away. Additionally many are concerned about their medical insurance cost which is depressing spending. The household de-leveraging has slowed down, so that is not depressing spending.

I see the entry of hard discounters over the next 5 years which will be additional competition for the discounters.

Lee Kent
8 years 20 hours ago

My mother used to tell us (I had 4 sisters), “Girls, all you need is one or two good pieces and the rest, “get away with it” pieces, and you’re good to go.”

The market is in the “get away with it” pieces. That’s my 2 cents! And Momma’s!

George-Marie Glover
George-Marie Glover
8 years 19 hours ago

Unfortunately, many average Americans have yet to benefit from the recent economic gains, so stores like TJX will continue to do well in the foreseeable future. Women will continue to primarily shop at stores for clothing with a slight shift to shopping online for familiar brands.

Sadly, much of the ability to offer lower prices in clothing is because of lower quality materials and overseas sweatshops. Cotton is too expensive so cotton-synthetic blends dominate. Fabrics have become thinner. It’s harder to find fully lined slacks or jackets. Even some luxury items lack in quality. Buttons quickly pop off and seams come undone. It almost makes me want to make my own clothes.

Frankly, I hope our economy will find some way to thrive again so we can stop this trend.

Tony Orlando
8 years 19 hours ago

Discounter’s both large and small need to understand that a junked up store does nothing for most folks. Green bedsheets marked down, ugly cheap furniture, and crappy house ware is not going to move out very quickly.

To me – and probably many others – a quality brand name at an excellent value is what will make me buy. All of us are in search of value, but substituting low grade junk will not win consumers over, certainly in the long run. In my store, we redid all the center store, with premium and private label offerings closely matching the discounters, and we’ll see how it goes, as we have the upper hand on the perishables.

Keep bringing it hard on the deals to your customers, and don’t forget to treat them well, and you’ll do okay.


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