TJX Companies

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Luxury Brands, Fast Fashion, Treasure Hunt, Localization, Super Value


\"TJXThe TJX business model is not easily copied. In fact, one could make the case that the specific differentiators and advantages that have been crafted into its DNA cannot be duplicated, period. With the exception of Ross Stores, smaller and not a pure copycat, TJX Companies Inc. (T.J. Maxx, Marmaxx, Marshalls and HomeGoods) all but owns the so-called “off-price” space it dominates.

Hey, you guys in the other sectors, in the middle of the “perfect storm” of an overstored, intensely competitive retail environment, with omnipotent consumers driving you into the insanity of the retail share wars, you can only dream of being in such a position.

TJX had 2014 revenues of just over $29 billion, up from about $2 billion In the early 1990s. It has achieved 18 consecutive years of EPS growth (and the last six with double-digit EPS growth), with annual same-store sales dropping only once in the past 37 years. It has grown in size to some 3,395 stores worldwide (more than 500 in the United States), and projects a 60 percent increase to 5,150 stores. Along with the store projection, TJX has stated a goal of $40 billion in sales. While not putting a timetable on that number, if the company continues on its meteoric growth trajectory, 2020 should be eminently doable.

And, even though its blistering growth has slowed somewhat of late, some of it is likely due to the sluggish economy, particularly in the apparel sector.

However, there is also reason to believe that the acceleration of outlet store openings, including designers and luxury retailers such as Nordstrom, Neiman Marcus, Saks and others, are beginning to squeeze its space. Perhaps a greater threat will come from Macy’s recently announced rollout of a pilot chain of “off-price” stores. In fact, Karen Hoguet, Macy’s CFO, said that their off-price is more likely to be like a T.J. Maxx than a department store’s outlet.

Nevertheless, with TJX hardly hiccupping during the Great Recession, experts believe the recession may have caused a paradigm shift in consumer behavior weighing more towards value seeking. This would put TJX in an even longer-term untouchable position.

By the way, for more background, TJX is profiled in my co-authored book, “The New Rules of Retail.” Check out chapter 11: Ideas From The Great Ones.

OMG!!! How Do They Do It?

There is no greater rush of the addictive brain chemical dopamine than the one unleashed when a shopper pulls into the parking lot of one of the TJX Companies’ stores. The jolt of anticipation is not just about one awesome experience in those stores. It’s about five expectations, all within the four walls.

  1. It’s about a “treasure hunt.”
  2. It’s about luxury brands they can afford (the largest purveyor of upscale brands in the world).
  3. It’s about “fast fashion.”
  4. It’s about localization.
  5. And, all lumped together, it’s about the best value you can find anywhere.

And, baked into the entire process is a “sell low, buy lower” mindset at TJX. So, how do they do it?

Let’s Count the Ways

TJX stays above the fray by simply taking the best of the spoils from each of the warring brands and retailers around the world and putting them all together in a TJX store. And since the products consist of overruns, order cancellations, and closeouts, retailers and brands are happy in most cases to sell them to TJX for whatever they can get above cost. Plus, TJX buys less-than-complete assortments, pays promptly and asks for neither advertising funds nor markdown allowances.

Thus, TJX, with the strategic advantage of its off-price business model, is able to provide consumers with “more for less” of everything branded: fashion, apparel, accessories, fine jewelry, footwear and home, for up to 60 percent below traditional department and specialty stores, all the time.

Although you can’t count on finding anything in particular at any given time in its stores, you know you’ll find high-quality product at unbeatable, irresistible values, which entices shoppers to keep coming back for more. This is what we call becoming addicted.

For consumers now addicted to (and largely responsible for) the relentless discounting, unprecedented outlet-store expansion, couponing, mobile e-commerce “daily deal” onslaught and whatever other “race to the bottom” pricing gimmickry is being employed, TJX’s stores are nothing short of shopping nirvana. Rather than hunting and pecking from one store or website to another, and fumbling through coupons and store circulars, shoppers can meander through some 16,000 vendors’ brands, all in one location.

The Treasure Hunt, Fast Fashion and Localization

The shopping experience is likened to Costco’s popular “treasure hunt,” except that instead of finding a designer brand or other unexpected item that Costco offers only once every few weeks, the thrill of the hunt — and surprise findings that delight — occurs every day in the TJX stores. This is the result of another incredible strategic advantage TJX has over all other retail sectors, which is its totally flexible business model, both operationally and structurally.

The company’s 900 merchants are sourcing from vendors in more than 60 countries, continuously on the prowl for an opportunistic buy, and are able to pounce on a great find. And because they are on the hunt 24/7 around the world, they are not bound by seasons or a narrow list of vendors. TJX defines itself as a “value-driven global sourcing machine.”

Delivering value — a combination of fashion, quality, brand AND price — to its customers every day is what drives the business. Value is not just about price — it has to be the right product, delivered at the right time, with all the elements that make up the value equation. The off-price business model, while greatly flexible, takes relentless attention to execute well. And TJX executes better than anyone else.

Its buyers are in rapidly changing marketplaces, reading and reacting to market and fashion trends. They must constantly monitor the various macro environments that affect the business.

And, because it is not buying full lines, its merchandise flow is similar to the fast-fashion giants Zara and H&M, introducing new merchandise, brands, styles and fashion at least once a week, rather than every month. Scarcity is built into the process, compelling consumers to visit more often to hunt for what’s new, and when finding it, to buy it, since it will probably be gone in a day or two.

Since TJX is buying all the time and closer to each season, it has a better idea of what consumers are looking for, which, along with its use of Big Data, also enables it to localize its assortments. One will find different merchandise assortments in upscale and working class neighborhood stores.

Finally, to fill in some of the broken assortments or missing categories, TJX has goods produced for its own private and licensed brands. It is also astute in selecting lines it deems to be more fashion-right several seasons into the future, which it will buy and “pack away,” as it defines the process.

And make no mistake about it: Though the company keeps much of what it does under wraps, this kind of stellar execution, moving hundreds of thousands of units through its system every day to thousands of stores, obviously requires top-notch purchasing, inventory management and distribution technology — in short, preemptive excellence in distribution.

Millennials Love It and TJX Loves Millennials

Not only is TJX demographically democratic, it attracts younger Millennial customers like crazy and has focused on selecting more contemporary brands and styles and on marketing through social media sites such as Facebook, Twitter, Pinterest and Instagram.

Less than 15 percent of the merchandise is from previous seasons, a particularly important feature for younger consumers. The company changed its marketing to emphasize details like this because it realized its old strategy was talking to existing customers, when it really wanted to attract new ones. Price tags say “past season” if it is.

Unlike in the old days, when TJX sourced primarily from agents and jobbers, 85 percent is now purchased directly from manufacturers. Much is identical to what the brands sell in department stores. A very small portion is irregular. These distinctions are more significant than ever for consumers looking for a good buy in a wash of deals. To attract those manufacturers and shoppers who feel off-price stores can be a lot less appealing than department stores, the company has remodeled most of its stores over the past few years and is on a mission to continually elevate the in-store experience.

Structurally, to accommodate the more rapid turnover and constant flow of newness, TJX’s stores are easily adjustable. Since there are no walls formalizing a branded or category segment, they are continually resetting floor areas to accommodate rapidly flowing new merchandise and brands. This also heightens the thrill of the hunt and provides a continually new shopping experience for consumers. The TJX Rewards credit card allows customers to accumulate points for expenditures that can be redeemed for reward dollars to be spent at TJX’s stores, further cementing its relationship with customers.

For all these reasons, the TJX nameplates are go-to destination brands in the minds of consumers.

E-Commerce: The Elephant in the Room

Until recently, TJX had not wanted to — and given its success, may have felt it didn’t have to — recognize the elephant in the room: Its slow progress in e-commerce. It may have believed, understandably, that its focus had to be on managing and scaling its store growth. Because while it has no real direct competition, other than the off-price chain Ross (whose e-commerce progress is even slower), it trailed consumers’ desires to be able to access brands wherever and whenever they wish. Though TJX’s sales have grown virtually every year, the competition for bargain-hunting shoppers is coming from an increasing number of sources. Between outlet stores, pure-play e-commerce sites like and flash-sale sites like Rue La La, The RealReal, One Kings Lane, HauteLook and eBay, you have a consumer constantly bombarded with discount offers. So after acquiring off-price Internet retailer Sierra Trading Post and launching in September 2013, the company finally has a U.S. e-commerce site that complements the “thrill of the hunt” luxury- and designer-deal model that is experienced in the stores, thereby implementing a segmented strategy that provides a distinct and unique role for each of its distribution platforms. Some of the branded deals offered in the stores cannot be replicated online without alienating the brands that liquidate through this channel. However, TJX has come to believe that to win today you need to be on every platform, even if that means with product different from the stores. Will TJX also come to realize something that the well-run omnichannel retailers have discovered: Consumers shopping both channels spend three to four times more than those shopping one? Or will it find that its model, which revolves around the “thrill of the hunt” and the delight to the senses that its physical stores provide, obviate the need for omnichannel retail? Only time will tell. Until then, bargain shoppers will continue to enjoy visiting the stores that are, as one of its old advertising campaigns called them, “never the same place twice.” Indeed, they are still untouched, and in my opinion, untouchable.



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