TJX Sees Future in Cheapskates

Mar 01, 2010
Tom Ryan

By Tom Ryan

Not seeing the bargain hunters leaving anytime
soon, TJX Cos. believes it can nearly double its size primarily by expanding
its core T.J. Maxx and Marshalls concepts. The prediction came last week
after the off-pricer reported fourth-quarter earnings jumped 57.6 percent
to $395 million. Revenues increased 10 percent to $5.9 billion with comparable
stores up 12 percent.

On a conference call, president and CEO Carol
Meyrowitz said gains were driven by new customers across income levels
flocking to its stores amid the downturn. She expects many of them to keep
shopping after the economy perks up.

“We believe that there has been a paradigm
shift among customers to value,” said Ms. Meyrowitz. “Regardless of whether
the economy is weak or strong, value isn’t going out of style. Also, if
some of our newly acquired customers go back to shopping at their favorite
high-end department store more often than in the past, it does not mean
they’ll stop shopping us. Our value proposition meets the needs of the
consumer in an unconventional way.”

She also said the chain’s “no walls” business
model enables it to shift rapidly to meet consumer needs.

“We can entirely eliminate one category and
open a new category within weeks or months,” said Ms. Meyrowitz. She also
credited her merchandising team with taking on over 2,000 new vendors
in 2009, bringing its supplier base up over 12,000.

are actually more of a sourcing machine than practically any other retailer,
and I am not sure that this is understood as well as it should be,” said Ms.
Meyrowitz. “I believe the
quality of our merchandize mix is more exciting than ever and getting even
better. My expectations for 2010 is to wow our customers even more.”

Also supporting the company’s sales growth
is an extensive store remodel
program launched in 2009 at its T.J. Maxx and Marshalls chains and bigger
investments in marketing to get its value message out. Company research
shows that that 75 percent of U.S. shoppers have not shopped its stores
in the past year.

“That means there are tens of millions of
untapped shoppers in just the U.S. alone we can attract to our stores with
great value,” said Ms. Meyrowitz.

TJX plans to expand its square footage by
five percent in 2010 and by another six percent in 2011, up from three
percent in 2009.

According to The Wall Street Journal,
one doubt came from the investment firm Jefferies, which believes the trend
of a “trade-down consumer” throughout the recession appears to be reversing
and the pendulum shifting away from TJX as the quantity of excess supply

Discussion Questions:
Do you see value-oriented consumption persisting after the economic
recovery, supporting TJX’s expansion? What area (i.e., merchandising,
marketing, in-store experience) does TJX most need to work on to retain
the new customers it found during the downturn?

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13 Comments on "TJX Sees Future in Cheapskates"

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Dick Seesel
11 years 2 months ago

TJX is the best operator in the off-price retail space. It has an opportunity to pick up market share from weaker stores in the same segment. More importantly, there is a big difference between the merchandise assortments available at competitors like Burlington compared to the product at TJ Maxx in particular. The “new normal” of consumer behavior has tapped into a growing segment of “aspirational cheapskates,” and I agree with TJX that this new shopping habit isn’t going to die off anytime soon.

George Anderson
George Anderson
11 years 2 months ago

Personally, it’s always seemed too much like work finding what I want in chaos on the racks and shelves in Marshalls. Until they clean up the store, I’m sure that there are others like me who will choose to shop elsewhere.

Max Goldberg
11 years 2 months ago

The Great Recession rocked most American consumers. Consumers turned to T.J. Maxx and Marshalls for bargains. As the economy recovers TJX Cos. will retain some of their new-found consumers, while others will seek more traditional retailers.

TJX can retain some of their shoppers through marketing and a better in-store experience. By letting consumers know what is in the stores and how much they can save, they can drive customer traffic. A neater look inside the store which makes it easier for consumers to find what they are looking for and does a better job of presenting the merchandise will help encourage consumers increase their basket size and return again.

Carol Spieckerman
11 years 2 months ago

It’s tempting to frame TJX’s success as being driven by frugal shoppers. That’s part of the story; however, TJX’s expansion will increase its opportunistic appetite and capacity for retailer and supplier overruns even more. Perfect timing as brand exclusives become the rule and not the exception for retailers and retail vendors. This leftover inventory can’t be sold to other full-price retailers; however, it now can have a higher-capacity home at TJX.

I already know of several companies that have ramped up their re-tagging and re-ticketing operations in the U.S. so that inventory can be repurposed for sale at off-price retailers. TJX has always filled a vital role in the food chain; now they will be able to gorge on the tastiest bits from the bottom and the top while relieving over-stocked suppliers of their overindulgence. Nice formula.

Roger Saunders
11 years 2 months ago

The “Treasure Seeker” has discovered TJX in greater numbers over the past 5 years. When asked “Which store do you shop most often for clothing” in the February, 2010 Consumer Intentions & Actions Survey of BIGresearch, the TJX shopper shows up with an annual household income of $79,825, which indexes her at 142 vs. the General Population. She is better educated, with 15.8 years of school, vs. 14.5 for her sisters, she is 75% more likely to be work in a professional/managerial role.

Top these demographics off with the fact that she indexes against the General Population at 124 in terms of being a home owner. And, she’s a stated value hunter, yet admits that she likes the “newest trends and fashion”.

This is a shopper with a discerning eye. As long as TJX continues to offer her a positive in-store experience, they have a “Treasure Seeker” who is going to come back over and over again.

Bill Emerson
Bill Emerson
11 years 2 months ago

TJX is the dominant player in the off-price channel. They carry the biggest “pencil” into the supplier community, with no deal too big for this incredibly well-capitalized company. They also, as an operating principle, work diligently towards a long-term “win-win” relationship with their suppliers. This enables them to provide their customers with the best assortments and the best value available.

The big question is where value fits in the current (and future) shopper’s list of priorities and the relative size of the “value” shopper. Given the severity of the financial collapse of 2008 and what appears to be chronic high unemployment for years to come, I agree completely with Carol that value will continue to be a primary criteria for shopping for a long time.

Cathy Hotka
11 years 2 months ago

Savvy shoppers can always find an outstanding deal at TJX’s several brands. The challenge will be to retain their new, frugal shopper base by improving the generally challenging store experience. That will mean having more personnel in the store to keep lines at checkout manageable, and to tidy up the merchandise. If TJX can do this, department stores should be on notice!

Doron Levy
Doron Levy
11 years 2 months ago

Many ‘pundits’ say that we will go back to our old ways once the economy recovers. The assumption is that we will return to previous levels of consumption once credit and housing prices recover. I don’t agree. I think that this episode has created a new breed of consumer. One that embraces value and is very price sensitive. This could present an opportunity for TJX but there is some tweaking and optimizing to do.

The new discount shopper won’t suffer through stores that look like discount stores. The discount channel has improved substantially over the last 5 years and TJX will need to get itself to that level in terms of store image and service.

Mark Johnson
Mark Johnson
11 years 2 months ago

TJX needs to use, mine, and leverage more of their behavioral data.

Chuck Palmer
11 years 2 months ago

Let’s look at the emotional side of this. Traditionally, TJX’s customers have been driven by the experience of the hunt.

Under the new normal, their new customers (the foundation upon which they are building their growth plans) have discovered a new experience–one that has less organization, editing and presentation than they are used to. They tolerate this in exchange for a bargain.

Will they stick around and tell their friends and be proud of where they purchased? I think TJX has some work to do to really appeal over time to their new guests.

Their selection and marketing are on the right track; they know the merchandise and how to tell their story. They need to work on the way the merchandise is presented and organized. The in-store experience needs to be re-engineered to keep delighting all of their customers.

Don Delzell
Don Delzell
11 years 2 months ago
This may be more a function of the massive consolidation and abandonment of the department store model than a reaction to the recession or changes in consumer behavior. With the low-moderate department store arena left to Kohl’s and Penney, and Macy’s as virtually the only major player in the moderate to better department store niche, an enormous amount of room exists — particularly for apparel. The TJX and Marshalls model has been in evolution for some time, and the perception that they operate as close-out liquidators is no longer remotely valid. From a marketing perspective this positioning continues to reap dividends, but from an operating model it is hardly the case. The bottom line here is that TJX and Marshalls have a very unique set of circumstances. The market positioning vis-a-vis the consumer provides for a tolerance of below-average shopping conditions, poor assortment depth, inadequate service, and undependable size coverage. Moreover, the shift to owned private label used-to-be brands allows for difficult value comparisons. While the words used above seem to indicate a negative affect,… Read more »
angiretlwire dixon
angiretlwire dixon
11 years 2 months ago

For those of you who talk about the need for TJX to improve the “shopping experience,” for many customers, the joy of the Treasure Hunt is the experience.

In addition to outperforming almost all retailers during the recession, TJX was also outperforming almost all traditional and off-price stores for at least 5 years before the recession (in terms of increases in net income & comp store sales growth).

Antonia Branston
Antonia Branston
11 years 2 months ago

When you have the money to afford mainstream but shop at TJ Maxx in the hope of finding a fantastic designer bargain, that’s ‘Treasure Hunting’. When you shop at TJ Maxx because you need some clothes for work and can’t afford anywhere else, navigating that store environment is simply drudgery.

The downturn has forced mainstream retail to bring their price points closer to TJ Maxx levels at the same time as TJ Maxx’s expansion has made bulk brands more common on their racks than real designer bargains. In order to continue prospering, TJ Maxx either needs to improve stock depth and store environment, or it needs to make sure that there is more in the way of designer treasure on those racks to make the searching worthwhile.


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