off price retailers

In comparison to other stores, off-price retailers are doing exceptionally well. Off-price stores such as Ross and TJX are seeing business success while other large retailers such as Macy’s struggle. Stingy buyers, rapidly evolving habits, and expectations have all benefited off-price stores such as TJX. As a case study for this research article, I will look at the off-price store TJX. First, I’ll include a background on the firm, its business model, and its current market position. In addition, I’ll look at the strategic elements used and the resulting long-term competitive edge. Finally, I will address the amount of competition that TJX faces in the industry.

Background and Profile

Off-price retailers as the name suggests are simply discount retailers. That is, these companies buy products such soft-goods and assorted brands at a bargain from manufacturers, then sell them to the final consumer at a lower price than the prevailing one. So how are they able to get more favorable pricing than other retailers? They buy directly from manufacturers, usually in bulk. They buy end-of-season close out items, good returned by other retailers, cancelled orders, overruns, irregulars as well as seconds and closeouts. Subscription retail on the other hand, involves regular payment of subscription fees usually monthly or annually. Usually, subscribers pay a consideration in order to access services. In retail, it is used by consumers to buy short-term goods that require regular replenishment.

TJX was founded by Bernard Cammarata in 1956 as the Zayre discount department store and deals in American apparel and home goods. In 2016, TJX reported revenue of 33. 184 billion dollars and a profit of 2.298 billion dollars. According to its website, the company is also the largest discount retailer in the United States. A report on pubic traded companies at the Dow Jones placed the company’s share growth at over 15% for the year ended 2016growth. Its target customer audience consists of individuals looking for a bargain on branded products.

Strategic elements

They are six retail elements available for the company. These elements are brand/product, pricing, location, market, facilities, and operations. Pricing is one of the strategic elements that are used by TJX. They buy from the source in large amounts thus enjoy economies of scale due to discounts. These goods are then sold to consumers at a discount or a price lower than the prevailing market price hence the ‘off-price’ reference. Their pricing is the main source of competitive advantage for TJX allowing it to thrive while other large retailers are faced with financial distress. TJX’s product or brand portfolio is also a strategic element. The retailer deals with various brands that they do not own hence the brands are an important part of TJX’s strategic elements. Off-price retail is still a growing sector and the diversity of products is one of the ways the players in the industry can attract more customers into their outlets. With increasing competition from Ross and Macy’s as well as increased demand, TJX has to cast a wider net as far as product portfolio is concerned to avoid switching.

Operations and logistics are also very important in the strategy of TJX as the company invests in new and faster ways of restocking. In addition, the retail has also attempted to localize the selection of products so as to take advantage of regional taste and preferences as well climate. TJX plans to open upwards of five thousands stores to increase its geographical presence. Promotion is another tool available to TJX in a bid to compete more strategically. The retail industry depends on promotion and advertisements to create market awareness and promote their range of products. I feel that TJX is not doing enough as far as promoting their stores are concerned, this is in contrast with new entrants into the segment. Intensive promotion campaigns need to be rolled to increase the company’s visibility, consumer awareness of the deals at their outlets and to differentiate themselves from their competitors.

The company might be disadvantaged by the fact that they rely on sales from other brands. The off-price segment is fast shrinking with newer and bigger players in retail adopting this same strategy. The company should invest in its own flagship brands that it can sell at its stores. With its network of suppliers, it should be that hard for the company to put out competitive brands to compete with those its already selling in attempt to increase customer loyalty.

Sustainable competitive advantage

TJX has already established itself as a company leader. It is however, going to be very difficult to maintain this position owing to greater competition arising from more departmental stores adopting off-pricing. With prices of other competitors getting too close, customers might not be able to see the value of off-price retailers. The company needs to explore other alternatives to sustain its position as market leader.

Competition

As previously stated, the competition for TJX is increasingly rapidly. It faces direct competition from companies such as Ross, Burlington, and Nordstrom Rack are other companies in the off-price sector that are looking to take a bite of the company’s market share. Indirect sources of competition include online retailers such as Amazon as the e-tailor focuses on home products as well as apparel. Moreover, traditional brick and mortar retailers such as Macy’s are also adopting off-price strategy in some of their outlets. This means that the off-price sector is shrinking and the company needs to diversify its operations.

References

Forbes Off Price Market:

https://www.forbes.com/sites/richardkestenbaum/2017/11/15/the-off-price-business-is-more-troubled-than-it-looks/#3b4f9c5e1554

Big Box retailers are betting on Stores:

https://www.nytimes.com/2017/11/14/business/dealbook/discount-retailers-add-stores.html?WT.mc_id=SmartBriefs-Newsletter&WT.mc_ev=click&ad-keywords=smartbriefsnl

TJX Earnings Report:

https://www.chainstoreage.com/finance-0/hurricanes-take-toll-high-flying-tjx/?tp=i-H55-Q5S-4uI-7Sb7z-1u-c2E-1c-1JoP-7Sj7G-PKLD6&utm_campaign=Daily&utm_source=Experian&utm_medium=email&cid=18866&mid=110250259

REAL REAL

http://www.therobinreport.com/the-realreal-high-end-disruptor-or-gateway-drug-to-luxury/?utm_source=The+Robin+Report&utm_campaign=7e61b9abf6-The+RealReal_2017_11_13&utm_medium=email&utm_term=0_e90268c709-7e61b9abf6-229102005