The Off-Price Retail Boom: Lessons For All Retailers

The thrill of the in-store hunt is still going strong within the retail industry, as off-price retailers such as T.J. Maxx, Marshalls and Burlington Coat Factory continue to build momentum and outperform traditional department stores. In fact, according to a 2016 report from Moody’s Investors Service, off-price retailers are “anticipated to experience apparel revenue growth of 6% to 8%, outperforming the broader apparel segment by a collective 4% in the next five years.”

TJX Companies, Ross Stores and Burlington continue to outpace overall apparel, which are growing at a much slower pace,” said Christina Boni, VP, Senior Analyst for Moody’s in a statement. “In contrast, the department store industry is losing share to off-price and other areas of apparel spending, as online competition increases and mall traffic continues to decelerate.”

So besides the excitement of finding an unexpected bargain, what draws shoppers to off-price stores? Experts point to a variety of factors:

  • Consumers have become more value- and experience-oriented;
  • Off-price offers a unique pricing structure that reveals the full price, the discounted price, and the amount of savings on tags; and
  • Off-price stores are a one-stop-shop offering of apparel, home goods, beauty products and more.

Off-price retail success relies heavily on customers shopping in stores to hunt for treasures within the constantly-changing influx of inventory. Yet, industry experts agree that omnichannel must be top-of-mind and off-price retailers should start capitalizing on its potential.

While many off-price retailers are looking to keep a majority of their focus on physical stores, there is still a place for an online channel that complements the physical store experience.

“I don’t think anyone can avoid the omnichannel phenomenon,” said Paula Rosenblum, Co-founder and Managing Partner at RSR Research. “[Off-price retailers] may not put the entire assortment online and in stores, but a good portion of it must be synchronized. Omnichannel isn’t a ‘nice to have’ anymore. It’s table stakes. And treasure hunts are well and good, but they have to be synchronized.”

Creating An Omnichannel Strategy That Complements Physical Stores

T.J. Maxx reportedly isn’t terribly concerned with e-Commerce because of its reliance on the in-store treasure hunt experience; and the fact is T.J. Maxx e-Commerce sales “hover at just 1% of the business’ total sales,” according to Bloomberg News.

But even though the retailer doesn’t rely on e-Commerce sales, the brand still maintains an online presence. The retailer re-launched its e-Commerce web site following a hiatus, which now plays a complementary role to its physical stores.

“While [e-Commerce] is a small part of our business, we see it as highly complementary to our physical stores,” said Ernie Herrman,…