- [Narrator] A Pima cotton blend T-shirt
on Vince's site costs $85,
but the same shirt sells for $29.99 at T.J. Maxx.
So why does it cost less?
Over 10 years, the off-price retailer
has opened 263 more stores.
In 2022, TJX, which owns T.J. Maxx,
Marshalls and HomeGoods,
brought in almost $50 billion in sales revenue,
more than Nordstrom's and Macy's combined.
And the secret to its success,
the company isn't shifting most of its business online,
or using big data to figure out what shoppers want.
Instead, it's sticking to a decades old playbook.
♪ You get the max for the a minimum minimum price ♪
♪ And it's never ever the same ♪
- [Narrator] This is the economics of T.J. Maxx.
There are really two components to T.J. Maxx's strategy,
the bargain, and the hunt.
One way T.J. Maxx gets discounted goods
is by buying excess merchandise
and canceled orders from other brands and retailers.
Essentially, it takes advantage of surplus
and waste in the retail system.
This allows the company to sell its merchandise
generally around 20 to 60% below regular retail prices.
But there's a catch.
- Just the fact that the price is low is not enough.
What you need is also reference price
because people don't know how much things cost.
- [Narrator] That's where Alex says
something known as the anchoring effect comes in.
At T.J. Maxx, most items have two prices,
the T.J. Maxx Price and a comparison price.
- People anchor in the regular price
and then they see
exactly how much of a deal they're getting.
And this way they really understand what the value is
that T.J. Maxx provides to them.
- [Narrator] Take these rag & bone shorts.
A T.J. Maxx in Manhattan sold them for about $40
with a comparison price of $50, that's a 20% discount.
But the original price tag happened to be on these shorts
and it lists the price as $195.
That would be around an 80% discount.
And that comparison price is really just an estimate.
On T.J. Maxx's website,
there's a message next to the comparison price that says
"These prices are references to regular retail prices.
Where identical items are not available,
we compare to products of a similar type,
quality and style."
These price tags aren't the only way
T.J. Maxx helps customers feel
like they're getting a bargain.
- You got the whole positioning of T.J. Maxx is
that we give you brand names for less.
And the reason why it's important is
because very often when you see low price
you think it's low price
because the quality of the product is low.
- [Narrator] But if the customer knows and trusts the brand
then they won't assume the price is low
because it's a bad product.
Instead, Alex says they'll attribute it
to T.J. Maxx's ability to get discounted goods.
And because people often expect name brand items
to be more expensive, the brand itself acts as an anchor.
- Emphasizing the fact that
as a customer you're getting a deal, makes people feel good.
It's not only I'm getting a low price
but I'm actually getting a deal,
which makes people feel good about themselves,
that they're smart shoppers.
- [Narrator] T.J. Maxx says it gets its goods
from about 21,000 vendors
and the inventory in its stores is constantly turning.
- So as a result, people tend to go more often
to this type of stores
and also spend a little bit more time in the store
in search of something.
- [Narrator] Across its companies
TJX employs more than 1200 buyers
that each control millions of dollars
and has authority to cut deals on the spot.
- As a buyer for T.J. Maxx, I'm always on the hunt.
- Let's say you have a bathing suit brand
and it's right before Memorial Day weekend
and they're stuck with extra bathing suits,
so that's when T.J. Maxx buyers show up at the showroom.
You know, they can cut a deal right on the spot
and they can get it to their stores within a week.
- [Narrator] Department stores, on the other hand,
can take weeks to review
and approve orders from their buyers.
So T.J. Maxx buys the merchandise quickly
and gets it into the store just as fast.
- They have a saying internally "Door to floor in 24,"
meaning that any merchandise that shows up
at a store in the morning
has to be on the sales floor by the end of that day.
- [Narrator] To ensure speed,
merchandise often arrives at stores
already on racks that employees wheel off trucks
and move straight onto the sales floor.
And once it's there,
all the merchandise is laid out differently
than other retailers too.
Helping to create that treasure hunt experience.
While most department stores group items by brand
T.J. Maxx organizes its inventory by type.
This means that different brands
can end up next to each other on the same racks.
And since T.J. Maxx doesn't have walls dividing sections
of the stores or brands,
it can easily reconfigure the layout
based on changing inventory.
Seeing all the products and changing layout
can encourage impulse buying.
Shoppers know that if they see something they like
they need to buy it now.
If they wait, it may be sold out
or hard to find when they come back.
- Once you take it home, things are changing dramatically
because now you are not buying something
you are giving up something.
Lots of research has shown
that giving up something is more difficult than acquiring.
You are willing to pay more
not to give up something than to buy something.
- [Narrator] Retailers struggled through the rise
of E-commerce in the pandemic,
and while TJX's off-price retailers still took a hit,
they have bounced back.
In 2021, TJX had the highest sales in the company's history.
A record it then beat the following year.
And it's not because T.J. Maxx
and the other off-price retailers adapted,
but rather because they never drifted away
from their core strategy.
- T.J. Maxx tends to perform pretty well
in an economic downturn
because that's when customers tend to be bargain conscious
and, you know, they offer really good value for the money.
(quirky music)