TJ Maxx’s Treasure Hunt Works Millennial Magic

Ray Hartjen
Ray Hartjen
Director, Marketing

As retail prepares for Holiday 2016, the off-price category continues to showcase itself as one of the industry’s most successful segments, and with its strategies, abilities to execute, and a special connection with millennials, T.J. Maxx looks to reaffirm its leadership position.

In a challenging retail environment, the off-price segment has repeatedly of late flexed its muscles, garnering the attention of not only those shoppers wondering what all the fuss is about, but also that of old-guard retailers wanting a piece of the action. Earlier this summer, NPD Group reported that off-price buyers represent two-thirds of all consumers, and together they account for 75 percent of apparel purchases across all retail channels.

And, while consumers 45 and older represent over half of all off-price apparel purchasers, it’s older millennials – the darling demographic of so many retailers – who capture the imagination, as the 25-34-year old segment already accounts for 16 percent of off-price apparel purchases, and its share is growing rapidly.

When it comes to off-price retail and the millennial market, perhaps no one does it as well as T.J. Compass on treasure mapMaxx (part of the TJX Companies Inc., NYSE:  TJX). T.J. Maxx, and its sister subsidiary Marshalls, prosper with the millennial segment by delivering shopping experiences that are much more treasure hunt than mundane shopping journey or chore. It’s that shopping experience that gets my colleague Haley – herself a young millennial – to regularly visit T.J. Maxx to discover all the items she didn’t know she needed and wanted. Oh, and get this – her discovery missions take up to two hours and cross multiple departments.

Does it work for T.J. Maxx and TJX? Well, you tell me. Despite warning last month that its third-quarter profit forecast falls short of previous estimates, TJX is profitable, and that’s something not every retailer can boast about. Not only is TJX profitable, it’s among the most profitable retailers, regardless of segment, returning a second quarter profit (July 30) of $562.2 million, a robust $0.84 earnings per share, and projecting to deliver $3.39-$3.43 per share for the fiscal year ending January 31, 2017.

Additionally, second quarter net sales not only rose 7 percent, but also ended with comparable-store sales up four percent, the 30th consecutive quarter of increases. Don’t think the market hasn’t taken notice either, as TJX’s market capitalization now approaches $50 billion.

TJX 5-year stock price (Yahoo! Finance)

TJX 5-year stock price (Yahoo! Finance)

So, why T.J. Maxx? First, while the treasure hunt appeals to a differentiated shopping experience, the core defining quality of treasure is a perception of value, and that is derived directly from bargain pricing. But, it’s more than off-prices. Our friend Robin Lewis at The Robin Report notes that less than 15 percent of T.J. Maxx’s apparel inventory is from previous seasons, allowing stores to attract millennials – and all shopper demographics – with relevant, timely and contemporary styles and fashions.

So, what are competitors like department stores to do? Well, for starters, they should consider Shoes! fishing where the fish are and join the fray. But, joining the fray doesn’t necessarily mean opening off-price outlets and the like (see relevant, timely and contemporary styles, above). Rather, it will pay to remember the underlying value of the treasure hunt, and interesting new strategies like Bloomingdale’s deployment of Snapchat filters to incorporate gamification and their own version of the treasure hunt show tremendous promise.

As Holiday 2016 kicks off in earnest in a few short weeks, the off-price category will continue to showcase itself as one of retail’s most successful segments, and with its time-tested strategies, abilities to execute across the enterprise and its special connection with the growing millennial segment, T.J. Maxx looks to reaffirm its position at the top of the category.

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