The T.J. Maxx Effect

The stone which the builders refused is become the head stone of the corner.

— Psalm 118:22 (KJV)

To everything, there is a season. To merchandise, there is a time to be full-price, a time to go on clearance and a time to go into the penny stock bin.

In retail, an item can no longer be sold after it’s been out of season for a certain amount of time. Essentially, it’s expired. Sears refers to this as being “zeroed out” because the item rings up as $0.00 at the register. Macy’s calls the items “penny stock” because each one rings up as $0.01. (For the purpose of this article, I’ll just call the merchandise “expired”.) Expired merchandise has its own purgatorial bin in each department’s stockroom. I’d figured it was sent back to the manufacturer from there, but I learned from one of my Macy’s co-workers that the bins are where expired merchandise waits to be thrown into a landfill, recycled, donated or sold to off-price retailers like T.J. Maxx, Daffy’s and Ross.

Here’s the problem with that last option.

As I mentioned in an earlier post, consumers aren’t as willing to pay middle-market prices as they used to be. They’ve discovered that they can save more money simply by waiting a few months for designer-label merchandise to hit the off-price retailers. Grab-and-go shoppers like me appreciate not having to search through crowded sales floors to find the best discounts. For leisurely shoppers, there’s still enough merchandise for browsing. And since these stores frequently change their stock, bargain hunting’s serendipitous nature is kept intact. Off-price retailers also have lower overhead costs because they don’t have as much stock as department stores and they require fewer employees. Everyone wins except for the stores that supply off-price retailers with their merchandise; specifically, Macy’s. It was once one of off-price retail’s largest suppliers. TJX, which owns T.J. Maxx, Marshall’s and T.K. Maxx in Europe, has profited so much from Macy’s rejects that it’s now one of its biggest threats.

Macy’s, God bless it, decided to counter this by creating its own off-price chain called Macy’s Backstage. As its 28 stores (as of this publication) would not be able to handle all of the expired merchandise, I don’t know whether or not it still sells some of it to other off-price retailers. There’s always the donation/recycling route, but because I’m cynical, I have a feeling that the landfill is penny stock’s main destination.

I hope the Backstage thing works out for Macy’s, but I don’t think they can afford the risk. Off-price doesn’t guarantee success. For every T.J. Maxx, there’s a Stein Mart. But there’s also a Filene’s Basement, which was beloved enough that it outlasted its parent store and still exists as an Internet retailer. At this point, anything can happen. The mighty can fall; they can also adapt.

Image Credit: Mtaylor848/Wikimedia Commons

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