TJX e-commerce sales in North America were basically zero
Ernie Herrman does a lot of things right...but maybe not everything.
In a story in the Wall Street Journal on Tuesday, Herrman, the CEO of off-price giant TJX Cos. TJX , was quoted as saying to analysts in May, “Strategically, nothing will change. We will not look to e-commerce as our major leverage point to get us through Covid and out the other side.”
Let that sink in for a minute.
TJX, which owns TJ Maxx, Marshalls, HomeGoods and a few other nameplates and is unquestionably the leader in the off-price channel, is telling the people who own and buy its stock that it doesn’t need a robust online business to continue to be successful.
This, from the head of a $40-billion-or-so-retail colossus that saw every single one of its more than 4,400 physical stores closed and completely shut down for anywhere from 90 to 120 days due to the coronavirus pandemic that has devastated much of the American economy.
TJX also shuttered its anemic e-commerce business during the same period, meaning its total sales in North America were basically zero. That’s a zero, followed by a lot of other zeroes. Even most other retailers who were forced to close their physical stores during the pandemic, from Macy’s M to Michael’s and from Belk to Bed Bath & Beyond BBBY , still kept their online operations open for business, at least bringing in some cash.
Since reopening, the TJX stores have generally been booming, chock full of customers desperate to get out of their homes and into a place where they could search for bargains (or at least perceived bargains). Anecdotal reports from around the country are confirming its stores are among the first places shoppers are returning to.
Apparently they are also checking out whatever online sales TJX offers, but with far less satisfaction. In fact the WSJ article confirmed the company is slowing down e-com orders and on a recent visit to the TJ Maxx site, a viewer was greeting with the message that no more orders were being accepted that day: “We’re limiting orders each day as we get back up and running. Thank you for your patience.”
It’s all part of TJX’s master plan, according to Herrman’s statement to the Journal. “We plan to continue growing e-commerce strategically.”
Growing it won’t take much. The Journal article says its current online business represents just 2 percent of its total sales. Contrast that with the overall general merchandise sector where e-com was thought to be around 15 percent give or take a few points depending on the category before the pandemic and projected to as much as double before all the COVID dust settles.
Which raises the obvious question: Can any retailer afford to ignore and walk away from a quarter of its potential market? Not that TJX is alone. Competitor Ross Stores ROST doesn’t even have any online sales at all and another off-pricer, Burlington, said it was shutting its e-com business completely right before the pandemic hit.
All of these retailers argue that their “treasure hunt” style of merchandising doesn’t lend itself to online. Shoppers love searching through their physical stores to find just the right thing to buy. The off-price experience is the original shopping experience, they say.
Here’s why they are all wrong:
• Yes, that treasure hunt process is critical for off-price and many shoppers will tell you they are going to one of these stores just to see what they have that day. But isn’t searching online and going down some virtual rabbit hole pretty much the same process? The similarities are inescapable.
• The argument that they can’t coordinate in-store and online inventories just seems a giant fallacy. On a much smaller scale, Rent the Runway is doing just that but even big stores are now using their physical stores as distribution points for online purchases. It’s hard to believe that $40-billion companies can’t figure out the logistics and software to make this work.
• They will also say they don’t want to jeopardize their supply chain which provides them with well-known brand merchandise that suppliers wouldn’t want to see showing up online. Yes, there’s still some opportunity purchasing that is part of the off-price buying mix but increasingly the goods for sale in these stores are programmed, reorderable merchandise made specifically for them. Where there is a brand, it is more likely than not a secondary label that has long since disappeared from mainstream retailers and has been secured by the vendor for the specific purpose of selling through off-price, still insultingly called “third tier” within the trade. The only one who might be embarrassed would be the namesake designer — assuming they were still alive – and that would fade quickly once they cashed their royalty checks.
• Off-price executives, including Herrman, say the profit structure for off-price doesn’t lend itself to online since they work on such tight margins. Have you looked at TJX earnings recently? The company is among the most profitable retailers in the business and has consistently been so for quite some time. Surely, they can make e-commerce work for them financially just as they have found the right formula in their stores.
Ernie Herrman is one of the most respected guys in retailing and frankly, TJX is among the most admired companies in America. They have built a brilliant business and they continue to execute at best-in-class levels. Wall Street, vendors, landlords and customers: they all agree this is a stand-up company.
But what will they say when e-commerce becomes a quarter, a third or even more of the overall retail industry? Will they say the same thing they did to the railroads when they said they were in the ground transportation business, not the transportation business? Will they say the same thing to the video stores who said they were in the DVD rental business not the entertainment-on-demand business? Will they say the same thing to the electronics companies who said they were in the mainframe business not the computer business?
Will they say the same thing to TJX and the rest of the off pricers when they say they are in the physical retail business not the retail business?
And how will Ernie Herrman and his colleagues answer?
Source: https://www.forbes.com/sites/warrenshoulberg/2020/06/24/tjx-says-it-doesnt-need-more-e-commerce-why-its-wrong/#51e465574c74
