TJ Maxx and other discount retailers like Ross and Burlington wait for the perfect moment to buy stock for their stores. When there are extra clothes in the market, these retailers buy them up and sell them to their shoppers at a discount. Bargain hunters love buying items from these stores because they’re a great place to find quality items at a more affordable price. However, some brands are moving away from TJ Maxx and other bargain stores because they’re no longer having problems with their inventory.
Because people are buying a lot right now, clothing has been selling at a much faster pace than over the last few years. This has led to great success for brands like Steve Madden, Under Armor, and Ralph Lauren. While shoppers at TJ Maxx often look for these items on the shelves, they’re going to be harder to find now that there is a clothing shortage due to the COVID-19 pandemic that caused supply chain issues across the entire globe.
In recent weeks, noteworthy brands, including Levi’s jeans, have been making moves to distance themselves from “off-price” stores like TJ Maxx. Because they don’t make much money when their inventory goes onto the shelves at these stores, they’re the least profitable way for brands to make money. In reality, they’re just a last resort place for the companies to offload any extra supply they might have.
“Off-price is a last resort,” said Susan Anderson, a retail analyst at B. Riley Securities.
Instead of working with TJ Maxx and similar retailers, these brands would prefer to sell their items at premium outlets or online directly to the consumer. They’re able to accumulate a lot more money from buyers this way rather than giving their extra supply to TJ Maxx and Ross at a discount that then gets passed on to the customers of those stores.
The pandemic has thrown off the balance between supply and demand. Because people are eager to get their hands on products, but it is very difficult for companies to make large amounts of items – there are more people looking to buy than there are items available to sell. This means that companies are not stuck with a lot of products at the end of the quarter that they need to offload to retailers like TJ Maxx. By distancing themselves from these “off-price” stores, brands are able to make more money and get their goods to consumers who are willing to pay a premium for them.
“We have reduced the amount that we’re selling to the third-party off-price channel,” Under Armor chief financial officer David Bergman said on an earnings call this month. “Those partners would like more product.”
Bergman said that while Under Armor might still sell some of their extra stock to “off-price” retailers, these companies are “going to pay a little more to us” because Under Armor simply does not have as much stock available in their warehouses. They’re selling their clothing to consumers and are not stuck with leftovers.
“Our first priority is always feeding full-price channels,” Steve Madden CEO Edward Rosenfeld said on an earnings call this month.
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