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<\/p>\nThe off-price retail chain T.J. Maxx (\u201cTJX\u201d) is a great example of a business that has been highly effective at driving alignment between both its operating and business model. TJX, headquartered in Framingham, MA, is an American department store chain (over 1,000 stores nationwide) that specializes in offering high-quality, brand-name and designer fashions at 20%\u201360% less than department and specialty store regular prices on comparable merchandise [1]. The TJX business model is straight forward. However, what is interesting, is how the company has used its operating model of educating and training buyers to cultivate strong and lasting relationships with buyers to drive the company\u2019s long history of out performance in an increasing competitive business eco-system.<\/p>\n
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The business model is a win\/win for both merchandisers and consumers. For merchandisers, TJX is a key partner to offload excess inventory when a vendor has over-produced or as a buyer to sell unused inventory to when retail stores buy too much and return the unsold merchandise or have backed out of an order all together. In addition, unlike department stores, when TJX buys merchandise from vendors it forgoes the ability to return the merchandise to the vendor [2]. As a result of this \u201cno return policy\u201d, vendors also produce excess inventory on purpose, hoping TJX will buy it [3]. Moreover, this policy allows the retailer to procure merchandise at a lower price point than department stores, squeezing vendors on price in exchange for their ability to de-risk the sale.<\/p>\n
For consumers, TJX represents a great value channel, offering a compelling \u201ctreasure hunt\u201d shopping experience and merchandise that resonates with all income brackets. For consumers, TJX offers a wide product and brand assortment of mostly in season items (less than 15% of the merchandise is last season [4]). However, the greatest value proposition for consumers, is the value itself, as consumers can find items such as a Michael Kors clutch that costs $198 at a department store for only $79.99 at TJX.<\/p>\n
So that\u2019s the business model. How has TJX designed its operating model to deliver the aforementioned value?<\/p>\n
TJX University \u2013 Educating World Class Merchandise Buyers<\/u><\/p>\n
TJX has what many members of the retail industry consider to be best in class merchandise buyers. TJX spends a significant amount of time and money educating its buyers through its robust training program \u2013 TJX University. At TJX University, TJX trains buyers on how to select the right products, how to develop advanced negotiation skills, and how to communicate with vendors [5]. TJX buyers focus much more narrowly than their department store counterparts; rather than be responsible for accessories, a TJX buyer might specialize in just handbags [3]. This specialization allows buyers to become experts in their category and cultivates the ability to develop strong and long lasting relationships with suppliers \u2013 which is key as TJX is dependent on vendors for inventory.<\/p>\n
Further, TJX buyers are in the market weekly, unlike their peers whom purchase inventory seasonally. This weekly presence allows TJX buyers to constantly source new inventory, which in turn is what allows TJX to offer such a wide assortment of products and brands to consumers. The expertise attained by buyers fosters the ability to source merchandise for the lowest price in the market.<\/p>\n
Scale & Door to Floor![\"\"](\"https:\/\/marketrealist.imgix.net\/uploads\/2015\/04\/Inventory-Management.png?w=660&fit=max&auto=format\")
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With over 1,000 stores, TJX has the scale to execute a \u201cbuy everything\u201d purchasing model that allows them to buy all of the excess merchandise that a vendor can offer. A one stop solution that gives the company a significant advantage over its competitors. In addition to scale, TJX recognizes that it is in a volume business \u2013 the key to profitability is selling a ton of goods and selling them fast. This belief is illustrated very clearly in its operating model, as the company turns over inventory every 63 days (vs 85 days for its competitors) and has a cash conversion cycle of 26 days (vs. industry average of 86 days) [6] [7].<\/p>\n
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Ultimately, TJX has done a remarkable job of creating an operating model built on strong relationships with suppliers, which is fostered through the implementation of a flexible and well informed army of buyers, which allows the company to procure a variety of products and brands at extremely low costs to both TJX and its loyal customers. Lastly, not only has this model been successful for decades, it has proven to be difficult to emulate, as illustrated by the fate of several ecommerce players, such as fab.com and gilt groupe. Further, TJX\u2019s size and expertise has allowed it to continue to be best in class, as many stores, from Saks Fifth Avenue to Nordstrom go to market with competing off-price retail concepts.<\/p>\n
[1] http:\/\/tjmaxx.tjx.com\/store\/jump\/topic\/our-company\/2400014<\/p>\n
[2] http:\/\/fashionista.com\/2010\/08\/inside-the-world-of-off-price-retail-we-go-behind-the-scenes-at-marshalls-and-t-j-maxx-hq<\/p>\n
[3] http:\/\/fortune.com\/2014\/07\/24\/t-j-maxx-the-best-retail-store\/<\/p>\n
[4] http:\/\/usatoday30.usatoday.com\/money\/industries\/retail\/story\/2011-10-25\/tjx-ceo-carol-meyrowitz\/50916340\/1<\/p>\n
[5] https:\/\/hbr.org\/2014\/05\/the-ceo-of-tjx-on-how-to-train-first-class-buyers\/ar\/1<\/p>\n
[6] http:\/\/financials.morningstar.com\/ratios\/r.html?t=TJX<\/p>\n
[7] https:\/\/www.sageworks.com\/datareleases.aspx?article=299&title=Retailers%E2%80%99-Slower-Moving-Inventory-Is-Tying-Up-Cash-Longer&date=April-21-2015<\/p>\n
[8]\u00a0http:\/\/marketrealist.com\/2015\/04\/department-stores-threatened-tjxs-off-price-model<\/p>\n","protected":false},"excerpt":{"rendered":"
The off-price retail chain T.J. Maxx (\u201cTJX\u201d) is a great example of a business that has been highly effective at driving alignment between both its operating and business model. TJX, headquartered in Framingham, MA, is an American department store chain […]<\/p>\n","protected":false},"author":789,"featured_media":132,"comment_status":"open","ping_status":"closed","template":"","categories":[18,31,16,17],"class_list":["post-131","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-consumer","category-discount","category-retail","category-supply-chain"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\n