{"id":3286,"date":"2015-12-08T18:11:32","date_gmt":"2015-12-08T23:11:32","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/the-tjx-companies-a-tried-and-true-model-continues-to-drive-results\/"},"modified":"2015-12-08T18:11:32","modified_gmt":"2015-12-08T23:11:32","slug":"the-tjx-companies-a-tried-and-true-model-continues-to-drive-results","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-tjx-companies-a-tried-and-true-model-continues-to-drive-results\/","title":{"rendered":"The TJX Companies: A Tried and True Model Continues to Drive Results"},"content":{"rendered":"

TJX serves customers a truly unique retail experience by offering brand name apparel and home product at prices 20-60% lower than department stores and specialty stores. As the company relentlessly pursues customer loyalty by offering the \u201cwow\u201d factor, it has also become a model of operational effectiveness. No other player in the off-price retail space is able to deliver value so consistently and at such a large scale as the TJX Companies.<\/p>\n

Business Model<\/u><\/strong>: Exciting finds at great values define the customer experience and keep them coming back.<\/em><\/p>\n

\"In<\/a><\/p>\n

While TJX has been a powerhouse in the world of off-price apparel for decades, the company secured its place as the single most powerful buyer of off-price product in the 1990s through the acquisition of Marshalls in 1995 and the in-house development of the HomeGoods banner in 1992. The company has expanded internationally (albeit at a measured pace) and today has a significant presence in the US, Canada and Europe. Today, TJX boasts revenues of $29B across 3,389 stores and 7 countries, making it the largest off-price retailer in the world.<\/p>\n

What makes the TJX store experience so powerful is its ability to drive foot traffic through rapidly changing assortments and the \u201ctreasure hunt\u201d experience. While most retailers market product lines on a predictable schedule that turns over ~6 times per year, the inventory TJX offers at its stores changes on a daily basis. The best \u201cfinds\u201d tend to disappear quickly, training shoppers to make opportunistic purchases or risk losing the item. Target customers (fashion and value conscious women ages 25-34) shop the stores often, with the most loyal shoppers visiting at least once a week. The business model is successful not only in terms of scale, but also in the way it appeals to an unusually wide demographic audience in terms of age, income, and location.<\/p>\n

Operational Model<\/u><\/strong>: Investing in key infrastructure and driving steady returns is critical to sustained success. <\/em><\/p>\n

\"Global<\/a>\u00a0The success of the business model and its ability to translate across different categories and geographies is driven by a core competency in opportunistic buying and aggressive inventory management.<\/p>\n

Opportunistic buying is at the center of what TJX does. With more than 1,000 buyers on the payroll and a best-in-class training program for new associates, TJX invests heavily in its buying infrastructure to stay on top. Buyers are trained to evaluate potential deals across 4 criteria: Brand, Fashion, Price and Quality. Product is sourced from more than 17,000 vendors across 100+ countries, with the top 25 vendors comprising only 25% of purchases.<\/p>\n

Long standing relationships are bolstered by the financial strength of the company, with TJX being viewed as a critical partner for companies to manage inventory across economic cycles. These established relationships are supplemented each year with new and exciting brands that keep customers engaged. Finally, while some buying is executed up to 12 months in advance of the sale, a large portion of the merchandise mix is purchased very close to need. This ensures the merchandise budget is flexible and open to last minute deals on opportunistic purchases. The goal for the buying team is to fill the store with on-trend, in season product that will be relevant to the fashion-conscious consumer.<\/p>\n

\"WeOnce the supply chain is sourced with a broad assortment of products, the company executes on merchandising its ~3,400 stores. TJX manages its inventory very closely to ensure product is turning quickly, which means the store will look different on any given day. This focus on freshness drives repeat foot traffic and delivers customers the \u201cthrill of the deal.\u201d Flexible inventory management also allows the merchandise planning team to stay nimble, adjusting assortments for unseasonable weather or new trends. This drives positive same-store sales through all seasons, geographies and economic cycles.<\/p>\n

Alignment Drives Results<\/u>: <\/strong>The alignment of operations with the customer promise at TJX is best demonstrated through its results: comp store sales have risen for 27 consecutive quarters as the company\u2019s unique, globally sourced assortments and exciting in-store experience drive customer loyalty.<\/p>\n

\"HQ\"<\/a>Sustained Competitive Advantage<\/u>: <\/strong>The TJX model has proven successful throughout economic cycles and despite increasing competition for online. In the increasingly challenging world of brick and mortar retail, TJX has secured a distinct competitive advantage that appears defensible.<\/p>\n