The TJX Companies (NYSE:TJX) recently launched the first e-commerce store for its off-price Marshalls chain. Considering that its sibling T.J. Maxx already has an online shopping site -- and many discount retailers and even dollar stores offer customers a way to shop online -- you could ask: What took Marshalls so long?
Off-price has usually meant offline
Up until now, and probably even still, Marshalls hasn't needed an e-commerce arm. The off-price clothing duo represented by TJX's MarMaxx segment has enjoyed strong results. Sales were up 4% year over year in the second quarter on a 2% increase in comparable-store sales, with total revenue up 6% in the first half of fiscal 2020. That continues the trend of healthy sales growth of 9% in fiscal 2019 and 8% the year prior with comps up 6% and 2%, respectively.
Bringing an e-commerce operation online hasn't been a necessity, and in the discount segment, it's a relatively recent phenomenon.
While Burlington Stores says it's offered customers an online channel for a decade, the digital presence of closeout stores like Big Lots has more often than not been a way to view the weekly circular rather than a place to shop. Only in the past few years has it become a venue for customers to purchase merchandise.
Tuesday Morning, in fact, closed its e-commerce channel a few years ago, and the website is now merely a portal directing you to its stores.
Constantly changing inventory requires a different strategy
There are actually a few reasons off-price retailers like TJX have been late to the game (T.J. Maxx's website was launched in 2013).
The ever-changing nature of the merchandise these retailers offer makes it difficult to manage inventory for the online store. Full-price competitors deeply source their products and have plenty of stock in inventory, but off-price shoppers are constantly looking for new goods to fill their racks -- the well-known "treasure hunt" effect that has made TJX an industry-leading retailer.
The inventory is also different from store to store, let alone between physical stores and the online portal. Given this logistical hurdle, T.J. Maxx's digital presence, now several years old, is still just a small piece of the top line.
The retailer plans to differentiate the Marshall's website from the in-store experience with different products, just as it did with the T.J. Maxx launch. CEO Ernie Herrman told analysts on TJX's second-quarter earnings call that it's important not to cannibalize sales from its brick-and-mortar stores, so three-quarters or more of the merchandise on Marshalls.com will not be found in stores.
Beyond the T.J. Maxx and Marshalls websites, TJX also operates Sierra, an online off-price retailer it acquired in 2012, which helped get tjmaxx.com off the ground. It will probably play a role this time, too. It's not that TJX doesn't know how to approach e-commerce, it just wants to do it strategically.
A time to supplement sales
It may be management sees now as an opportune time to get Marshalls online, because brick-and-mortar sales are slowing. The 2% comps growth it saw last quarter was well below the 6% rise it enjoyed in the year-ago period. Getting online now could help boost sales even if it's only expecting the initial gains to be incremental.
Analysts are expecting sales to grow 5% in the current quarter with earnings rising a like amount. That would be well below the 12% increase in sales in the prior-year period, when comps jumped 9% and earnings grew 8%.
Even though it's not a straightforward endeavor for an off-price chain like TJX to develop an online presence, the company has the experience to successfully bring the treasure hunt experience to the new Marshalls site.