Behind the bargains at T.J. Maxx, Marshalls

ByABC News
October 26, 2011, 12:54 PM

— -- Shelly Levy could be T.J. Maxx and Marshalls' dream customer.

The Houston legal assistant shops at the stores once or twice a week, lured by the chance of getting buys like the Nanette Lepore dress she had seen a year earlier at Neiman Marcus, designer jeans by Seven and Joe's and an Isabella Fiore handbag at Marshalls that all her friends were envious of.

In a rare interview, TJX CEO Carol Meyrowitz explained how conventional wisdom is wrong when it comes to T.J. Maxx and Marshalls. Meyrowitz, 57, has been with TJX for almost 30 years, rising from a buyer in 1983 to CEO in 2007. During that time, the chain has turned into a retail powerhouse, with more than 1,700 stores — nearly as many as Target. She says 85% of what the stores sell is from the same season and same year it was designed for, and 85% is purchased directly from manufacturers. Much is identical to what the brands sell in department stores, she insists. Less than 5% is irregular.

These distinctions are more significant than ever for consumers looking for a "good buy" in a sea of deals.

TJX's sales were down only once in the last 34 years — 1995 — but the competition for bargain-hunting shoppers is coming from an increasing number of sources. Outlet stores now occupy 68 million square feet of retail space, up from 56 million in 2006, according to Value Retail News. Outlet stores typically only sell one retailer or manufacturer's brand, but that difference is fast getting muddled, too. When you add Web-only off-price stores such as (formerly and sites with short-term deals known as "flash sales," you have a consumer bombarded with purported bargains and a demand for discounted goods that couldn't possibly be satisfied with last year's leftovers and manufacturers' mistakes.

"For brands, the discount segment represents a huge revenue channel," says retail strategist Alison Jatlow Levy of consulting firm Kurt Salmon. "The challenge for brands is how to manage it without negatively impacting their image."

The source — and quality — of all this marked-down merchandise can be confusing to shoppers. Outlets, like off-price retailers, sell at least some products that were "never intended to ever touch the doors" of traditional retailers, says retail brand expert Ken Nisch.

"Consumers are taken by brand names and styles, and quality, I think, comes in second," says Lisa Lee Freeman, editor-in-chief of ShopSmart, a magazine published by Consumer Reports. "Gone are the days when people bought shoes and other clothing and hung onto them for years and years and repaired them to keep them in top shape."

How it works

Meyrowitz says TJX typically deals directly with brands — not with liquidators.

But there is an interesting sort of denial associated with these brand/off-price relationships.