Name: T.J. Maxx’s Recession-Proof Pricing Strategy, Explained | WSJ The Economics Of
Uploaded: 2023-06-11T12:35:04.000Z
Duration: 5 min 53 s
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but the same shirt sells for $29.99 at T.J. Maxx.

brought in almost $50 billion in sales revenue,

more than Nordstrom's and Macy's combined.

the company isn't shifting most of its business online,

or using big data to figure out what shoppers want.

Instead, it's sticking to a decades old playbook.

♪ You get the max for the a minimum minimum price ♪

- [Narrator] This is the economics of T.J. Maxx.

There are really two components to T.J. Maxx's strategy,

and canceled orders from other brands and retailers.

Essentially, it takes advantage of surplus

This allows the company to sell its merchandise

generally around 20 to 60% below regular retail prices.

- Just the fact that the price is low is not enough.

because people don't know how much things cost.

something known as the anchoring effect comes in.

At T.J. Maxx, most items have two prices,

the T.J. Maxx Price and a comparison price.

exactly how much of a deal they're getting.

And this way they really understand what the value is

- [Narrator] Take these rag & bone shorts.

A T.J. Maxx in Manhattan sold them for about $40

with a comparison price of $50, that's a 20% discount.

But the original price tag happened to be on these shorts

And that comparison price is really just an estimate.

there's a message next to the comparison price that says

"These prices are references to regular retail prices.

we compare to products of a similar type,

- You got the whole positioning of T.J. Maxx is

because very often when you see low price

because the quality of the product is low.

- [Narrator] But if the customer knows and trusts the brand

to T.J. Maxx's ability to get discounted goods.

And because people often expect name brand items

to be more expensive, the brand itself acts as an anchor.

as a customer you're getting a deal, makes people feel good.

which makes people feel good about themselves,

- [Narrator] T.J. Maxx says it gets its goods

and the inventory in its stores is constantly turning.

- So as a result, people tend to go more often

and also spend a little bit more time in the store

and has authority to cut deals on the spot.

- As a buyer for T.J. Maxx, I'm always on the hunt.

- Let's say you have a bathing suit brand

and it's right before Memorial Day weekend

and they're stuck with extra bathing suits,

so that's when T.J. Maxx buyers show up at the showroom.

You know, they can cut a deal right on the spot

and they can get it to their stores within a week.

- [Narrator] Department stores, on the other hand,

So T.J. Maxx buys the merchandise quickly

- They have a saying internally "Door to floor in 24,"

meaning that any merchandise that shows up

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T.J. Maxx’s Recession-Proof Pricing Strategy, Explained | WSJ The Economics Of

constantly

stick

conscious

struggle