E-Commerce is On for Off-Price Retailers

BY Dan Berthiaume

Off-price retailers have traditionally stayed offline when it comes to conducting actual retail transactions. While most off-price retailers have long operated informational sites where customers can perform tasks such as locating nearby stores and checking prices, it has been very rare for retailers in this space to allow customers to buy goods via the Internet. Until now.

This month, leading off-price chains Belk and T.J. Maxx both introduced true e-commerce sites. Belk launched its e-commerce site with a great deal of fanfare (including mentioning it in a recent Chain Store Age article), while T.J. Maxx went with an unpublicized “soft launch.” Of course off-price e-commerce sites are not completely unknown. T.J. Maxx actually tried its hand at e-commerce about eight years ago and decided to abandon the effort, while Tuesday Morning shut down its e-commerce site this past summer.

However, when T.J. Maxx and Belk both go live with e-commerce in the same month, it’s a clear sign that an off-price e-commerce trend may be developing. These two off-price mainstays are not both heading into the world of virtual retail by pure coincidence. Let’s look at a few larger developments that could fuel much more widespread e-commerce activity in the off-price vertical.

Customer Demand
Simply put, today’s customers expect to be able to purchase the same goods online that they can in physical stores. The fact that certain aspects of the off-price vertical make this trickier to pull off behind the scenes than in other verticals (more on that in a moment) does not resonate with consumers, nor should it. As Stein Mart executives explain in the current August/September issue of Chain Store Age, the key drivers for becoming one of the first off-price retailers to have a fully functional e-commerce site were expanding the customer base and responding to requests from existing customers for 24-hour shopping access.

Improved Supply Chains

Off-price retailers often provide an extremely wide and somewhat unpredictable assortment of goods. As products span numerous categories and frequently become available on short notice due to closeouts, manufacturer errors, etc., it is especially difficult for off-price retailers to accurately make current inventory available for purchase online.

However, in recent years supply chains have become “leaner and meaner” thanks to the implementation of standards such as those provided by VICS and Six Sigma, as well as of technologies that provide near- and real-time visibility into supply chain activities. The price of implementing these standards and solutions has come down as they have matured, making them more accessible to off-price retailers that generally operate on slim margins.

Channel Convergence
In addition to an evolution occurring in supply chain technology, an evolution is also occurring in e-commerce technology. E-commerce is by and large no longer a siloed activity, but merely one more channel in an “omni-channel” retailing strategy that also includes stores as well as mobile devices and social media platforms. As with supply chain solutions, the cost and complexity of implementing and integrating omni-channel technology is coming down over time, making it more accessible to off-price chains.

It will probably be a while before the majority of large off-price retailers are fully engaged in e-commerce, but the precedent is being set. Customers clearly have affection for brand names at discount prices, so they will probably show a little patience as the vertical catches up.

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