Off-pricers: Happy days are here to stay?

Off-pricers like TJMaxx, Ross Stores and others are benefiting from some key trends right now:

1. Value-oriented retailers in general are gaining share at the expense of higher-priced stores. The best examples right now are Walmart and the dollar stores, but the trend is also leaving more aspirational luxury retailers behind.

2. Off-price stores stand to gain when department stores find themselves with a glut of inventory and open orders they can’t use. This product needs to go somewhere, so the vendor community finds off-pricers a more viable option than in the past.

3. Many national chains (Macy’s, Target, JCPenney as examples) are devoting more open-to-buy and floor space to exclusive and private labels. National brands are being squeezed out and their own outlet stores can only absorb so many goods.

Do these short-term changes represent long-term shopping behavior changes? Not necessarily: At some point both retailers and vendors will learn to ratchet down their inventory levels (if they haven’t done so already) in response to slow demand, making access to product more difficult for off-pricers. And the off-price stores themselves need to make sure they are differentiating from each other — otherwise you can foresee a wave of contraction and consolidation in this segment just as in so many other areas of retailing.

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