If you’ve ever found yourself in a TJ Maxx store, you’ve likely noticed how reasonable their prices are compared to other retailers.
A quick look at the company’s website will inform you that their prices can be as low as 40% of department store prices.
What’s even better is that they often stock clothing from high-end designers, rather than cheaply made junk that can often be found at discount stores.
Why can TJ Maxx sell goods so much cheaper than other retailers?
We’ll discuss ten reasons why they are so cheap.
Why Is TJ Maxx So Cheap? (Top 10 Reasons)
1. Year-Round Purchasing
Most department stores hire buyers who find items for the companies to stock in their stores.
Buyers plan, select, and purchase the merchandise a store will stock each season.
The job description includes visiting manufacturers to see what is available, analyzing market trends, negotiating deals, and building relationships with vendors.
TJ Maxx does the same, although they have one key difference.
While most department stores buy merchandise based on the season, buyers from TJ Maxx look for inventory all year long.
This means they can buy merchandise whenever it is on sale.
TJ Maxx is willing to buy inventory that is out of season because it is much cheaper then.
This flexibility allows them to snag deals that other stores might miss due to their seasonal buying.
It is also typical for department stores and other retailers to purchase inventory with a particular “look” or style.
This allows them to develop a brand image that customers can easily recognize.
TJ Maxx doesn’t have a particular brand.
They will purchase from nearly any supplier.
Some of their vendors are big, recognizable brands like Adidas, Calvin Klein, and Tommy Hilfiger.
Others are high-end designer labels, such as Dolce & Gabbana, Marc Jacobs, and Michael Kors.
Finally, they find items from small boutiques or up-and-coming labels.
Some brands are specific to TJ Maxx, created by vendors just for them.
Finally, TJ Maxx has the flexibility of choosing which stores to stock certain items in.
If a product is not available in bulk, TJ Maxx can choose only to put that product on the shelves at certain locations.
This way, they can purchase any item in any amount, rather than having to miss out on big savings.
2. Clearance Sales
TJ Maxx (along with its sister stores, Marshalls, Sierra, and HomeSense) purchase their inventory from several different places.
They usually do not order their merchandise directly from vendors, as many retailers do.
(However, this does sometimes occur, but more on that later.)
These stores rely on their company buyers to go out and find cheap goods, often from other retail stores.
When retailers need to get inventory out of the store quickly, they may put them on clearance or have a closeout sale.
These are usually customer-facing, meaning that they will be on sale for customers to purchase.
However, at a certain point, the retailer will just need to get rid of the products in any way possible.
One of the ways they do this is by opening the closeout sale up to resellers.
If an item isn’t selling well, a retailer will put it on closeout.
They will lower the price on the item, in hopes that customers will decide to purchase it.
This usually will help clear out a large portion of their inventory, and then they can sell the rest to a reseller.
Closeouts also happen when retailers close permanently.
When stores go out of business, the merchandise they haven’t sold is money down the drain.
This is why, as a store’s final day of business gets closer, they will often put larger and larger discounts on the items they still have in stock.
Closeout sales are a great place for TJ Maxx’s company buyers to find inventory.
The merchandise will typically be in perfect condition.
Some closeout items can be purchased for as little as 10 cents on the dollar.
These sales are a win for everyone because the retailers are able to curb their losses, resellers can find inventory, and customers get great deals on quality products.
3. Overstocked Merchandise
Perhaps surprisingly, there are other reasons retailers might sell their merchandise to resellers like TJ Maxx.
One of these reasons is overstock.
Overstock refers to excess merchandise that a store orders.
If they order more than people will buy, it becomes overstock.
Often, a store’s first step in this situation is to slash prices on the product for customers.
When it becomes clear that they aren’t going to sell all their inventory, they will sell it to resellers like TJ Maxx for a much lower price just to get rid of it.
TJ Maxx buyers look for these overstock deals and will capitalize on them whenever they can.
By purchasing other retailers’ extra inventory for lower prices, TJ Maxx can pass their savings on to customers.
For this reason, you may sometimes see the same product in both a department store and TJ Maxx being sold for wildly different prices.
TJ Maxx sometimes will purchase overstock right from the manufacturers.
Sometimes, a factory will produce too much of a product—more than department stores will order.
In this case, they need to get rid of it or eat the cost of production.
They are willing to sell the extra merchandise for less, so TJ Maxx will snag those deals.
4. Returned Goods
TJ Maxx will also purchase products that were originally bought from department stores, then returned.
There are many reasons a customer may be less than satisfied with a product they purchased.
If the goods are damaged or defective, they will likely be returned.
They are also likely to return clothing that didn’t fit correctly.
Sometimes returns are simply due to the customer changing their mind.
Online purchases are especially susceptible to being returned.
Nearly 30% of online purchases are returned to the retailer.
It is far less common at physical stores for a few reasons.
In physical stores, customers can see what they are purchasing beforehand.
It also takes more effort to return goods to the store, rather than just mailing online returns back to the retailer.
Even so, when a company has hundreds of retail stores across the country or even the world, that can mean they see thousands of items of merchandise returned every day.
Because some items are not as valuable after they have been bought once, returned products can cause retailers to lose a lot of money.
If a previously sealed product was opened, a retailer cannot always sell it.
If the customer purchased the item at the end of the season, then took a long time to return it, it may already be off store shelves.
For some types of merchandise, a return can void the warranty, since they can’t be sure what happened to the product in the previous owner’s home.
This could even create issues with safety, as small parts may be missing.
Especially around the holidays, retail stores see a lot of returns.
At this point, they will separate the items that can be resold and those that cannot.
They will sell the items that don’t meet their standards to resellers.
This is where TJ Maxx often steps in.
Their buyers will find stores selling returned goods and purchase them for much cheaper than they were sold for the first time.
5. Defective Products
According to TJ Maxx, the large majority of its merchandise is department-store quality, with no damage or defects.
This is generally true, but some of its inventory is technically “defective.”
This does not mean that they are selling worthless junk or goods that are destroyed.
It simply means that other retailers can’t or won’t sell them.
For example, the print on a shirt may not be perfectly centered, or a pair of pants might have two slightly different inseam lengths.
These items of clothing are still perfectly wearable, and it’s likely the defects are largely unnoticeable.
However, many retailers have standards their products are required to meet.
The manufacturers or retailers will then be forced to sell the irregular items to resellers like TJ Maxx.
Since the resellers get them for such a great price, customers can purchase them for much less than the same items without defects.
According to TJ Maxx and other sources, this is not the norm for their clothing.
Most of their clothes and shoes (about 95%) come to them as part of overstock or closeout deals and are therefore department-store quality.
6. No Buyback Policy
A little-known aspect of stocking retail stores is what is called a buyback policy.
A buyback policy acts as a contract between suppliers and retailers.
The policy indicates that, at the end of the season, the supplier will buy back a predetermined amount of unsold inventory from the department store they sold it to.
Sometimes the supplier will only agree to purchase back some of the inventory, and in other cases, they will buy back all the merchandise.
This works as an incentive for retailers to stock merchandise.
Retailers are more likely to stock these items with a buyback policy in place because it prevents a certain amount of lost profit when items go unsold.
On the other hand, it also causes suppliers to sell their products for a higher price.
If they don’t sell it for enough and then have to buy back a lot of it when the season ends, they likely won’t make a profit on the items that did sell.
When a supplier buys back some of their merchandise, they may then sell it at a discount to a reseller like TJ Maxx to cut some of their losses.
TJ Maxx does not have a buyback policy, however.
They do not require vendors to buy their products back when they don’t sell.
This usually means they don’t have to pay as much for the merchandise.
When TJ Maxx gets inventory cheaper, so do consumers.
Any merchandise that TJ Maxx doesn’t sell will be marked down repeatedly until it does.
Eventually, some unsold inventory may be donated to thrift stores. It is never sold back to suppliers.
7. No Branding Costs
TJ Maxx does not spend as much money advertising as many retailers do.
Because the brands they carry are changing all the time, marketing their merchandise can be tricky.
Instead, TJ Maxx lets the big-name stores do the advertising and trusts that customers know they can find great deals at their stores.
Since 2018, department stores in the United States have collectively spent between two and three billion dollars on advertising each year.
This is a huge expense, regardless of how they choose to market themselves.
Some stores use billboards to advertise the brands they sell, while others produce TV commercials or take out pages in magazines.
Celebrity endorsements, which can cost millions in and of themselves, are a popular way to advertise clothing and beauty brands.
Finally, most department stores curate a brand image for themselves to attract customers looking for a certain style.
TJ Maxx forgoes this step entirely.
They do not spend money on branding themselves in any particular light.
They do very little advertising in general.
They choose instead to offer great deals and let customers rely on them to consistently stock designer brands for fantastic prices.
By saving millions of dollars on branding and advertising, TJ Maxx is able to offer even lower prices for their goods.
8. No Frills
One aspect of the shopping experience that many department stores pay close attention to is the “vibe” of the store.
As soon as you walk into a shopping center, you begin to take in the sights, sounds, and smells of the environment.
Some stores choose to have a spacious floor, with most of the inventory around the walls.
Some use their perfume or cologne supply to keep the store smelling nice, and to encourage customers to try out their scents.
Nearly all stores do their best to display their products in an aesthetically pleasing and efficient way.
Developing the way a store feels when you walk in is an important part of creating a company image.
It requires time, human labor, and materials, which all cost extra money.
This is another step that TJ Maxx chooses to skip in the interest of saving themselves (and their customers) some cash.
When you walk into TJ Maxx, you may notice that the clothing racks are not grouped by type of clothing, but rather by size.
You may find Nike sweats next to Lucky Brand Jeans.
It may make it more challenging to find pieces you like, but the money saved on organizing and folding can be passed on to you at the register.
You may also find that the shelves of shoes, home decor, and other goods are rather disorganized, or not displayed in the most efficient way.
This is all strategic.
Spending lots of money and manpower on organizing merchandise by type or style would require TJ Maxx to charge more for their goods.
It also makes hunting for bargains at the store more exciting.
Who knows what you’ll find!
9. Used Products
TJ Maxx has a reputation for high-quality, designer brand clothing and shoes.
Their decor section is also very popular among customers.
However, when it comes to the other items in the store, such as makeup or beauty supplies, customer satisfaction tends to be much lower.
Unfortunately, TJ Maxx’s no-frills approach to store layout tends to come with a lack of supervision and maintenance of store aisles.
When you head into the makeup section, you will likely find products that have been opened and sampled.
TJ Maxx does not spend money on test products for their makeup.
Some customers take it upon themselves to create test products by opening the items on the shelves to try them out.
These opened products don’t always get caught by employees and can cause problems if a customer accidentally purchases them.
For one, you don’t want to buy makeup that’s already half used.
You also don’t want to use anything that’s touched someone else’s lips or eyes.
Lastly, it’s hard to know if you like a product without sampling it first, so you might get something you’re not satisfied with.
10. Inconsistent Stocking
Most stores have regular restocking dates and try not to let themselves run out of any in-season product.
If an item is more popular than they anticipated, they will likely order more as soon as they can because being out-of-stock is bad for business.
Even when a retailer is out of an item you’d like, it’s very probable that you can find it online, and that the physical store will have it back in stock soon.
For TJ Maxx, however, that guarantee isn’t there.
When TJ Maxx purchases merchandise from retailers, it’s unlikely that the retailer will be getting rid of more of that same product in the future.
They won’t order more inventory that didn’t sell well in the first place.
Since TJ Maxx gets most of its inventory from retailers, not manufacturers, you likely won’t get many chances to purchase an item.
When the item has sold out at TJ Maxx, it’s probably not coming back.
Since there’s no promise (in fact, it’s highly unlikely) that TJ Maxx will restock an item, their prices are lower.
Customers may be less willing to shop at a store that they can’t count on to have items they like every time they come.
Therefore, TJ Maxx lowers their prices a little to get customers in the door.
While TJ Maxx boasts plenty of great deals, if you often feel you need to think about purchases for a while before making them, it may not be the store for you.