Off-price retailers have seen dramatic growth in market share since the economic recession of 2008/2009. As household budgets began to shrink it made good economic sense for consumers to do their shopping in the off-price sector (dominated by chains such as Burlington, Ross, and the TJX family which includes TJ Maxx and Marshall’s.) Shoppers found they could get better value for their money, purchasing many of the same products from familiar brands at steeply reduced prices. By some estimates, off-price retail currently accounts for about 8% of all total fashion and soft goods retail.
But as the economy rebounds, off-price continues to outpace the rest of retail. Moody’s estimates that the off-price sector will continue to see growth on the order of 6-8% for the next five years. Scott Tuhy, Vice-President Senior Credit Officer with the firm forecasts that “the off-price segment will continue to do better than the overall apparel and home sector into the foreseeable future.”
Not only are off-price stores stores being built at a faster rate than traditional department stores, they are also generating more revenue per square foot. TJ Maxx and Marshall’s average approximately $300 per square foot, nearly triple the ratio that JC Penney’s, and almost double the revenue per square foot that Macy’s makes.
How is this possible?