COVID-19 Effects on Off-Brand Retailers
Insights into the effects of COVID-19 on Off-Brand retailers like TJ Maxx and Marshalls indicate that these off-price retailers will be overwhelmed by inventory from other retailers, in particular, department and specialty stores. Research findings also suggest that these stores will likely gain a bigger market share post-COVID-19. Some measures they have put in place to continue business during the pandemic include canceling and suspending all orders, operating for a limited number of hours, and temporary staffing for off-price retailers like Dollar General that provide essential goods and services.
I. Effects of COVID-19 on Value Brands
- Under the current COVID-19 pandemic, most big brands will face problems handling inventory and selling at full-price. Moreover, in-store discounts are unable to encourage buyers to shop at full price.
- In this regard, these big brands are exploring new ways to offload inventory to other channels, including their outlets or off-price chains. Consequently, off-price retailers continue attracting more customers following the COVID-19 pandemic.
- According to analysts, off-price chains are likely to grow even more and can potentially affect full-price sales at large retail outlets. Meantime, major retailers, including online retailers such as Net-a-Porter, are already offering discounts as high as 30%.
- As Full-Line retailers and big brands, especially in the apparel sector, work to offload most of their inventory, Off-Brand retailers, on the other hand, are stocking that excess inventory from department stores and specialty stores like American Eagle, Zara, etc.
- Therefore, once things reopen, Off-Brand retailers will have a bigger market share owing to the significant amount of inventory they have to clear, which would also drive costs down.
- Overall, experts expect these Off-Brand retailers to gain more market share following their resiliency during economic weaknesses, as was the case during the Great Recession.
- Analysts believe that the excess inventory from specialty and department stores, specifically those that provide apparel would overwhelm off-price retailers with limited inventory capacity.
- According to Bob Phibbs, the president and CEO of The Retail Doctor, there are currently not enough off-price retailers capable of handling the excess inventory from major stores and big brands.
- On that note, Phibbs believes that most of the inventory will end up pilling up in landfills because off-price retailers lack enough inventory capacity to handle excess inventory and because consumer demand is expected not to increase as fast as retailers discount.
- While most analysts expect consumer spending to weaken during the COVID-19 pandemic, some are forecasting a significant lag before shoppers start shopping, even when promised a great deal.
- Unfortunately, off-price companies perform well only to the extent that shoppers have some disposable income to spend; however, that is not the case currently and would likely not be once things return to normal.
- Some experts predict that consumer spending shall remain weak even for a few months following post-COVID-19 reopening. Unfortunately, with shrinking consumer demand, closure of stores, and the disruption & halting of TJX's online distribution center, there currently exists no advantage for off-price retailers.
Off-price Retailers Attract More Shoppers
Off-Brand Retailers to Gain Market Share
Low Inventory Capacity for Off-Price Retailers
Consumer Spending Weakness
II. Examples of Insights into Solutions Off-Brand Retailers Can Apply to Mitigate Losses Due to COVID-19
- On March 25, 2020, Ross Stores Inc. wrote a letter to its vendors and suppliers, notifying them that it is going to cancel all merchandise purchase orders through June 18, following the impacts of COVID-19.
- Ross Stores Inc. is not the only store canceling orders, as many more are following suit. For example, Gold Medal International of New York City, a supplier of items like socks and gloves to Ross Stores has received requests to cancel orders from other major retailers like Macy’s Inc., Nordstrom Inc., TJX Companies Inc., and Burlington Coat Factory.
- Now that TJ Maxx, Marshalls, Ross, and Burlington are not taking any orders, the pressure continues to mount on inventory stockpiles. These off-price retailers are canceling orders because they are "unable to deliver exceptional merchandise to their customers."
- Some off-price retailers like General Dollar have done the opposite of what quite many businesses are doing during the COVID-19 pandemic. They are hiring more employees.
- As a surprise to many, Dollar General aimed to hire at least 50,000 new workers from late March through April. As one of America’s essential retailers, Dollar General is hiring more employees to help support customers' needs.
- Dollar General invests in its staff as a competitive advantage and seeks to continue serving customers across its 16,300 stores in 45 states, which according to the company, serve close to 75% of the American population.
- TJ Maxx and Marshalls have started reopening most of their stores in the U.S.; however, they are opened for a limited number of hours. For example, from Monday through Saturday, both stores will operate from 11 am-7 pm and Sundays from 12 pm- 7 pm.
- Both off-price retailers are also offering dedicated shopping hours every Monday through Saturday (10 am-11 am) for individuals who are at higher risk, including seniors (60+). On Sundays, these at-risk individuals can shop from 11 am-12 pm.
- As these off-price retailers start resuming operations following weeks of closure, other services such as layaways remain closed, while others, such as pickups and cancellations, are functioning.
Limited Store Opening Hours
To uncover insights into how COVID-19 is affecting Off-Brand retailers like TJ Maxx, Marshalls, Dollar General, etc., and how they are responding to the effects of the pandemic, your research team leveraged findings from the most recent news, business, and retail reports from March 2020 through May. Most of these reports are published by leading business news websites like Forbes, Reuters, Business Insider by Pulse, and Quartz, along with news channels like Wral, and AI (artificial intelligence) for retail vendors like CB4. The information in these reports focuses on the most recent happenings following the COVID-19 pandemic, including how businesses, in particular, off-price retailers are responding and coping with the pandemic. In this regard, the information reveals the current activities these companies are doing to remain relevant during the pandemic and post-COVID-19.