Marshalls expansion underscores consumer appetite for extreme value - TJX Cos. adds another Marshalls to Tampa area

DSN Retailing Today, August 18, 2003 by Mike Troy

TAMPA, FLA. -- Further evidence of the ongoing consumer shift toward companies that offer a compelling value proposition was on display recently in a quiet suburban area northeast of Tampa.

The TJX Companies opened a new Marshalls store on Bruce B. Downs Boulevard on July 31 at 8 a.m., and just 15 minutes later brand, name bargain hunters had depleted the store's supply of 100 shopping carts. By 8:30 a.m., cashiers at each of the store's eight checkouts and three nearby customer service stations were busy scanning merchandise while other employees were already fetching carts from the parking lot. The store, one of three Marshalls units to open on the same day in the Tampa Bay area, gives the retailer a total of eight units in the market.

Ironically, customers at the new Marshalls stores woke to newspaper headlines that morning about the closing of a Lord & Taylor department store (see sidebar) at an upscale mall that had opened just two years earlier near downtown Tampa. Scarcely any customers were shopping at the immaculate, two-level Lord & Taylor store at noon, although the mall's food court was bustling. The scene in Tampa is one that has been replicated nationwide in recent years as consumers have become less willing to pay full price at inconveniently located mall-based department stores thanks to the availability of better-quality goods and name brands at stores closer to where they live. It is a situation Lehman Brothers analyst Kimberly Greenberger summed up neatly in a July 24 report in which she initiated coverage of TJX Companies.

"We believe a favorable secular trend toward value-oriented retailers has emerged over the past several years, resulting in the off-price channel increasing its share of the total U.S. apparel market, largely at the expense of department stores," according to Greenberger. "We believe that this trend will continue and that TJX, with its dominant position in the channel, is poised to benefit from it."

The allure of retailers such as Marshalls, as well as T.J. Maxx, a similar format operated by TJX Companies, is the availability of brand name merchandise at discounted prices contained in stores that are conveniently located to where customers live. The stores are not big on presentation, opting for long racks of apparel that customers have to sort through to unearth that special garment they may have seen elsewhere for more money. Yet it is this treasure hunt atmosphere that customers at Marshalls find enjoyable and makes them feel savvy. The retailer reinforces that mindset and encourages frequent visits with large signs on the store's outer walls that read, "new merchandise all the time," and "brand names for less. Every day." Smaller signs atop fixtures read, "brand names for less. Aren't you smart."

The merchandising scheme at Marshall's is not exactly pretty with barely room for two customers to pass between the racks of apparel. However, the layout is functional enough and in the retailer's newest prototype strides have been made to improve the layout and appearance, without driving costs through the roof. The best example of this strategy is a home decor area that has been expanded in Marshalls newer stores. The home decor department runs across the rear of the store where shoes were previously merchandised. While tile is used as the flooring surface throughout most of the store, simulated hardwood flooring is used in the home decor area and endcaps feature displays of matching products.

The "family footwear" department that was relocated to the center of the store serves as a sort of transitional hub that ties the entire store together. For example, women's, men's and children's shoes are all merchandised in the center of the store, but each is adjacent to the women's, men's or children's apparel departments.

It is a formula that works and appears to have growing appeal to consumers. TJX includes its Marshalls and T.J. Maxx stores in a division of its company called MarMaxx. Last year that division consisted of 629 Marshalls stores and 713 T.J. Maxx stores and produced sales of $9.5 billion and accounted for roughly 80% of total TJX sales of nearly $12 billion. TJX plans to increase its net store count of the Marshalls and T.J. Maxx formats by about 75 units annually and has indicated it could eventually operate up to 1,800 combined Marshalls and T.J. Maxx stores.