The Secrets Behind How Discount Stores Acquire Their Clothes: Ross, Marshalls, TJ Maxx, and DSW

Introduction

Discount stores like Ross, Marshalls, TJ Maxx, and DSW are known for providing shoppers with a unique buying experience, offering new trendy items at a fraction of the original price. The critical question is, how do these stores manage to acquire such a vast and varied inventory at these low prices? This article delves into the strategic sourcing methods that enable these stores to keep their prices competitive and their customers happy.

1. Overstock Purchases

Definition: One of the predominant methods used by discount stores is the purchase of overstock inventory from brands and manufacturers.

How it works: Retailers often produce more items than they can sell within a fiscal quarter or year. When this happens, they can offer these excess items to discount retailers at a lower price. This allows the brands to clear out their surplus inventory without taking a significant loss.

Example: Nike might have ordered too many pairs of Tiger print sneakers in orange. After the summer sale, they can still sell these items to discount retailers like Ross or Marshalls, ensuring that these products are sold and not gathering dust in storage.

2. Closeouts and Liquidations

Definition: Another source of clothing is from retailers who go out of business or need to quickly clear their remaining stock.

How it works: Liquidation sales offer a wide array of products from different retailers. These stores buy up these products, which are then resold to the public at a discount. The primary goal is to recover as much of the initial investment as possible.

Example: A clothing brand like Banana Republic might close its stores and sell off its entire inventory to discount retailers. This not only helps the brand recoup some of its losses but also provides an opportunity for discount stores to offer unique products.

3. Off-Season Merchandise

Definition: Discount stores sometimes stock up on items that didn’t sell during their peak season.

How it works: For example, a clothing store might have produced jackets in vibrant colors that did not perform well during winter. Come spring, they can sell these jackets at a discounted price. This allows the retailer to clear out its inventory and make room for new products.

Example: A clothing line may have created a collection of winter coats with six different colors and patterns, but only one or two colors sell well. They can still offer these remaining colors at a reduced price, making them available to customers in the off-season.

4. Direct Relationships with Brands

Definition: Many discount retailers establish direct relationships with clothing manufacturers and brands.

How it works: By developing direct connections, these stores can purchase items at a lower price. This often leads to exclusive deals and offers that might not be available at traditional retail outlets.

Example: Levi’s might directly sell its jeans and other products to discount stores at a reduced markup, giving them a competitive advantage in the promotional market.

5. Private Label Brands

Definition: Discount stores sometimes create their own private label brands.

How it works: These brands mimic popular styles but at a significantly lower cost. Private labels allow stores to have full control over production and pricing, offering unique products to customers without incurring the high costs associated with licensed brands.

Example: DSW might produce its own line of women's footwear that looks similar to popular brands like Cole Haan, but at a much lower price point.

6. High Volume Low Margin

Definition: This is the business model that underpins the success of discount stores.

How it works: Discount stores operate on a high-volume, low-margin strategy. They sell a large quantity of items at lower prices, ensuring that even with lower markups, they can maintain profitability.

Example: Ross, for example, might sell 5,000 pairs of sneakers in a month, each at a 25% discount. The lower markups on each item are outweighed by the sheer volume of sales.

7. Frequent Inventory Turnover

Definition: Discount retail stores typically have a rapidly changing inventory.

How it works: This strategy encourages customers to buy items quickly as they may not be available in the next cycle. The constant flow of new products keeps the store exciting and attractive to frequent shoppers.

Example: TJ Maxx could introduce a new collection of suit jackets every week, ensuring that customers are always “getting new.” This strategy also helps to avoid overstocking and delays in delivery.

Conclusion

Discount stores like Ross, Marshalls, TJ Maxx, and DSW have developed sophisticated strategies to acquire clothing at low prices, offering consumers a wide range of options at affordable rates. Their methods focus on strategic sourcing, high volume sales, and constant turnover. Understanding these methods helps to explain why these stores can consistently provide shoppers with fresh and diverse products at unbeatable prices.

Keywords: discount stores, Ross, Marshalls, TJ Maxx, DSW, overstock purchases