Retail secrets: discussing business strategy and pricing

B2
90 min
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1

Think about these questions before watching. Share your ideas with a partner.

  1. Think about the last time you bought something at a significant discount. What factors, besides the lower price, convinced you that you were getting a good deal?
  2. Some shops are famous for their 'treasure hunt' atmosphere, where you never know what you might find. What are the pros and cons of this kind of shopping experience compared to a more organized store?
  3. When a price tag shows a 'compare at' or 'original' price next to the current sale price, how does this affect your decision to buy? Does it make an item seem more valuable or desirable?
2

Watch the video carefully. Pay attention to the main ideas and key details.

Video script145 segments · click a timestamp to jump

- [Narrator] A Pima cotton blend T-shirt

on Vince's site costs $85,

but the same shirt sells for $29.99 at T.J. Maxx.

So why does it cost less?

Over 10 years, the off-price retailer

has opened 263 more stores.

In 2022, TJX, which owns T.J. Maxx,

Marshalls and HomeGoods,

brought in almost $50 billion in sales revenue,

more than Nordstrom's and Macy's combined.

And the secret to its success,

the company isn't shifting most of its business online,

or using big data to figure out what shoppers want.

Instead, it's sticking to a decades old playbook.

♪ You get the max for the a minimum minimum price ♪

♪ And it's never ever the same ♪

- [Narrator] This is the economics of T.J. Maxx.

There are really two components to T.J. Maxx's strategy,

the bargain, and the hunt.

One way T.J. Maxx gets discounted goods

is by buying excess merchandise

and canceled orders from other brands and retailers.

Essentially, it takes advantage of surplus

and waste in the retail system.

This allows the company to sell its merchandise

generally around 20 to 60% below regular retail prices.

But there's a catch.

- Just the fact that the price is low is not enough.

What you need is also reference price

because people don't know how much things cost.

- [Narrator] That's where Alex says

something known as the anchoring effect comes in.

At T.J. Maxx, most items have two prices,

the T.J. Maxx Price and a comparison price.

- People anchor in the regular price

and then they see

exactly how much of a deal they're getting.

And this way they really understand what the value is

that T.J. Maxx provides to them.

- [Narrator] Take these rag & bone shorts.

A T.J. Maxx in Manhattan sold them for about $40

with a comparison price of $50, that's a 20% discount.

But the original price tag happened to be on these shorts

and it lists the price as $195.

That would be around an 80% discount.

And that comparison price is really just an estimate.

On T.J. Maxx's website,

there's a message next to the comparison price that says

"These prices are references to regular retail prices.

Where identical items are not available,

we compare to products of a similar type,

quality and style."

These price tags aren't the only way

T.J. Maxx helps customers feel

like they're getting a bargain.

- You got the whole positioning of T.J. Maxx is

that we give you brand names for less.

And the reason why it's important is

because very often when you see low price

you think it's low price

because the quality of the product is low.

- [Narrator] But if the customer knows and trusts the brand

then they won't assume the price is low

because it's a bad product.

Instead, Alex says they'll attribute it

to T.J. Maxx's ability to get discounted goods.

And because people often expect name brand items

to be more expensive, the brand itself acts as an anchor.

- Emphasizing the fact that

as a customer you're getting a deal, makes people feel good.

It's not only I'm getting a low price

but I'm actually getting a deal,

which makes people feel good about themselves,

that they're smart shoppers.

- [Narrator] T.J. Maxx says it gets its goods

from about 21,000 vendors

and the inventory in its stores is constantly turning.

- So as a result, people tend to go more often

to this type of stores

and also spend a little bit more time in the store

in search of something.

- [Narrator] Across its companies

TJX employs more than 1200 buyers

that each control millions of dollars

and has authority to cut deals on the spot.

- As a buyer for T.J. Maxx, I'm always on the hunt.

- Let's say you have a bathing suit brand

and it's right before Memorial Day weekend

and they're stuck with extra bathing suits,

so that's when T.J. Maxx buyers show up at the showroom.

You know, they can cut a deal right on the spot

and they can get it to their stores within a week.

- [Narrator] Department stores, on the other hand,

can take weeks to review

and approve orders from their buyers.

So T.J. Maxx buys the merchandise quickly

and gets it into the store just as fast.

- They have a saying internally "Door to floor in 24,"

meaning that any merchandise that shows up

at a store in the morning

has to be on the sales floor by the end of that day.

- [Narrator] To ensure speed,

merchandise often arrives at stores

already on racks that employees wheel off trucks

and move straight onto the sales floor.

And once it's there,

all the merchandise is laid out differently

than other retailers too.

Helping to create that treasure hunt experience.

While most department stores group items by brand

T.J. Maxx organizes its inventory by type.

This means that different brands

can end up next to each other on the same racks.

And since T.J. Maxx doesn't have walls dividing sections

of the stores or brands,

it can easily reconfigure the layout

based on changing inventory.

Seeing all the products and changing layout

can encourage impulse buying.

Shoppers know that if they see something they like

they need to buy it now.

If they wait, it may be sold out

or hard to find when they come back.

- Once you take it home, things are changing dramatically

because now you are not buying something

you are giving up something.

Lots of research has shown

that giving up something is more difficult than acquiring.

You are willing to pay more

not to give up something than to buy something.

- [Narrator] Retailers struggled through the rise

of E-commerce in the pandemic,

and while TJX's off-price retailers still took a hit,

they have bounced back.

In 2021, TJX had the highest sales in the company's history.

A record it then beat the following year.

And it's not because T.J. Maxx

and the other off-price retailers adapted,

but rather because they never drifted away

from their core strategy.

- T.J. Maxx tends to perform pretty well

in an economic downturn

because that's when customers tend to be bargain conscious

and, you know, they offer really good value for the money.

(quirky music)

3

Answer these questions in your own words. Support your answers with evidence from the video.

01According to the video, what is the 'anchoring effect' and how does T.J. Maxx use it on its price tags?
Sample answerIt's a psychological trick where people base their idea of an item's value on the first price they see. T.J. Maxx uses it by showing a higher 'comparison price' next to their lower price, which makes their price seem like a fantastic bargain.
02Why is selling products from well-known brands a crucial part of the company's strategy for making customers feel they've found a bargain?
Sample answerBecause normally, a very low price might make someone think the product is low quality. But if the customer recognizes and trusts the brand, they know the quality is good and will believe T.J. Maxx is just skilled at getting good deals.
03In what ways is T.J. Maxx's process for buying and stocking new products faster than that of traditional department stores?
Sample answerTheir buyers have the authority to make deals immediately, without needing long approvals. Plus, they have a policy called 'Door to floor in 24,' which means new merchandise has to be on the sales floor within a day of arriving at the store.
04How do the store's layout and constantly changing inventory create a 'treasure hunt' experience that encourages impulse buying?
Sample answerThey organize items by type instead of by brand, so shoppers have to search through racks to find hidden gems. This, combined with the fact that inventory is always changing, creates a sense of urgency. Shoppers feel they need to buy something they like right away, or it will be gone when they come back.
4

Vocabulary

Vocabulary
These expressions will help you communicate more naturally about this topic.
Examples
Snap up a bargain — to buy something quickly because its price is very low.
Usage note: This is an informal phrasal verb, often used to describe enthusiastic shopping during a sale. For example: 'Shoppers were quick to snap up the bargains on Black Friday.'
Competitive edge — an advantage that makes a business more successful than its competitors.
Usage note: This is a common business collocation. Companies can 'gain', 'have', or 'maintain' a competitive edge through lower prices, better quality, or a unique strategy.
Value for money — the idea that something is worth the price you paid for it, based on its quality or usefulness.
Usage note: This phrase is used to evaluate a purchase. You can say something 'is' or 'offers' good value for money. For example: 'The off-brand T-shirt was surprisingly good value for money.'
Surplus stock — products that a company has been unable to sell and now has too much of.
Usage note: This term is common in discussions about supply chains and retail. A synonym is 'excess inventory'. Off-price stores often buy surplus stock from other retailers.
Drive sales — to take actions that increase the amount of goods sold.
Usage note: This is an active business phrase. Marketing campaigns, special offers, and pricing strategies are all designed to drive sales. For example: 'The 'treasure hunt' model helps drive sales by encouraging impulse buys.'
5

Decide if each statement is true or false. Correct the false ones.

01The company employs over a thousand buyers who have the authority to make deals for millions of dollars immediately.
02T.J. Maxx's recent success is primarily due to its strategic shift towards online sales and the use of big data to predict customer preferences.
03The video suggests that T.J. Maxx often performs well when the economy is weak because shoppers become more focused on finding bargains.
04The video explains a psychological principle where customers find it more difficult to give something up than it was to acquire it in the first place.
05According to the company's internal policy, new merchandise must be moved from the delivery truck to the sales floor within one week.
6

Complete the sentences with words from the box. One word is extra.

Word bank
01A company's ability to offer unique products at lower prices gives it a significant over other retailers.
02While the initial cost was high, the durability and quality of the product meant it was excellent in the long run.
03At the end of the season, the warehouse was full of that needed to be sold off quickly, often at a deep discount.
04The marketing team launched a new advertising campaign specifically designed to during the holiday season.
05The company's total increased by 15% last year, although its net profit margin remained slim.
7

Choose the best answer based on what you heard in the video.

01According to the video, how does T.J. Maxx determine the 'comparison price' on its tags when an identical item isn't available for reference?
02How does the store layout at T.J. Maxx differ from that of most traditional department stores, according to the video?
03What does the video identify as a primary source for the discounted goods sold at T.J. Maxx?
04Which of the following business practices is NOT mentioned in the video as a key part of T.J. Maxx's strategy?
8

Business strategy sentence match

How do retail businesses succeed? Complete the sentences to learn more about common strategies.

Match each item on the left with the correct item on the right.

Drag or click to match
Definitions
9

Discuss these questions with a partner. Try to use vocabulary from the lesson.

  1. The video highlights that T.J. Maxx avoids big data and a major online shift. In today's digital world, is this a brilliant strategy that gives them a unique competitive edge, or a risky gamble that will eventually fail to drive sales?
  2. Think about the popular discount or off-price stores in your country. Do they use similar tactics, like buying surplus stock or emphasizing a 'treasure hunt' experience, to convince shoppers they are getting great value for money?
  3. The video explains the 'anchoring effect' where a high comparison price makes the sale price seem like a fantastic deal. Do you think this tactic is a clever way to drive sales, or is it a slightly deceptive practice? At what point does a marketing strategy cross the line from persuasive to misleading when it comes to helping customers snap up a bargain?