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Seven Secrets of T.J. Maxx's Insane Retail Success

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Image by Dwight Burdette.
Image by Dwight Burdette.

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Everyone can agree that "Maxxinista" is a horrid term. And yet T.J. Maxx has, over the past six years, managed incredible growth with annual sales of $27.4 billion. In its latest issue, Fortune writer Beth Kowitt went to great lengths to uncover the discounter's secrets. It was difficult. "TJX is Company X: a black box—arguably one of the most secretive retailers around," she writes, noting that its CEO Carol Meyrowitz rarely gives interviews and the company is loathe to divulge its strategy thanks to heavy competition from the likes of Nordstrom Rack and Saks Off 5th.

After spending four months consulting with 50 former T.J. Maxx employees and retail experts, Kowitt compiled a list of seven reasons why the chain has only had one year of negative-store sales in its 40-year history.

1. Quick inventory turnover: T.J. Maxx cycles its product through stores much faster than its competitors. "Former employees say that the stuff moves so rapidly that merchandise is often sold before TJX has paid its vendors for it. The busiest stores can take daily delivery of product, which employees put out on the floor right away—a 'door to floor' approach that cuts down on the amount of space needed for backroom storage." The store will discount items if they've been around for seven or more weeks.

2. The mix contains some true shopping gems: The store "makes a point of hiding gems for the well-heeled as well as the middle class." Not all the merchandise is "cheap;" there are bargains to be found for different types of shoppers—those who crave luxury included.

3. Buyers are heavily trained and their buy is very specialized: Store buyers focus on specific niches—bags instead of all accessories, for instance—and undergo comprehensive "TJX University" training. Instead of buying a season in advance, they're buying all the time. "Waiting longer often results in a better price but also gives the buyer more information about current fashion trends."

4. Designers make merchandise specifically for T.J. Maxx: "Vendors, say experts, also produce excess inventory on purpose, hoping TJX will buy it." T.J. Maxx also produces its own private label brand.

5. The company's size allows it to buy big, resulting in savings: "The company is big enough that it can spread the merchandise—both the diamonds and the roughs—throughout its thousands of retail outlets. That also means that brands that don't want to advertise that they're selling in off-price chains aren't as visible." Four sources told the magazine that TJX was Ralph Lauren's biggest client, something the company would not confirm. "We're absolutely fine with every vendor saying they don't do business with us," said TJX's CEO in an interview in 2011.

6. Designers have a better relationship with TJX than with department stores: While department stores charge vendors for delayed deliveries and returns, and negotiate like "they're making a one-time car buy and they're never going to go back," TJX has built up a friendly relationship with the very same suppliers. "TJX buyers are taught to make the vendor feel like it's a win-win and to leave the door open if they can't come to an agreement this time around." The store also pays its designers on time.

7. T.J. Maxx's CEO is a retail veteran: Meyrowitz started her career as a buyer at Saks and started working for the TJX corporation in 1983, eventually moving up into the CEO role in 2007. "People who have worked with Meyrowitz say she has an intuitive sense of the business because she's been on the frontlines."

· Is T.J. Maxx the best retail store in the land? [Fortune]
· The Science Behind Clothing Price Points [Racked]
· The Pay Gap Between Retail CEOs and Store Employees Will Astound You [Racked]
· Can Once-Mighty Teen Retailer Aeropostale Save Itself? [Racked]