TJ Maxx And Saks' Off Fifth To Debut Online Stores

By Sam Lewis

Retail rivals realizing the value of e-commerce

It appears the retail world’s need for technology has caught up with its need for fashion as 2013 has been highlighted by many retailers updating their sales platforms by going online and mobile. The latest do so are TJ Maxx and Saks’ Off Fifth — the luxury retailer’s outlet store.

That’s not to say that the move to e-commerce has been easy. Retail is chaotic, and inventory management can be tricky. For chain retailers offering clearance items, last-year’s fashion, and overrun merchandise — like Saks Off Fifth and TJ Maxx — it can be even more so. Unpredictable, fast-moving inventory can exponentially complicate selling goods via the web. TJ Maxx demonstrated this by its first attempt at e-commerce in 2005 that it quickly abandoned and left the company $15 million in the hole.

Years later, inventory management software has made advancements in real-time tracking and website updates, allowing retailers to avoid the cardinal sin of e-commerce: don’t tell customers something is available when it is not. Companies like TJ Maxx now feel confident enough in inventory management software’s abilities to make significant investments in it, and step into the ring for another swing at e-commerce. In 2012, TJ Maxx spent nearly $200 million to buy Sierra Trading, an online retailer, for its technology and expertise. The investment might be big, but the annual payout of online sales totaling $1 billion, according to Avondale Partners, makes it a small price to pay.

Meanwhile, Saks, which has closed department stores in favor of expanding its discount chain — Off Fifth — is in the midst of carrying out a three-year, $95-million overhaul of computer systems that will allow upgrades to e-commerce. Additional money was spent to move the launch to autumn 2013, opposed to early next year. Saks CEO Steve Sadove told Reuters that Off Fifth’s online selection will be limited, focusing on its best sellers. This move cut costs of merchandise photography and editorial content. “Ultimately, what you have to weigh is the cost of putting an item up online against the incremental sales that'll be generated," Sadove said. "It's not free."

Canadian retailer Hudson’s Bay was attracted to the moves toward e-commerce being made by Saks. The interest led to a multibillion dollar deal, allowing Hudson’s Bay to acquire the New York-based luxury retailer late last month.

According to Forrester Research, e-commerce is growing quickly, at a rate of 10 percent a year. Retailers are learning, some sooner than others, this new channel is here to stay, and those not making investments in it might be the doing the equivalent of leaving money on the table.