Already coming off a banner year which saw sales top $23 billion, off-price retail giant TJX Companies said it will be making a "substantial investment to start up e-commerce" in the near future as part of a plan to "become a company of $40 billion and beyond,"
"E-commerce is clearly in our future," CEO Carol Meyrowitz said on the Q4 conference call. "We continue to see e-commerce as a major opportunity for TJX. We see it as a marriage between our stores and the Web. We plan to lever our $23 billion brick-and-mortar business and merchant organization that is over 700 people strong,"
So how big is the opportunity? The Commerce Department said total U.S. e-commerce sales jumped 16.1% to $194.3 billion in 2011 and comprised 6.8% of total retail (excluding restaurant, auto dealer and gas station) sales. Over the past 5 years, compound annual growth of online sales was 11.1% vs. just 2.2% for overall retail sales. Take a look at a few of the largest chains in the U.S. selling a significant amount of apparel:
Each company has built up its e-commerce operations to over 5% of total sales and are seeing much greater growth in the online channel than in stores. TJX, which operates 2,241 T.J Maxx, Marshalls and HomeGoods in the U.S, is already the fastest growing company of this group over the past 5 years. We see no reason why they can't scale up relatively quickly and build an e-commerce business that complements the brick-and-mortar presence and eventually makes up greater than 5% of their total sales.
"We believe e-commerce will open a greater landscape for categories," Meyrowitz said. "Just think about the potential for us to carry categories online that we wouldn't carry in our stores."
And it's not as though they're starting from scratch: The current sites are only informational right now, but Merowitz said in aggregate they drew over 1 billion impressions during the holiday season and average "well over 4 million visits every month." TJX has been active with social media – the three brands in the U.S. combined have nearly 1.5 million "likes" on Facebook and over 66k followers on Twitter, and have an extensive email list of millions of shoppers.
The company made a brief foray into online selling back in 2004, only to abandon the effort after less than a year amid operating losses (they still sell through T.K Maxx in the U.K.). Meyrowitz said TJX has learned from its mistakes and online experience in the U.K. and will move cautiously this time, refusing to speculate if e-commerce is in the cards for 2012:
"The more we learn, the more convinced we are of the huge opportunity e-commerce can be for us. That said, we'll take our time, and we'll do it right. We're not ready to talk timing yet, and we will have more to say as we move through the year."
This move is a potential game-changer not just for TJX, but for discount retailers in general. Trends such as the explosive growth of flash sale sites have shown that shoppers are hungry for heavily discounted brand names online. And while the nature of the business model might not have translated well to online selling in the past, the recent move into e-commerce by Dollar General and Dollar Tree show that the economics are starting to make sense. We expect names like Ross Stores, Family Dollar and 99 Cents Only to join the online party in the near future.