Amid COVID-19, is it Finally Time for Off-Price to Prioritize E-Commerce?

It’s a question worth discussing as the unprecedented pandemic continues to strain the retail industry. Take, for example, TJX, the parent company of T.J. Maxx, Marshalls, and HomeGoods, which reported first quarter net losses exceeding $887 million after closing all of its stores and distribution centers over a two-month span in compliance with statewide lockdowns. Similar losses have been felt elsewhere. And although retail stores recently started to reopen, expected consumer reluctance to shop in public settings will likely hinder profit margins for the immediate future, as well as the possibility of a second wave shutdown. Right now, TJX is the only major off-price company in North America that offers e-commerce options, but even those are limited.

It’s safe to say that off-price retail companies assimilating into the e-commerce arena comes across as slightly contradictory. After all, the two worlds don’t parallel one another. The in-store shopping experience is one of the major appealing aspects of shopping the off-price route, and it’s difficult to replicate that thrill of the hunt online. In March, Burlington eliminated its entire e-commerce platform to solely focus on its brick-and-mortar stores. As we observed from the flash-sale sites following the 2008 Great Recession, constantly flooding consumer email inboxes with discount advertising isn’t a sustainable business model.

However, there’s logical reasoning to it. From stay-at-home orders and full-time remote working to wearing masks and social distancing in public, this pandemic has taught us that amid challenging times, unprecedented adjustments tailored to overcoming complex obstacles are necessary for survival. And when using the term unprecedented, off-price shifting to e-commerce definitely fits the bill. It could prove to be a viable solution.

Here are three potential benefits to consider:

1. Aligns With Consumer Behavior

On a global spectrum, e-commerce was already growing in popularity prior to COVID-19, and is now even more relevant due to consumer spending shifting online during the pandemic. Considering more than 51 million people have filed for unemployment since the pandemic began, consumer tendencies have also shifted to value-based shopping similar to their recession response in 2009. Off-price e-commerce platforms would allow consumers to continue value-based shopping without entering public settings.

Although the treasure hunt feeling wouldn't be fully replicated, off-price retailers could still sell additional products — thus expanding their profit potential while capitalizing on historic excess inventory levels from major brands whose seasonal lines were disrupted. The e-commerce offerings would coincide with steady in-store selling, serving as an additional revenue stream throughout a recovery process where every dollar counts. Online sales may fluctuate, but would still provide more benefit than harm. In the same vein, designated online-only inventory could provide stores with additional space for assortments that otherwise wouldn’t be available, paving the way for a wider range of items to sell. 

2. Develops Stronger Customer Loyalty

Another important byproduct of e-commerce to consider is increased customer satisfaction and loyalty levels. By off-price retailers adding e-commerce, customers would appreciate their efforts to help alleviate the anxieties of entering public settings. It would create a simplified customer journey completely new to the off-price retail realm. Retailers could offer BOPIS (buy online, pick up in-store) options along with product shipping, which would add further fuel to the fire for increased sales and enhanced customer loyalty. Then, an extensive marketing campaign built around “making it easier for you”  and “we’re all in this together” sentiments would foster long-term customer relationships.

There's also the environmental aspect. In expanding e-commerce capabilities, off-price retailers would be reducing the carbon footprint of excess inventory that usually ends up in landfills that produce greenhouse emissions. By focusing on sustainability, they could attract a new audience of eco-friendly consumers who are passionate about reducing climate change. It would align with the times. Studies have found that 53 percent of millennial consumers prefer to purchase eco-friendly products, while 87 percent are willing to spend more on sustainable clothing. Thirdly, an eco-friendly shift would create avenues for exclusive partnerships with some of the industry’s largest environmentally conscious brands.

3. Creates Opportunity for Digitization

Despite the aforementioned benefits, there’s a reason e-commerce hasn’t been widely implemented in the off-price sector yet. With a business model pillared on rapid product acquisition, it's extremely difficult to coordinate in-store and online inventory levels. Adding an off-price e-commerce platform will require the use of advanced technology in order to remain agile while handling two separate inventory entities. A diverse range of software solutions can help companies simplify excess inventory acquisition, streamline supply chain processes, enhance inventory management, stay on top of consumer trends, and increase their operational efficiency.

In a perfect world, off-price retailers wouldn’t need robust e-commerce offerings to thrive. However, the current reality of retail is far from perfect. The complex challenges of an unprecedented pandemic recovery can only be simplified through new, innovative lines of thinking. Although e-commerce wasn’t a part of the off-price sector’s past, it may be a smart path for its future.

Ronen Lazar is the CEO of INTURN, an enterprise solution that empowers brands to efficiently convert slow-moving and excess inventory into working capital.