Inside The Blossoming Relationship Between Indie Beauty Brands And Off-Price Retailers
Angelica Caporuscio isn’t big on shopping, but, when she has to, she shops at T.J. Maxx and Marshalls.
“Most of my clothes come from there, and most of the things in my house come from there. I thoroughly enjoy their locations. I hate spending money, that’s what it comes down to. I’m one of those people that, if I can get something for a deal, I will do it,” she says. “I feel like they provide really great products for really great prices.”
Caporuscio now has an additional reason to visit T.J. Maxx and Marshalls. Her young skincare brand, Veise, is available on the stores’ shelves along with a growing number of its beauty startup peers. For emerging beauty brands, the off-price segment isn’t as off-putting as it once was. It is flourishing while other retail segments languish, provides dependable cash, and heightens exposure to customers that beauty entrepreneurs relate to because they patronize value retailers, too.
“I knew that, once people tried the products, they would love them and keep using them. Our biggest obstacle was not having a marketing budget and not having employees because we’re a broke startup,” says Caporuscio. “I had to get creative about getting products in people’s hands. By working with T.J. Maxx and Marshalls, it’s almost like they’re paying us for marketing.”
The openness to relationships with off-price retailers and, in particular, T.J. Maxx and Marshalls, is a shift for beauty brands. Traditionally, off-price retailers have been viewed as necessary evils to offload merchandise that didn’t move elsewhere and often avoided out of fear their lofty discounting could hurt a brand’s full-price positioning, but, for largely unknown indie entities, the business prospects of off-price presences can be awfully enticing.
“They are very, very huge. They make larger purchases than anybody, so they can be very competitive,” says Suzannah Raff, founder and CEO of natural deodorant brand Cleo&Coco, of T.J. Maxx. “They are very aggressive with their pricing, but they make up for the pricing in volume. It took me a year to be ready to fulfill such a large order. I had been fulfilling orders of 50 to 100 [units], and their small test order was in the thousands.”
Off-price retail is huge – and getting huger. Across its formats, which include HomeGoods, Winners, HomeSense, Sierra Trading Post, T.J. Maxx and Marshalls, The TJX Cos. Inc. had 4,000 locations in nine countries as of Feb. 3 and plans to expand its store base by 50% to 6,100 locations. Last fiscal year, TJX’s sales advanced 8% to $35 billion. In contrast, sales at Macy’s, operator of 690 department stores, dipped 3.7% in fiscal year 2017 to $24.8 billion.
“They are very aggressive with their pricing, but they make up for the pricing in volume. It took me a year to be ready to fulfill such a large order. I had been fulfilling orders of 50 to 100 [units], and their small test order was in the thousands.”
Off-price retailers have been resilient despite questions about whether the strong economy, perhaps diminishing the allure of low prices, would cause their sales and customer traffic to soften. TJX has registered 15 consecutive quarters of customer traffic increases, and the company is predicting sales will jump 5% to 6% for the current fiscal year to $37.7 billion to $37.9 billion. In a note supplied to RetailDive, JP Morgan analysts estimate off-price stores will realize $18 billion to $19 billion in incremental sales by 2021. The “growth runway for off-price is far from over,” they informed the publication.
“T.J. Maxx and Marshalls are stores that are going to be around. I’m not worried about them going bankrupt,” says Ahlam Abbas, founder of natural, cruelty-free, vegan and unisex skincare line Dirty Lamb. “I feel like I’m one of their main customers. I knew I could reach people there with similar values to myself. I believe what’s happening is that a lot of their customers are reading the labels and appreciating our ingredients.”
TJX’s beauty strategies are kept tightly under wraps. During a first quarter earnings conference call, Ernie Herrmann, chief executive officer and president, declined to dole out specifics on the company’s beauty assortment, but shared, “We’ve taken a pretty good position in it.” Beauty Independent contacted T.J. Maxx for further comment, but didn’t hear back. Like many retailers, it appears to have enlarged its natural beauty selection in response to swelling consumer demand. Grand View Research Inc. anticipates the global organic personal care market will climb at a compound annual rate of 9.5% to hit $25.1 billion in 2025.
“[At T.J. Maxx,] essential oils and natural beauty are really exploding, and they really want to grow that and their natural deodorants. That’s why they approached us,” says Raff. “They have a lot of natural deodorants, and they’ve had them for a while. So, Cleo&Coco is a good fit because it allows me to be next to mainstream natural deodorants, which is very exciting. There might be 20 of those and two deodorants from Cleo&Coco, but at least we’re on the shelves with other natural deodorant brands for brand awareness.”
Although its doggedly pursuing beauty brands, Michelle Williams, owner and CEO of consultancy The Michelle Williams Group, suggests TJX hasn’t significantly changed its beauty profile. “If you’re going to get serious about beauty, you have to come up a bit on your price and find a way to have your floor look like a discovery area,” she says, referring to T.J. Maxx. “They can play little sister to the way Sephora and Ulta do things. It doesn’t always have to be about some brand’s product for $5.99.”
Discounts are towering at T.J. Maxx. TJX details its stores offer designer merchandise at prices 20% to 60% below the prices at department store, specialty and major online retailers, notably Amazon. Indie brands divulge beauty products are primarily sold at 40% to 70% off at T.J. Maxx and Marshalls, but discounts can get steeper. Cleo&Coco’s natural deodorant, normally $18, is $9.99 at the value retailer. Dirty Lamb sells its Turkish Coffee Mask for $44 and Coffee Scrub for $28. At T.J. Maxx, they’re $8.99 and $6.99, respectively. Priced typically at $24, Veise’s Hydrating Face Wash can be found for $8 at T.J. Maxx.
“It’s cool for indie brands. It gives them an entry into the marketplace to discover what it’s like to work with a major retailer. T.J. Maxx also pays very rapidly compared to other retailers who may, when you first enter them, want to pay in 90 days. T.J. Maxx has a 30-day turnaround time.”
Williams advises fledgling brands to steer clear of T.J. Maxx because of the enormous discounts required to be stocked at its stores. “Don’t do it until you have exhausted all other distribution points. You have to have a plan, and you have to know, if I do this, it’s one time, it’s going to be in and out. Be ready for the outcomes,” she says. “I don’t think they do anything except [delivering] cash flow and putting the product in some people’s hands.”
Certainly, payment can be a persuasive argument convincing nascent brands to sign up for TJX. “It’s cool for indie brands. It gives them an entry into the marketplace to discover what it’s like to work with a major retailer. T.J. Maxx also pays very rapidly compared to other retailers who may, when you first enter them, want to pay in 90 days. T.J. Maxx has a 30-day turnaround time,” says Caporuscio. On top of the favorable payment schedules, ancillary costs for fixtures, returns and staffing don’t pile up at TJX in the manner they might at specialty beauty and department stores. Indie beauty brands report T.J. Maxx commands a 50% margin. The retail margins at beauty chains can be well over 50%.
Indie beauty brand founders contend there are benefits to TJX beyond quick cash. “We get a lot of people, especially on Instagram, DMing us or tagging us to say, ‘I found your face wash and toner at T.J. Maxx, and I’m so excited that I found you there. I want everything else in your line.’ And they do get it,” says Caporuscio. Raff says, “If someone is not sure whether they want to pay $18 for a deodorant, and they can get it for $9.99, it’s a no-brainer. It’s worth the risk to try it. And, if they buy it and fall in love with it, they are happy to pay full price.”
On the parts of indie beauty brands, concerns persist, however, about what being sold at off-price retailers could mean for the potential to secure full-price distribution partners. Veise has been able to swing off-price and full-price retailers simultaneously. It’s in Lord & Taylor as well as T.J. Maxx and Marshalls. Abbas is developing a luxe version of Dirty Lamb to distinguish products that might be sold at higher-end stores from those at off-price stores. “A lot of people [employed at retailers] don’t want to hear about me being in T.J. Maxx or Marshalls,” she says. “To them, it lowers the brand value, which I still don’t understand. Personally, I don’t think it does.”
Caporuscio posits the possibility of damage to a brand from off-price distribution is overstated. “If you think about Ralph Lauren, Nike or Estée Lauder, these massive brands have great reputations, and you can purchase their products at T.J. Maxx or Marshalls,” says Caporuscio, mentioning Estée Lauder-owned brand Glamglow is carried by T.J. Maxx. “You can’t consistently go in there and find us. If we were a mainstay there, I think we would create a different brand or a different side of the brand that stayed within T.J. Maxx and Marshalls. [I would leave] if I ever felt it is actually hurting us with our other sales channels.”
TAKEAWAYS
- Recognizable beauty brands have historically been coy about their connections to off-price retailers. They’ve relied on them to offload merchandise occasionally, but avoided long-term stays at the likes of T.J. Maxx and Marshalls out of worries discounts could hurt their full-price positioning.
- Many indie beauty brands largely unknown to consumers are having a change of heart about the off-price channel. They’re turning to it for marketing purposes and to receive cash from sizable orders placed by TJX, parent company of T.J. Maxx and Marshalls. Indie beauty brand founders are also drawn to TJX’s quick payment schedules and traditional retail margins.
- TJX hasn’t provided information about its beauty strategies, but the retail company appears to be aggressively pursuing beauty brands and has enlarged its natural beauty selection.
- Beauty products are sold at T.J. Maxx and Marshalls at extremely high discounts. Products from indie beauty brands are available at the stores for 40% to 70% off – or even more. Despite the price cuts at off-price stores, indie beauty brand founders haven’t noticed sales in other channels affected.
- While many retail segments are struggling, the off-price segment continues to thrive. TJX forecasts its sales will jump 5% to 6% for the current fiscal year to $37.7 billion to $37.9 billion.
