Many shoppers have experienced the thrill of finding a designer item for a fraction of its original price. This bargain hunt often leads them to an off-price retailer, a store that sells brand-name merchandise at a significant discount. These stores offer recognizable brands for 20% to 60% below what you might find in a traditional department store, creating a popular shopping destination.
The Off-Price Business Model Explained
The business model of an off-price retailer is built upon opportunistic buying. Unlike traditional retailers that order merchandise months in advance, off-price buyers purchase goods whenever an opportunity arises. This allows them to acquire high-quality, branded items at a lower cost, with the savings passed on to the consumer.
A primary source is manufacturer overruns, when a factory produces more of an item than the original client ordered. If a department store cancels a large order, manufacturers are left with excess inventory they need to sell quickly. These retailers also purchase past-season merchandise no longer current enough for full-price stores and products from closeout deals when a company goes out of business.
To keep prices low, off-price retailers also manage their operational costs efficiently. Store designs are simple, with no walls between departments, which allows categories to expand or shrink based on the inventory they acquire. They spend less on advertising and elaborate store displays compared to department stores, use lean staffing models, and rarely offer coupons, relying on consistently low prices to attract customers.
Examples of Off-Price Retailers
The TJX Companies is a major player in this sector, operating several chains, including T.J. Maxx, Marshalls, and HomeGoods. T.J. Maxx and Marshalls offer family apparel, accessories, shoes, and home items, with Marshalls often featuring a larger men’s and footwear section. HomeGoods focuses exclusively on furniture, decor, and other housewares.
Ross Stores operates as Ross Dress for Less and competes directly with T.J. Maxx and Marshalls, but is often perceived as offering lower price points. Burlington, formerly known as Burlington Coat Factory, has expanded its inventory beyond outerwear to include a wide range of clothing, home goods, and baby products.
How Off-Price Retailers Differ from Other Stores
The off-price model is distinct from other discount-oriented stores. Discount stores like Walmart and Target primarily sell private label goods or purchase current-season products in massive, predictable volumes to secure low prices. Their inventory is consistent and not based on opportunistic buys of leftover goods.
Outlet stores also represent a different model. While they traditionally sold a brand’s excess items, many are now owned by a specific brand, like a Nike or Coach Outlet. A significant portion of the merchandise in modern outlets is “made-for-outlet,” meaning it was manufactured specifically for those stores and never intended for full-price retail. This differs from the off-price model, which sells goods from many brands that were originally meant for other retailers.
The contrast with department stores like Macy’s or Nordstrom is sharp. Department stores are the primary clients for new, current-season merchandise from brands. They order products far in advance and sell them at full retail price when they launch. Their inventory is predictable and organized by brand, offering a full range of sizes and styles for the season.
The Off-Price Shopping Experience
Shopping in an off-price store is often described as a “treasure hunt.” Shoppers rarely go in with a specific item in mind, but rather with the hope of discovering an unexpected deal. The merchandise is organized by category and size, not by brand. For example, all women’s medium shirts from many different brands will be grouped on a single rack.
This environment is a direct result of the business model. The inventory is constantly changing and inconsistent from one store to another, or even from one week to the next. What you find today will likely be gone tomorrow, creating a sense of urgency to purchase. This “buy it now or it’s gone” feeling encourages customers to return frequently.
Pros and Cons of Shopping Off-Price
The most significant advantage of shopping at off-price retailers is the potential for substantial savings on high-quality, brand-name products. For value-conscious consumers, the ability to purchase apparel, accessories, and home goods for 20-60% less than department store prices is a major draw.
However, this model has drawbacks. The inconsistent selection means you can’t rely on finding a specific item, brand, or size when you need it. The quality of merchandise can also vary, as some items may have minor imperfections. Return policies can also be stricter than those at traditional retailers, sometimes offering store credit rather than cash refunds after a certain period.