Shoppers load up their vehicle outside a HomeGoods store in South Bend, Indiana, U.S., on Monday, … [+]
TJX Cos. CEO Ernie Herrman did a pretty big about face last week when he announced that his company’s HomeGoods brand would enter the e-commerce arena. E-commerce will “satisfy our customer base and attract new shoppers,” Herrman told investors in a statement that contrasted sharply with sentiments he had made earlier in the year, and in which he had claimed that his company would “not look to e-commerce as our major leveraging point to get us through Covid and out the other side.”
But, oh what a difference six months makes.
Since the start of the year, the pandemic has shone a bright light on two important things — one, that home furnishings is a great margin business (especially, when people are trapped at home), and, two, that e-commerce is kind of a big deal in 2020.
Both of which are why Mr. Herrman’s latest pair of flip flops looks really good on him.
While TJX’s overall comp store sales fell 5% this past quarter, HomeGoods’ store comps, in comparison, helped TJX exceed analyst expectations as they rose by what on the surface appears to be an almost ridiculous 15%.
Looks, however, can be deceiving.
A 15% increase does not hold a candle (pun intended) to what other home furnishings companies have been seeing online. For example, Wayfair last quarter reported that net revenue rose 83.7% over the prior year to $4.3 billion, and Target, in its earnings report last week, also reported total home furnishings category sales growth in excess of 20%, likely fueled by strong online sales as well.
Put simply, for TJX and HomeGoods, there is still room to grow online.
However, the real story here doesn’t begin and end with just getting into e-commerce. Sure, Wayfair, Target, Walmart, and even Home Depot and Lowe’s have been succeeding via e-commerce amid the pandemic, but TJX and HomeGoods are different. They are off-price retailers, a category of retail to which no one has quite yet cracked the code online.
Broady TJX is a great retailer because it does in store what is difficult to simulate online — i.e. the treasure hunt across everything from apparel to home goods. By the same token, HomeGoods is successful because its stores are veritable delights of unexpected home furnishings finds from one day to the next. Bargain hunting consumers never know what to expect in HomeGoods’ stores from one day to the next.
A myriad of companies have tried to simulate the psychology of the find online, but none have ever really captured its ethos. Online flash sale models have tried to approximate the concept, but they are like the red-headed stepchildren of off-price retailing because they are predicated on deal fever for large quantities of single items versus a plethora of routined unexpected delights at local stores.
Online resale sites, like ThredUp and The RealReal, are probably the next closest siblings to off-price deal hunting, but there, too, the items are all preowned, and the overall economics work quite differently from how TJX and HomeGoods operate day-to-day.
All that being said, there’s a there, there, somewhere.
It’s just a question of what the there looks like because the ultimate answer isn’t that HomeGoods should just enter e-commerce and start shipping products left and right. Amazon, Wayfair, Walmart, Target, and Overstock all do that already, and the landscape is littered with countless others that have also tried and failed.
No, if HomeGoods is to be successful in its e-commerce foray, it needs to seize the opportunity in a different way. It needs to put forward something that has never been done before, something that plays on its strengths and that has nothing to do with traditional ways of thinking.
It needs to make something that looks like this:
#1 — Each digital visit should be tailored to a local HomeGoods store
HomeGoods and off-price stores in general are unique. They all carry small lots of products that are hard to find anywhere else and that vary from store to store. Making this shine through online though is difficult. To do it right online, everything needs to be personalized via a digital front face so that loyal HomeGoods customers shopping online feel the same way they do standing and waiting to get into a HomeGoods store on a normal Saturday morning.
Say, for example, a customer lives in Des Moines, IA.
Once this Iowa customer goes online, all the items and the prices of those items should all be personalized, right down to his or her local store in Des Moines, the second he or she opens his or her mobile or desktop browser. He or she can then browse, search, or do whatever he or she wants, and then also rest assured that all the items in the online store are unique to the Des Moines locale and that he or she is not danger of competing with anyone outside of Des Moines to get them.
#2 — Product drops should be timed to the day
Once the inventory is localized as described above, the next thing HomeGoods should do is to take a page from Nike’s Sneakers App and tie the product deliveries at the store level to the time of day and in-store arrival schedule.
For instance, if new chairs at hot prices are set to arrive on a Saturday or if new markdowns are planned for the following Tuesday, HomeGoods should let customers know via upcoming “inventory drop” or “price cut” features online. Customers can then browse from the upcoming selections, ask for notifications of the upcoming events via text, or even, dare one say it, get spurred to go into their local stores to snap up something they like before they risk letting it go on sale.
#3 — Incent curbside and in-store pickup
With all the above now in play, the third and final step HomeGoods should take to achieve off-price omnichannel greatness is to make its localized inventory online available for curbside and in-store pickup at the top of the funnel on its product landing and detail pages.
Go back to the Des Moines, IA example.
Imagine the same local Des Moines HomeGoods enthusiast has her eye on a new chair that is arriving on Saturday at a hot price. She asks HomeGoods to notify her of when the product is available to be purchased for pickup in store. She later receives the notification via text, clicks on the notification, and then reserves the item for pickup on Saturday and after she plans to be finished taking the rug rats to their soccer practices.
All in all, she gets the same great HomeGoods treasure hunt experience, but she gets it on her schedule and at a time when circumstances would have otherwise prevented her from going into the store. She is still consuming. She is just consuming on her own schedule.
That is omnichannel greatness, and that is what HomeGoods has been missing and how it could also continue to differentiate itself in the marketplace. And, oh by the way, this is essentially the exact same technology that could be lit up through smart Facebook and Instagram ads at the point of serendipitous discovery, too.
Notice anything left out though?
Shipping.
Not once does the above say anything about shipping because shipping is not a point of differentiation. Amazon, Wayfair, etc. have shipping down pat. That is not HomeGoods’ game.
HomeGoods’s game is the delight of the unexpected, aka the “find” — i.e. the psychological feeling that comes not from the search bar but from the joy of shopping in its purest form. Amazon, Wayfair, Target, and Walmart are not built for the find. They are built online and in stores to push through mass quantities of items as opposed to unique items by store and by locale.
The beauty of what’s described above is that it gives HomeGoods a new way to talk to its customers digitally and in the moments of their lives when it matters most and in a way that still retains the beauty of its core business model. Plus, if it all works, there is nothing to say that HomeGoods cannot add shipping into the equation at a later date.
I asked a TJX spokesperson for a comment or even a hint of what to expect from the recent announcement and if the market should expect anything like what is posited above.
The spokesperson offered up the following: “We are excited about our plan to add HomeGoods to our U.S. e-commerce offerings later next year, which already include tjmaxx.com, marshalls.com, and sierra.com. We believe that current HomeGoods customers and new customers alike will love having the opportunity to shop our unique selection, great brands, and incredible values not just in store, but also from anywhere, 24 hours a day, 7 days a week. We look forward to bringing our treasure hunt experience online and hope our customers will enjoy this new way to ‘Go Finding.'”
Notice the emphasis on “shopping” and “finding” — both are right in line with how such a statement should read at this point, and that fact should not be at all surprising from a company that prior to this year had achieved 24 consecutive years of positive comp store sales growth.
TJX and HomeGoods have shown that they know what they are doing year after year.
Last week’s announcement may have looked like an egg on your face flip flop, but in reality it is more than likely just another sign of great leadership for the long haul.
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