After an 8-year hiatus, TJX Companies (TJX) re-launched tjmaxx.com, reestablishing the firm's e-commerce presence. The firm tried to become an online presence back in 2004, but given the nature of the TJX's opportunistic and odd purchasing, product allocation was sloppy and too much time and money was spent updating inventory.
What do we expect from tjmaxx.com now?
Although we do love TJX's business model of buying lots of designer goods at favorable prices, we admit the model does not really lend itself to online sales. In fact, that's one of the reasons why we think TJX, fundamentally, is one of the best stories in retail. It is simply extremely hard to replicate the in-store experience online, and the firm has built so many stores that it can easily allocate product to markets where it will sell quickly and at the best prices.
Becoming an Omni-channel retailer is admirable for the likes of Nordstrom (JWN) and Macy's (M),but the inventory selection at both firms is much more predictable and stable. Macy's may order 1,000 red Nike t-shirts for all sizes small through extra-large, whereas TJX might have 20 red Nike t-shirts, 30 pairs of purple Under Armour basketball shoes in assorted sizes, and 2 pairs of adidas soccer socks in XXL. It isn't hard to see the issue and lack of scale with putting TJX's inventory online.
Ultimately, we think the firm will focus only on the items it purchases large amounts of, so it can have predictable inventory online that won't require constant refreshing. We may also see the firm stock its online inventory from fewer vendors-limiting the scope of its online efforts but also limiting the scope of its headaches.
All things considered, we think re-rolling out tjmaxx.com is a good idea, as it will help the firm reach some consumers that have moved their shopping online. However, we don't think it's a replacement for the in-store business model, nor do we think it will cannibalize existing stores' sales.
Even though its current web presence isn't good, we can see from the above chart that TJX is wanting for sales acceleration (with the 2-year stacked comp relatively flat). Still, shares look fairly valued at this time, so we won't be adding the company to the portfolio of our Best Ideas Newsletter.