Wednesday, January 15, 2014

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The Truth About HomeGoods

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Framingham, MA, is perhaps most known for the Framingham Heart Study, a decades-long research project tracking the health of its residents. But the New England town is also the heartbeat of a company that millions of Americans love: TJX, which includes T.J. Maxx, Marshall's, and my favorite, HomeGoods.

The company dates back to 1919, when two brothers, Max and Morris Feldberg, opened the New England Trading Company, based in Boston. A decade later, they opened their first retail store, which specialized in one item: women's hosiery. (Kind of weird, right?) 

Fast-forward to the 1950s, when the Feldberg family opened a discount department store chain, Zayre (which means "very good" in Yiddish). It wasn't until 1977 that the first T.J. Maxx opened, and from the beginning, the store specialized in "off-price" merchandise—a model that was passed onto HomeGoods, launched in 1992. 
 
HomeGoods is the mecca of discount home decor, essentially Pottery Barn, West Elm, and Crate & Barrel all rolled into one—if everything was on sale. So how does HomeGoods achieve this caliber of incredible?

The store's parent company, TJX, is notoriously secretive about its buying habits. Case in point: When a business analyst asked a very specific question about the company's purchasing strategies, CEO Carol Meyrowitz bluntly replied, "Good try, Paul, but we don't comment on that." She frequently refers to the company's sourcing as its "secret sauce," refusing to share more than the vaguest of details about TJX's behind-the-scenes action

Perhaps the most repeated question: Am I buying past-season stuff that just didn't sell? The short answer: no. HomeGoods practices "opportunistic buying," a strategy also used by Ross Dress for Less. Here's how it works: Most retailers order products six to nine months in advance, and send out buyers just four times a year. But TJX does it differently: The company's buyers are on the prowl 40 weeks of the year, purchasing primarily for the present season (so buying for spring in the spring, instead of the fall prior). 

That means they're able to scoop up stock other retailers left behind a few months prior, while still buying in-season goods. TJX considers this an advantage: Opportunistic buying allows them to wait for trends to emerge, then score hot items at a reduced price. "They get better pricing because they're waiting until the last minute," said Morry Brown, analyst with C.L. King. "It could be apparel manufacturers made too many goods and need to sell the excess or it could be some department stores canceled or pushed orders back."

Reps insists this is the company's primary mode of stocking shelves—Merowitz says 85 percent of the product is in-season—although the stores do sell some past season items, which are labeled as such. (For example, in a 2002 lawsuit, Limited Too revealed that it sells past-season clothing to TJX.) And, occasionally, the warehouses stock up on items for later seasons, but that's not the favored approach.

Buying late in the game isn't the only way the company avoids stocking up on items doomed to the clearance aisle. HomeGoods purposefully keeps its inventory "lean" by buying a limited number of each item (sometimes as few as 100), allowing for quick turnover and a fresh flow of new treasures, keeping people like me coming back on a near-daily basis. (Merowitz says she's seen people come to HomeGoods with U-Haulsand even admits to being a bit of an addict herself, revealing, "I filled up my trunk last week, and I have to stop doing that, because my husband is going to be furious with me.") 

So where does HomeGoods find its seemingly endless supply of one-of-a-kind lamps and accent chairsenough to fill up every 27,000-square-foot store with unique inventory? Let's start with the website's (somewhat vague) explanation:


HomeGoods buyers travel the world to find the most exciting and unique merchandise available--many of the same items seen in high-end catalogs, specialty and department stores. Through innovative buying approaches and positive vendor relationships, HomeGoods is able to offer a wide assortment of high-quality goods, providing shoppers with a vast selection of unique merchandise along with substantial savings. 

This doesn't tell us much. So I did some digging, and found a 2010 lawsuit against HomeGoods, when a man sued because he sat on a bamboo bench at the store and it promptly collapsed. (The case was dismissed, BTW). Here's the tidbit of note: HomeGoods had purchased the faulty piece of furniture from a distributor, CBK. There's a company, Midwest-CBK, which according to its website, sells "exclusive, innovative, artist-driven products of the highest quality that reflect traditional and updated design trends." Check out a few pics from the showroom...








Totally looks like HomeGoods, right? (The company has showrooms across the country, but you have to be a retailer to gain access. Bummer.) But CBK definitely isn't HomeGoods' only supplier, lest you think the big shots are lying about those global shopping trips. (A quote from a company rep: "A buyer's life here is a lot of travel.") In a HomeGoods blog post, a buyer recently revealed the itinerary of a shopping trip: Italy, Spain, Morocco, Portugal, Hungary, Turkey, and Bulgaria.

So, yes, the merchandise really has as much international flair as the colorful shelves suggest. In fact, in 2012, The Journal of Commerce named TJX one of the United States' top 100 importers. How massive is its scope? The company works with over 16,000 vendors, has 13 buying offices in 10 different countries (including Australia, China, India, and Italy), and has a purchasing team of 900 people (one report said 700 of these buyers work for HomeGoods), who shop in 60 countries, pretty much year round. "Our global sourcing is one of our most powerful drivers, which allows us to buy virtually anywhere at any time," a company insider has said. 

It's taken TJX 36 years to master this merchandising system, which is built on solid vendor relationships. A "very high percent" of the sourcing is done in Europe, although the goal is to create a "very unique exciting assortment" of product. As a result, buyers are encouraged to take "intelligent risks," which may explain the quirky home accessories that seem to be exclusively sold at HomeGoods. (Random aside: Did you know there's a Canadian version of the store, called HomeSense?) 

In a USA Today article, Merowitz said that 85% of the company's products are purchased directly from the manufacturers (although some big-name brands like Coach say they only send 'excess discontinued inventory' to the stores). "We're absolutely fine with every vendor saying they don't do business with us," she said. "It's a very important part of our relationship." So, apparently, in the retail world, TJX is like the friend you secretly hang out with, but would never tell the cool kids about. And TJX is totally cool with that. 

Part of the deal: Unlike department stores, which can return unsold inventory to designers at the end of the season, TJX stores buy stuff and commit to it. In other words, if a buyer purchases a batch of lamps that totally bomb, HomeGoods will keep them until they sell (and yet again, someone like me finds the unloved item on clearance and takes it home). 

My only remaining question: Can I tag along on the next HomeGoods buying trip? 

18 comments:

  1. Really interesting and well-researched!

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  2. Why can't you buy anything online for HomeGoods or CBK?

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  3. Why can't you buy anything online from HomeGoods or CBK?

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  4. I've worked at TJX - Not all of this is true...

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  5. Do you know what HomeGoods' clearance schedule is? I know Target has one that's been circulating around the Internet...

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  6. Thank you for sharing wonderful information and it's very helpful article..

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  7. I work for home goods we get stuff that is damaged and repaired mostly , You see cracked furniture that has reinforced wood underneath or it has been glued in the back room I have repaired almost everything in the store we use no stich glue for fabric and superglue , wood glue or gorilla glue ,,,, Everything in the store is flawed thats why its such a deal its stuff that was meant to be damaged out but they buy it for penny's and sell it for $100's ...everything is almost always returned with in a week after being purchased ! Fuck them they pay workers next to nothing and pocket all the profits ...I was told when I was hired that they are hiring older people and getting rid of young kids I was also told I would get great hours and pay ....I have not seen that yet!!!!!!

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    1. are Home goods UPC's assorted or are they exact?

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  8. all i can say is I worked from them and I agree with anonymous over here

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  9. I was in there today and saw a nice ottoman! Looking closer saw a cigarette burn! All of the glass tables had scratches ..used furniture! Crazy never really thought about it nice but faulty!

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  10. This is very essential blog; it helped me a lot whatever you have provided. Thanks!!!

    Sell House Without Real Estate Agent

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  11. I can say that I have worked for Home Goods in the past and the people who do most of the returns are the interior designers who come in and buy up thousands of dollars worth of merchandise. They almost always return it once they are done with it. The returns were very rarely because of products that were damaged.

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  12. well explained.. thanks for sharing your thoughts.
    online furniture india

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  13. There are various benefits to having your residence furniture custom made. For newbies, you get the flexibility of getting exactly what you require. You do not have to help compromise on workstation size. One example is, say you have a computer system with the oversized screen. Instead of buying a regular-sized desk and then dealing with to situate the keyboard, computer mouse button, lamp, and any papers to allow the screen, you can have something built to hold programs.

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  14. Bought a brass and glass table for $399 found it listed online ranging from $785 to over $1300! There wasn't a scratch on it. It's hit or miss for me though mostly hit Love this store !

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  15. I have been reading your posts regularly. I need to say that you are doing a fantastic job. Please keep up the great work. read more

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  16. I had seen a beautiful sugar skull bride statue in our local HomeGoods store. The statue was put on clearance. I went back yesterday to purchase her and was told she was put into the compactor and crushed. This was a 36" tall statue with amazing detail and workmanship. Thrown away and crushed. I was literally sickened. How could they do that? How is this good business? The ladies working at the store said that is what happens to the clearance merchandise. So - they don't keep it until it sells. Apparently they throw it in the trash. Sad. I have searched the interwebs to find another statue like her and have turned up nothing.

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