How Overstock Stores Work: The Truth About TJ Maxx, Marshalls, and More

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"The discounts you get at these popular retailers come with a big environmental cost."

Have you ever thought that buying something at an overstock store like TJ Maxx, Marshalls, Ross, or HomeGoods was helping excess inventory stay out of a landfill?

It might seem that way—especially when you “take one for the team” by grabbing a bag of almost-expired chips on your way through the checkout. Combine that with rows of items that look like last year’s leftovers, and purchasing that Rae Dunn mug can really make you feel like a hero.

You did your part… right? Well, that’s what these retailers want you to think.

The Popularity of Overstock Stores

While you won’t spot any TJX (the parent company of TJ Maxx, Marshalls, and HomeGoods) or Ross finds while flipping through the pages of Vogue, these two companies have consistently been in the top 20 most profitable public fashion companies in McKinsey’s Global Fashion Index, going back as far as 2008.

The home sections of overstock stores—which include everything from furniture and decor to small appliances—are on the rise, too. In April, TJX shared its home business represented 40% of its total sales in 2020, up from 33% the year before. Sales are so good that it’s planning on doubling the amount of the stores it currently has, from 700 to 1,500.

Overstock stores like these continue to rise in popularity and sales, and consumers don’t see any harm in that. The assumption is that you’re getting great deals on excess and unsold merchandise from some of the biggest brands—things that would have otherwise gone straight into the trash if not for these retailers being the “hero” and scooping them up. But they’re not nearly as sustainable as they seem.

How much do we actually know how sustainable these stores are? How are they getting all that clothing in the first place? And how exactly do they get away with selling name-brand items at such a low price point? Here’s everything you should know before your next shopping trip.

How Overstock Stores Work

The supply chains that support the off-price market are typically categorized one of two ways: Those that provide unsold goods from the full-price market, and those that provide newly made goods to off-price retailers. Typically, overstock stores are dependent on both supply chains for their merchandise.

Take home items, for instance. According to HomeGoods, the products on store shelves are a mix of those from top brands and designers, and unsold and overproduced goods. “When a designer overproduces or other stores overbuy, we swoop in, negotiate the lowest possible price, and pass the savings on,” the site reads.

They also take advantage of “department or specialty store cancellations, a manufacturer making up too much product, or a closeout deal when a vendor wants to clear merchandise at the end of a season.” All of these methods allow them to buy merchandise for cheap, and sell it for cheap.

“Hurdles such as poor planning, lack of real-time data, and data transparency to canceled orders leave brands with goods that can’t be sold at the price the brands feel good about,” says Michelle Gabriel, an impact and sustainability strategist, and the instructor of Sustainable Fashion Business Strategy at Glasgow Caledonian New York College. “These unsold goods are a liability.”

One way to get rid of the liability? Sell to big retailers.

Enter the Off-Price Market

Buyers from these overstock companies form relationships with brands and negotiate to buy unsold items for a much cheaper price.

“These buyers aren’t as discerning as a traditional wholesale partner might be. They’re happy to accept incomplete size runs, odds and ends styles, or out of season items,” Gabriel says. “The trade-off is the low price offered for the goods.”

This isn’t something big retailers talk openly about, however. “For many brands, aspiration, status, and perception are very important components to their overall strategy,” Gabriel says. “Their customers would not want to buy their brand if they knew it was also being sold at a low-end, off-price store.”

Gabriel says these brands also have to defend their full-price opportunities. “That’s where the majority of their profit margin comes from,” she says. “They don’t want to point customers to discounts when they have new product to sell at full price.”

Where the Low Prices Actually Come From

Most consumers in the United States are on the hunt for a good deal. A 2018 survey from RetailMeNot shared 81 percent of Americans say finding a great deal or discount is on their mind throughout the entire shopping journey. So, how are these overstock stores getting such low prices on these goods?

When products don’t sell, companies can do a couple things: Pay to store them in warehouses, or pay sales and merchandising teams to try to sell them. That’s where the small price tag comes in: Big manufacturers are happy to make even the tiniest profit off of these items.

“Brands have almost no other means to offload unsold products,” says Gabriel. “So off-price retailers can offer exceedingly low prices for goods, and brands are often happy to have gotten any revenue from this liability product.”

Overstock stores can also buy surplus when a vendor has over-produced, or buy returns when a major department store has backed out of an order.

“This also works because the off-price customer is typically less fashion savvy or discerning; this customer doesn’t care so much that the item may be several seasons old or not the newest version,” Gabriel says. “They care about the brand name and the price.”

With that being said, as previously mentioned, those shelves aren’t just filled with unsold and excess goods. These stores are also notorious for buying new merchandise. According to then-TJX chief executive Carol Meyrowitz in a 2011 interview with USA Today, over 85% of the company’s merchandise is current season.

“We now have an inventory hungry—and very lucrative—sector of the fashion market that’s highly dependent on poor merchandising planning and wasteful production practices in the full-price market in order to operate successfully.”

All in all, overstock stores aren’t doing the planet any favors. These retailers are still encouraging consumers to buy trendy new items (versus more sustainable, long-lasting items)—aka fast fashion and fast furniture at its finest. In addition, they’re dependent on other brands’ overstock clothing, and those brands know it.

That means they’re not always concerned with overproduction… and the many environmental impacts that come along with it. Take the fashion industry, for instance. It’s responsible for 10% of global carbon emissions (there was an estimated 2.1 billion metric tons of greenhouse gas emissions in 2018 alone), uses around 93 billion cubic meters of water annually, and is to blame for 20% of all industrial water pollution worldwide. And that’s just the start of a very long list.

“We now have an inventory hungry—and very lucrative—sector of the fashion market that’s highly dependent on poor merchandising planning and wasteful production practices in the full-price market in order to operate successfully,” Gabriel says.

Home goods and furniture aren’t much better, as furniture is one of the fastest-growing landfill categories. According to the Environmental Protection Agency (EPA), the generation of furniture in municipal solid waste (MSW) accounted for 12.1 million tons in 2018, carpets and rugs was 3.4 million tons, and small appliances (toasters, hair dryers, etc.) was 2.2 million tons. It really makes you think twice about buying yet another throw pillow.

red and white dining tables and chairs

Unsavory Conditions

Exceptionally low-priced goods come with a lot of other unsavory sustainability issues. In the fashion industry, that includes unstable facilities, which can result in catastrophes like the 2013 Rana Plaza collapse, low (or lack of) environmental safety standards related to chemical inputs and water usage, and no labor standards governing living or fair wages.

A 2016 report from the Wage and Hour Division revealed more issues with products sourced by TJX. After a larger investigation, it revealed wage, overtime, and record-keeping violations in 85% of cases. Some workers were even reported to make only $4 an hour.

Now, TJX has a relatively extensive area of their websites speaking to how they define responsibility, how they action it, and how they’re improving. Ross also has pages dedicated to the company’s CSR strategy and sourcing standards, as well as a link to their annual sustainability report. With that being said, you can’t believe everything you read on a company’s website.

“This can feel great to see, but it’s important to remember that these are all voluntary disclosures and don’t necessarily speak to how any of these strategies are actioned or how impactful those actions might be,” Gabriel warns. “What they omit is as important as what they provide, and without regulation, there are few penalties for misrepresentations or fabrications.”

So, what can we as consumers do? The first step is to avoid these overstock stores whenever possible, and instead do your best to shop sustainably.

overstock stores

Alternative Ways to Shop More Sustainably

1. Support Ethical Brands and Retailers

Instead of shopping at overstock stores, support brands and retailers that make their products sustainably and ethically. The next time you’re in search of a cozy new blanket, cute dress, or home decor item, taking an extra step to research the company and buy from the ones doing good can make all the difference.

2. Spread the Word

Now that you’re well-informed, educate others about the truth behind overstock stores and other big retailer supply chains. Even sending this article to a so-called Maxxinista in your life may make them think twice about where they’re spending their money. Who knows—maybe the next time they’re in need of something, they’ll buy an eco version instead.

3. Let Go of Fast Fashion and Furniture

As enticing as it can be to go for the cheaper alternatives to home goods and clothing (or as Gabriel refers to it, “junk food fashion”), focusing on supporting sustainable brands will make you feel better about where your money goes. And, you’ll be rewarded with higher-quality items that last longer.

4. Be Vocal with Your Go-To Brands

It’s clear that excess inventory is a huge problem. To help the brands you love maintain a more sustainable supply chain, sign up for their email lists and let them know what you want. Doing so helps them drastically cut down on excess inventory and only order what they need.

5. Buy Secondhand

Buying secondhand is one of the most environmentally-friendly actions you can take. If you’re looking for high-quality items with a cheaper price tag, check out your local thrift stores or look online. Aside from being affordable, it’s also a fun way to find unique items not everyone has.

These changes may seem small, but they make all the difference. The next time you have the urge to drive over to your go-to overstock store, head to your nearest Goodwill instead.

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The discounts you get at these popular retailers come with a big environmental cost.

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