Such an interesting post, Elliott! TJX is truly regarded as the industry leader in off-price. However, I worry with the growing presence of Nordstroms Rack, Off 5th, Bloomingdale’s Outlets, and particularly Macy’s Backstage, which just officially launched this fall. I have two main worries:
1) As bigger retailers like Macy’s have their own off-price outlet offerings, they will transfer their slow-selling stock from regular Macy’s to Macy’s Backstage. Rather than jobbing it out to TJX for 1 cent/unit, they get a better return (think 3 cents/unit) for this channel stock-transfer. Also, holistically it is overall better for the total Macy’s parent business, presuming the Macy’s store stock being jobbed out is fitting for Backstage in the eyes of the Macy’s Backstage buyers. This will only deplete the amount of available inventory for TJX to purchase.
2) I worry that the relationships with the vendor community will be challenged. When Macy’s Backstage becomes a larger business, they will become increasingly harder to say no to. Suppose there are only 800 units of a given North Face fleece jacket available. North Face could sell these off-price units to TJX or to Macy’s Backstage (but they don’t have enough stock for both). When Macy’s is one of their biggest omni-channel retail partners, how can North Face say no to them? Macy’s will have incredible buying power as they buy for both their retail and off-price businesses.
Very interesting retail model, thanks for sharing! I had heard the name but didn’t know much about Le Tote itself. I would presume that getting a rental to convert into a purchase is how Le Tote makes the most of their money, but how does Le Tote do that? Do they look at similar shoppers to gauge their purchase patterns? For the customers that choose a package with Le Tote’s selection, is an actual stylist involved in the selection (or is it only algorithm-based)? I would be curious how they maximize their hit/purchase rate per customer. This ability to supply shoppers actual items that they love is also critical to minimizing their churn rate.
I also presume that the success of Le Tote relies on being on top of the fashion trends. How does Le Tote partner with wholesalers to get the newest product, or can they? Suppose that a BB Dakota dress just hit Bloomingdale’s and Nordstrom’s, as well as the BB Dakota website itself. This item is full-price. I would be skeptical if BB Dakota or other wholesalers would be willing to sell this new product to Le Tote, given that this item can be purchased from Le Tote’s website at a discount. Does Le Tote only receive items once they have been in regular distribution channels for a given time frame? If so, as Le Tote grows, can they look to develop exclusive product from their wholesalers as a new competitive edge? I worry customers might get upset if it becomes clear that they are getting “late” product (if that is the case).
Hi Roxy, I loved reading this post! It is really fun how Pixar’s operating model aligns with their business model of “possibility.” I had no idea that the Pixar team modifies their films for the proper cultural context. I found this “resonance with the customer” section to be incredibly interesting. Something that I thought of when I read your post is how Pixar does a fabulous job resonating with customers of all ages, too. They have a unique ability to speak to a 7-year-old on one level in the film, and to speak to an adult at an entirely different level, as well. Certain jokes are meant for the parents, which we love, yet the child has no idea. I think of Toy Story and Inside Out as two films that are loved by the old and young, alike. Pixar’s ability to create so deeply (relating to cultures, age, etc.) I think sets apart a Pixar film from that of any competitor. Great creative post!