The decision by off-price home furnishings retailer HomeGoods to shutter its ecommerce store should serve as a cautionary tale for other off-price retailers looking to sell online.
While ecommerce is a popular sales channel with consumers, off-price retailing is centered around attracting in-store traffic, which allows consumers to search for and discover bargains. That concept does not necessarily translate well to ecommerce, especially when off-price retailers’ catalogs and inventory are continually in flux, ecommerce experts say.
HomeGoods, which is a brand of parent The TJX Companies Inc., shuttered its online store Oct. 21, about two years after launching the site.
TJX Cos. Inc. ranks No. 69 in the Top 1000. The Top 1000 is Digital Commerce 360’s database of the largest online retailers in North America by web sales. HomeGoods does not rank independently in the Top 1000. TJX’s brands include Marshalls, TJ Maxx and Homesense.
“Being able to walk an off-price retailer’s aisles and search and discover is part of the appeal of off-price retailing to consumers,” says Brendan Witcher, vice president, principal analyst, Digital Business Strategy for Forrester. “It’s really not surprising that HomeGoods opted to stop selling online, because the question always surrounding the store was ‘would it work?’”
Why did HomeGoods stop selling online?
The decision to stop selling online was prompted in part by HomeGoods’ decision to focus more resources on its brick-and-mortar locations.
“We’ve made the decision to focus our resources on our more than 900 brick-and-mortar stores across the United States, where we invite our passionate HomeGoods.com customers to continue shopping for home fashion and décor,” HomeGoods said in a statement. “Customers may also continue to shop online at our sister sites www.tjmaxx.com, www.marshalls.com, and www.sierra.com, which will not be affected by this decision.”
HomeGoods reportedly notified its customers Oct. 18 via email that it would stop selling online Oct. 21. HomeGoods says it will fulfill and ship all online orders placed prior to closing. The retailer adds that all employees affected by the decision are being offered other jobs within the company.
HomeGoods’ online sales weren’t enough
Another likely factor contributing to HomeGoods’ decision to shutter its online store is ecommerce sales weren’t strong. In a 10-K statement filed in March, the retailer noted that HomeGoods.com “represented less than 1% of HomeGoods net sales for fiscal 2023 and fiscal 2022, and did not have a significant impact on year-over-year segment margin comparisons.”
In the same filing, HomeGoods noted its total net sales were $8.3 billion for fiscal 2023, compared to $9 billion for fiscal 2022, an 8% decrease. The decrease in net sales reflects an 11% decrease from comp store sales, partially offset by a 3% increase from non-comp store sales, the retailer says in the 10-K.
Overall, ecommerce sales remain “a very small portion” of parent TJX’s overall sales, TJX executives told analysts during an August earnings call. Digital Commerce 360 research estimates ecommerce made up about 10% of total TJX sales in 2022. That would amount to a 4.8% year over year increase, according to Digital Commerce 360 data.
TJX reported total net sales grew 8% year over year to $12.8 billion in its fiscal 2024 second quarter. Comparable store sales also grew 6% during the period. That’s “well above the company’s plan, and entirely driven by customer traffic,” the retailer said in a statement.
Off-price retailers’ battle with ecommerce
HomeGoods is not the first off-price retrial to venture into ecommerce, then pull the plug on the strategy, Witcher notes. In 2020, Burlington Coat Factory announced it was shuttering its ecommerce business. It accounted for just 0.5% of total sales.
“Burlington Coat Factory tried [ecommerce] and had a lot of the same problems,” Witcher says. “HomeGoods knew selling online would be difficult. It was an experiment that didn’t work, but it was good they tried.”
One of the key challenges off-price retailers face in ecommerce is keeping their catalogs current. They typically carry end-of-season stock, closeouts, overruns, returns, and excess inventory. As a result, retailers typically limit quantities. Items tend to sell out fast, and retailers may not replenish them in such cases. Hence, shopping at an off-price retailer’s store is like going on a treasure hunt for consumers. They don’t always know what discounted gems they will unearth.
“It’s not easy to go through all of an ecommerce retailer’s products online,” Witcher says. “Plus, consumers can’t physically examine products, whereas in-store, consumers can walk the entire store in about 10 minutes. For off-price retailers, their advantage is the physical store.”
HomeGoods’ exit from ecommerce should serve as a lesson to off-price retailers about how difficult it is to sell online.
“The myth that ecommerce will automatically be profitable is not true,” Witcher says. “Not all ecommerce ventures will be profitable. “This is a good lesson for all retailers, not just off-price retailers.”
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