Off-price retailer HomeGoods has launched an online store on its website, HomeGoods.com.
HomeGoods parent TJX Cos. announced late last year that the home specialist would move into e-commerce after years of minimal digital presence.
The online HomeGoods store launched with a curated selection of bedding, bath, kitchen, seasonal decor, pet and storage products. The company said new finds would be added regularly, and the online store would soon expand including through new gift and festive decor products.
When COVID-19 began its spread last spring, forcing retailers to shut their doors entirely, off-pricers were among the most affected in terms of short-term financial pain.
MKM Partners analyst Roxanne Meyer noted in April of 2020 that off-price was “worst positioned given they are solely reliant on store traffic returning, which could take time.” While sales and traffic have started to recover for off-pricers, the digital question remains open.
Before the pandemic, off-price had been a brick-and-mortar success story in an era when much of the retail chatter was focused on digital sales. Off-pricers have in fact shunned e-commerce, which has historically been a poor fit for the economics of their business model.
Rivals Burlington and Ross have no online shops. Just weeks before COVID-19 changed the world, Burlington folded its e-commerce operations entirely to focus on its stores.
The dearth of off-price digital sales could in part be due to the category those players are largely focused on: apparel, which has difficult logistics and slim margins. Free shipping, profit-sucking returns — these things make it tough to support the low price points of off-price. Moreover, the physical environment lends itself to the treasure hunt atmosphere that many credits with off-price’s success.
Home goods as a category carry higher price points, which can make online selling more profitable. But it, too, has its challenges. Just ask Wayfair, which, because of marketing and logistics costs, has mostly lost money from its operations over the course of its life as an online home goods retailer.
When it comes to profitable online sales, HomeGoods’ physical stores could be an advantage by reducing the company’s cost of returns. In announcing the new store, the retailer said customers could return goods in-store as well as via mail. And HomeGoods appears to be nudging customers toward in-store returns with a $14.99 shipping and handling fee for returns by mail, while returns at stores are free. HomeGoods also currently tacks on a $14.99 shipping fee for orders under $119, easing the cost of logistics.
TJX CEO Ernie Herrman said that the HomeGoods online shop would be complementary to its physical stores. “We believe this is something our existing customers have been waiting for, and there’s another way for us to attract new shoppers,” Herrman told analysts in August, according to a Seeking Alpha transcript.
Herrman added that the buying organizations between the physical and online HomeGoods stores are more connected than they are in the company’s other online stores, which could allow customers to better supplement their store purchases with online purchases.
In an August note, MKM’s Meyer said that “we view Homegoods.com as a key catalyst for sales gains and believe it could be significantly more impactful vs. tjmaxx.com (assuming the appropriate resources/inventory are behind it).”