EP074 Retail Showdown: Lessons from the TJX vs. Temu Battle
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[00:00:06] Darin Newbold: Good day and welcome to Commerce Today. My name is Darin Newbold and as a host here we also have Josh. Josh Warren is with me as always and we're excited to be here and well we always have a little bit of fun here and Josh has the flowery shirt to prove it and with that we've got a what we're calling the Retail Showdown.

Lessons from TJ Maxx and Temu. So that's the Battle Royale or the Battle Retail. Retail. I don't know how you

[00:00:35] Joshua Warren: what you did there.

[00:00:36] Darin Newbold: I tried.

[00:00:37] Joshua Warren: You did try. You tried. That's good. So yeah. And this all comes down to a quote from, so TJX you'll hear throughout this episode, parent company, TJ, TJ Maxx, and like five other brands, 

[00:00:49] Darin Newbold: their CEO 

[00:00:50] Joshua Warren: made a remark in their recent earnings call.

And honestly, I think of the scene in Mad Men where, you know, someone gives Don Draper some. Feedback and his response as well. I don't think of you at all. So the, the CEO of TJX when asked about Timu said, we see very little issue with them taking market share from us. I could see that their business model could overlap with some other brick and mortar guys or some online guys for sure.

But we just don't see them as bumping up with our customer base or in use.

[00:01:21] Darin Newbold: Interesting. Yes, definitely. Definitely a very Don Draper Mad Max kind of quote. Well, I guess. What does that end up looking like, Josh?

I mean, I know what TJ Maxx is. I've seen TMU a little bit, but where do they go? Where, how can he say something like this?

[00:01:40] Joshua Warren: Yeah. Well, and it's, it's just interesting too, I mean, just the dynamics between the two companies. I think it's such a good example of there's this ongoing fight that the and all a Wall Street Journal article started, of which is more important. You know, each e commerce or brick and mortar stores.

and that's really what this, this whole battle is about is okay. We have a company in TJX that is very store first and we have Timu that is obviously online

[00:02:08] Darin Newbold: All online. Yeah. 

[00:02:09] Joshua Warren: and yeah, it's, there's, we'll have to dig in to get to the meat of it, but there's definitely some interesting dynamics there. Well, is

[00:02:16] Darin Newbold: Well, is there, is there anything, I guess, kind of specific about Their overall approaches and their business models and the way they're kind of really going after their business that sets them apart and that would even put the their ceo and I forget the name already. I know you talked about it.

[00:02:37] Joshua Warren: Ernie,

[00:02:38] Darin Newbold: Ernie Ernie Herman. Why would, to allow Ernie to kind of be in a position where he'd, he'd feel comfortable saying something like that. 

[00:02:45] Joshua Warren: well, first of all, I think he's a very brave gentleman, for taking that stand. That's one of those remarks like the, the Kodak CEO that said no one will ever want a digital camera. so yeah, I think a lot of it goes back to TJX.

so they're an off price retailer. they operate TJ Maxx, Marshalls, HomeGoods and Sierra. And there's one other home brand they have as well. And they really have this, this business model that in some ways is very similar to Timu. And in some ways it's very different. And those differences I think are the key, because TJ Maxx, their, their model really is.

Branded merchandise. So higher quality merchandise, but at deep discounts and in like a treasure hunt environment. Like you never know when you go to a TJ Maxx, what they might have, Timu though on the flip side of that. So they are a very new, they were launched in September of

[00:03:34] Darin Newbold: 2022.

[00:03:35] Joshua Warren: 2022, very new online marketplace.

And really their business model is they want to be the absolute cheapest and they are going to take things directly from manufacturers in China. And sell them straight to consumers in America. So eliminating every step that is in kind of the supply chain for TJX. their focus really is it's not, there's a little bit of a treasure hunt aspect, but it's basically, if you're not so worried about quality and you're really worried about price, go to Timu.

they have been really expanding aggressively. They spent 2 billion on ads just on the meta platforms last year. So that's Facebook and Instagram. So 2 billion.

[00:04:15] Darin Newbold: Oh, yeah, I can't spend a second on Facebook without seeing one or more of their ads. And I noticed in the notes that that you had that we'd put together on this, I wanted to ask you a little bit about on Timu, their gamification, and any kind of and how they're doing their social engagement.

Oh,

[00:04:32] Joshua Warren: yeah, yeah. So we'll dive in a little bit deeper on that. as well as on, TJX. So I mentioned at TJX kind of that treasure hunt. So mm-hmm. Almost like an in-store, gamification, they are heavily reliant on stores, versus tmu who has none.

So, TJX, they actually, one of their brands shut down their e-commerce site entirely. and went. Straight back to brick and mortar. Now the main brand TJ Maxx does still have a large e commerce presence. but they're not totally reliant on it. they do have a really interesting mix. So Timu, you're going to find kind of the same things, like products.

If you see a product on Timu today, chances are you'll see it there in a month, if you go to a TJ Maxx store, those products you see today, you may not ever see

[00:05:16] Darin Newbold: ever say again.

[00:05:18] Joshua Warren: So yeah, and then on the team who side of it, they, we talk a lot about Timu in the U S they've actually already expanded to 49 countries.

They're in more countries now than TJX is. so that was a pretty quick expansion. and it really is about that, that low cost and that aggressive marketing. They even did, I forgot to mention, they did Superbowl ads like they The last time I saw a company that young sell or, selling online and a super bowl ad, I think it was pets.

com back right before the. com, 

[00:05:46] Darin Newbold: bubble burst. Exactly. 

[00:05:49] Joshua Warren: so yeah, they do. I mean, cynically, if you want to look at it cynically and, so I, and tangent, but I, I play a fair bit of video games and I've actually learned, I 

[00:06:00] Darin Newbold: know, 

[00:06:01] Joshua Warren: how dare I, and there is, there's these details that have come out about how the very big video game companies have hired psychologists to figure out, okay, what will get you to play longer?

What will get you to buy more of these? Totally irrelevant, random, you know, sets of gear in the game. They don't actually change the game at all. Just make your character look different. How can we get you hooked and get you buying those more and more? That's what Timu is doing as well. They have really, you look at kind of the.

the deepest, darkest ways to get people hooked on an experience and they've done it. So there's referral programs, they run special promos, they have games in the app. They really try to get you to not only get hooked on Timu, but get your friends to get hooked on Timu. And that goes way beyond anything I've ever seen TJX do.

[00:06:52] Darin Newbold: Wow, that is crazy. Well, kind of closing that out on, at least on the TMU side of it, I can only imagine there's got to be some challenges, maybe even a little controversy.

[00:07:02] Joshua Warren: There is, there is. So they have dodged a little bit of the intensity that say TikTok has been getting. but I think they may be up next after we see what happens with the TikTok ban.

so there's a lot of regulatory scrutiny. They actually, Utilize, and I think that's putting it nicely, a loophole in the customs laws. So there's a law, the de minimis law that basically says, if you ship something into the country and it's valued at less than 600, you don't have to pay duties on it.

And this was designed for, Americans on vacation that wanted to mail packages back home. Well, team is using this to where they don't have to declare. And, the USPS doesn't collect duties on any of these packages. You're getting straight from China. So versus product you buy in a store, somebody has paid some duties on that somewhere to get it here in the U S also because, and there's some great memes about this, but because it's coming straight from a manufacturer in China that maybe he's been in business a hundred years, maybe he's been in business a hundred hours.

You never know the quality you're going to get. So there's some people and some friends I have that have gotten some amazing deals. there's also some, I think the best example I've seen is someone that was so excited. They shipped their parents, a set of outdoor lounge chairs for their backyard. they arrived and they were from Timu and they arrive and.

They were for a dollhouse. They were like that big. So that wasn't mentioned in the description and the price was more along the size.

[00:08:31] Darin Newbold: the dollhouse.

[00:08:32] Joshua Warren: Yeah. So, and then also just the, the customer service isn't always the best. So, definitely some controversy there. Both of them and a similar company shine.

They're trying to, you know, get ahead of this. They're trying to say, Oh, we have a us division. We're, we're a us company. one of them is actually applied to join the national retail federation, which is for store retailers that are American companies, which everyone's kind of confused by that because they're like, you're a digital retailer from China, but they're trying to get ahead of it and manage it, but yeah, there's definitely some controversy attached.

[00:09:08] Darin Newbold: Well, it sounds like really crazy different models. You have TJ Maxx just having both the omni channel having an omni channel view of it, of both stores and online presence. They're kind of the search, find, treasure hunt type of deal.

You have Timu, which is definitely gamifying the online shopping experience and basically being the ultra, Cheap version of an Amazon in a way in the way they're looking at it. But let's maybe take it to what are some lessons that we can learn from this? What are, there are some positives out of all of this for sure.

It's not just maybe the statement that Ernie made in, in the earnings call, but more of what can, what can be learned from this and especially around direct to consumer brands.

[00:09:56] Joshua Warren: first of all, I think it's just such a good example of balance and of how for every business idea, there's a business model that's going to fit better or worse for it. there isn't a one size fits all magic solution. So even calling back that article I mentioned earlier about, you know, Oh,

does

e

commerce saved the brick and mortar store or is brick and mortar carrying e commerce?

it's not that simple, not that cut and dried. So I think this is a good example of if your business model and your product assortment supports it. Then physical stores can be such a good source of a differentiator, a barrier to entry to competitors. they can really do a lot for you. Now, just having a store isn't enough.

I've had some posts on linked in recently in my newsletter about how, target is doing terribly when you look at their earnings calls. They have a lot of stores, but they're doing terribly, and they blamed it on the economy. They even said, Hey, consumers aren't buying discretionary items. They're not buying home products.

They're not coming to our stores. Then TJX does their earnings call and says, man, people are coming to our stores more than ever. There's spending on discretionary items. We're selling home goods like crazy. so having a store, but also having the right assortment, having the product assortment that fits with your customer and that having the right environment.

so getting people into that treasure hunt environment. That's something that Timu tries to do. Like it feels like a treasure hunt sometimes online, but at the end of it, you're kind of, okay, I'm, I'm in an app or I'm on a website and I'm shopping online versus they can really curate an experience in a physical store.

[00:11:35] Darin Newbold: Interesting. Well, how about, the lessons and kind of the pieces around getting people inventory as well as the marketing and and that ultimate customer engagement.

[00:11:46] Joshua Warren: Yeah. So. I think, TJ Maxx has done a great job around their marketing and specifically around, they have affordable products. They don't have cheap products.

And what I mean by that is you order something from Timu, maybe it's going to be great quality. Maybe it's not. You go into a TJ Maxx store, you're going to get a great price on a product from a brand that you've heard of. That is of at least average quality, like you're not going to find the things that are just going to fall apart the first time you use them.

and I think really building that brand over the years, that's that's what allows them to say things like we're not even, you know, worried about Timu. It's because. Their customers know, Hey, I don't know about these other brands, but I know when I go to TJ Maxx, I'm going to buy a quality product. It's not going to fall apart on me.

and then, yeah, the way they manage their inventory, when you think about it, because the business models evolved over the years, but it, it really came down to other retailers having products that they couldn't sell that instead of trying to clearance in their own stores, they would sell it to TJ Maxx and TJ Maxx would distribute it out into their store footprint.

You don't always know what you're going to get with that. And you don't always know, like, am I going to get something that's this season, last season, next season, like, and so being able to the way, they've invested in the technology to take in all those products and then get the right merchandise out in the right markets at the right time.

they built a big moat there basically with their technology. Interesting.

[00:13:14] Darin Newbold: how does this reflect on, even in the digital marketing and the, how their customers ultimately engage, whether it's TMU or TJ

[00:13:23] Joshua Warren: And this is where I think they need to be really careful over at TJ Maxx of all of our customers are aging.

and if your attitude is, I don't care about the youngest generation, I've got this great customer base that's been with me for decades. Yeah. Well, at some point that stops working. At some point, those people retire. They go on to fix incomes. They pass away. Like you don't want to. Lose all those customers.

And I think that's the risk that TJX is has right now because they're not doing the gamification, they're not doing the, they're doing some influencer partnerships and some digital marketing, but they're not taking it to the level that Timu is. And that is one of the reasons that Timu is more effectively reaching the younger generations than TJ Maxx is.

So they got to be real careful there because it's going to become, it almost reminds me of, The comments that younger generations make about Facebook about, oh, that's where all the olds are. TJ Maxx could very soon be, oh, that's where all the old shop and they can make some good money off of that for a little while.

But when you take the more long term view, I could really hurt them. So I think picking

[00:14:31] Darin Newbold: to, sorry. I was gonna say, maybe they need to take a lesson from Old Willy Wonka and put a, a golden ticket somewhere in that treasure hunt

[00:14:37] Joshua Warren: There we

[00:14:38] Darin Newbold: that they were going for.

Well, let's, let's, let's take a, just a quick, quick run through kind of the challenges. What are the overall challenges and opportunities with all of this, with, with what's been said and as well as these two different kind of vastly different, but. Very similar models and approaches.

[00:14:56] Joshua Warren: So I think over at, TJ Maxx, they need to be careful with this attitude of, they almost have this attitude of digital can't touch us. And I think even shutting down e commerce for one of their brands. That shows me that their, their board and their executives really don't understand the future of e commerce and don't understand the future of omni channel.

And so I think there's some, some challenges on the horizon for them there. I think that Instead of having an attitude of, well, they don't even, our customers aren't even interested in Timu. Maybe they should be a little more curious and be like, well, why would someone, why is Timu so successful? Why would someone that shops at our store ever consider shopping at Timu?

Are there things we can learn and experience we can build out around e commerce, and omni channel. I think there's some, some really interesting things that they could do to push a little bit further into gamification. because I mean, that treasure hunt atmosphere that just, I mean, that screams gamification, but they haven't really touched that.

So, and then Timu, Oh, Timo. they are one giant challenge and opportunity. I think that, already there's been videos that come out of how they treat their employees and the shipping and sorting facilities, some of the logistics facilities and nothing that crossed the line into like illegal, but starting to push up against the line of, Especially the younger generation that they're kind of building their business model on.

They're going to start looking at that and saying, I don't want to buy from a company that behaves in that way. So I think there, there's someone, there's a book, I think I've referenced before called whoops. I'm in business about when you have something that just takes off a lot faster than you realize you're still always trying to catch up to it.

Timu took off faster than they expected. They don't have the processes and kind of the longterm view in place yet. I think they're all just kind of excited of like, wow. We can go out and drop $2 billion on advertising because we're, you know, making so much money right now. Right. And not thinking about, you know, like how sustainable is this and how do we keep it sustainable?

And again, flipping it around, that's what TJX has done so well with is they've been around for decades and they can say, okay, we've learned that this is how no matter what the economy does, no matter where consumer sentiment is, we are always gonna drive people to buy from us.

[00:17:17] Darin Newbold: Gosh, I almost wonder, is there a merger that could make sense? Well, that will leave for another episode. We need to, we need to land this one, Josh. So, is there any, real quick last takeaways that you want people to kind of walk away with from this?

[00:17:34] Joshua Warren: I think it's a really good example of don't, Just copy what some other big site is doing or some other big brand is doing know your customers I mean that's we didn't talk a ton about TJ Maxx versus Target I do have an article on LinkedIn about that and when you look at that, it's really that TJ Maxx knows their customers really well, and they have built a relationship with those customers.

And I think that whether you are digital only, or if you're omni channel and you have that brick and mortar store presence, making sure you know your customers and you're well connected to them is how you'll have long term sustainable growth.

[00:18:08] Darin Newbold: Totally makes sense. Well, as always, catch Josh on LinkedIn, Joshua Warren, definitely see his post and all of our content there or on YouTube. We welcome your comments and we love to hear from you as always. With that, thanks for joining us and we look forward to catching up with you next time. Take care. 

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