The Challenge
The Outcome
Discover the shopping patterns driving steady visit increases in the off-price apparel segment and find out which factors are likely to drive further growth in 2023 and beyond.
Read White PaperThe past few years have been good to off-price apparel brands. The segment quickly bounced back following the initial pandemic closures, and 2021 visits to leading chains such as Burlington, Ross, and T.J. Maxx were generally higher than they were in 2019. And although Omicron, rising gas prices, and inflation, slowed down growth in 2022, data from H1 2023 indicates that visits to the off-price segment are back on the rise.
So what is driving off-price visits? Which markets saw the most off-price growth? What can cross-shopping reveal about off-price consumers’ shopping preferences? And where does off-price luxury fit into the mix? Leveraging location intelligence tools to analyze the state of the off-price segment can answer these questions and provide a current snapshot of the segment on the rise.
Year-over-year (YoY) visits to the apparel category (excluding off-price) fell in H1 2023 as rising costs led many consumers to cut back on non-essentials. And although the visit gap narrowed in June – perhaps thanks to the increase in consumer confidence – visits to the apparel category (excluding off-price) remained below 2022 levels and underperformed the wider retail average. Meanwhile, H1 2023 foot traffic to the off-price segment skyrocketed, with June 2023 visits up 13.3% YoY.
The current success is likely due to a confluence of factors. The off-price segment has traditionally maintained a minimal e-commerce presence, so a larger share of off-price shopping takes place in brick-and-mortar venues when compared to other apparel categories. Rising costs have also led many consumers to trade down or seek out affordable luxuries, while other consumers may be attracted to the “treasure hunt” aspect of off-price shopping. The slow return to office and the normalization of hybrid work may also be driving visits, as consumers refresh their office wardrobe with off-price pieces that will only be worn a couple days a week.
Finally, some of the visit increase is likely due to families needing to buy shoes and clothes for their growing children without breaking the bank – which may also explain the stronger YoY growth in June and July, with Back-to-School season underway.
While off-price chains as a whole performed well in the first half of 2023, diving deeper into the regional data can uncover markets with particularly strong growth potential.
Off-price foot traffic was strong nationwide in H1 2023, with every state seeing a YoY increase in off-price visits. Certain large states, including Texas and California, saw a double-digit increase in off-price foot traffic YoY – an impressive feat given the size of these markets.
But the trend was even more pronounced in the smaller markets of the Midwest and Northeast, with off-price traffic in states such as Iowa, Nebraska, South Dakota, and Vermont up by over 20% YoY. Of course, some of the growth in these regions was driven by expansion – even one new store can lead to a spike in visits in states with relatively few off-price venues. But YoY visits per venue were also generally elevated in these states, which suggests that both new and old stores in these markets are receiving more visits – and that these states may have potential for even further growth.
Analyzing the chains leading the off-price segment provides further insight into the shopping behaviors and demand driving visit growth in 2023.
Ross, Burlington, and TJX-owned Marshalls and T.J. Maxx have all expanded their store footprint recently while still seeing consistent YoY growth in visits-per-venue in H1 2023. Even Ross – which did see a dip in YoY visits-per-venue between March and May 2023 as the chain expanded more aggressively than its peers – returned to visits-per-venue growth in June and July.
The almost across-the-board growth in visits-per-venue means that, on average, off-price venues are receiving more visits than last year, even though the chains are operating with larger store fleets. These trends indicate that the expansions are answering an existing and potentially growing demand for off-price apparel and that new stores are filling up quickly.
Looking at cross-shopping patterns (what percentage of visitors to chain A also visited chain B in a given time period) may help to explain consumers’ current attraction to the off-price concept. Between H1 2022 and H1 2023, the share of cross-shopping between the various off-price leaders increased, as shoppers at Ross, Marshalls, T.J. Maxx, and Burlington visited more than one off-price leader more frequently.
The increase in cross-visitation speaks to the determination of off-price shoppers to find the best deals. Shopping at an off-price apparel store can be hit or miss, and different chains – even different stores within the same chain – may have very different inventories during the same period. The traffic data indicates that off-price shoppers seem determined to unearth the best bargains, even if it means visiting multiple retailers to find the perfect product at the most attractive price.
The rise in the rates of visitors visiting more than one off-price chain also speaks to the allure of the treasure-hunt experience. Some of these retailers – specifically Ross and Burlington – have an extremely limited online presence, so consumers wanting to shop the latest bargains need to visit the physical store. And the cross-shopping data indicates that shoppers are ready and willing to make a real-life trip to these brands’ brick-and-mortar outlets and compare prices and products in person in the hopes of finding a particularly valuable offer.
Despite the substantial similarities between the four off-price leaders, the chains also exhibit certain differences.
TJX chains Marshalls and T.J. Maxx receive a larger share of visits earlier in the day, with over 30% of visits to the chains taking place between 12 and 3 PM. Meanwhile, Ross and Burlington tend to see a comparatively larger share of evening visits – 18.2% and 19.0%, respectively, compared to just 14.8% and 15.8% for T.J. Maxx and Marshalls, respectively. Ross and Burlington also have slightly longer in-store dwell time than Maramaxx – perhaps thanks to Ross and Burlington’s relatively large share of evening visits.
The difference in hourly visit distribution may be partially due to differences in opening hours. T.J. Maxx and Marshalls stores typically close around 9 or 9:30 PM, while many Ross and Burlington stores remain open until 10:30 or 11 PM. This means that Ross and Burlington visitors have more time to shop in the evening, after the day’s obligations are done. Conversely, T.J. Maxx and Marshalls shoppers who are stopping by during their lunch break likely have less time to browse – and these shoppers may also be engaging in shorter post-work visits due to these chains’ shorter opening hours.
But diving deeper into the psychographic makeup of each chain’s visitor base indicates that the differences in visit times may also reflect more fundamental differences between the off-price chains’ audience profiles. Analyzing the True Trade Area for Ross, Burlington, T.J. Maxx, and Marshalls using the Experian: Mosaic dataset reveals that T.J. Maxx and Marshalls, with their shorter, earlier-in-the-day visits, served a relatively large share of suburban families in H1 2023. Meanwhile, Ross and Burlington, with their larger share of evening visits, attracted a larger share of young urban singles – who may have an easier time shopping at night without worrying about leaving children unattended.
These psychographic differences could explain the differences in dwell time between the chains. Parents may have a harder time taking their children on lengthy shopping trips, while older consumers may not have the patience to take the time to go through each rack in the hope of discovering a gem.
It seems, then, that retailers looking to increase in-store dwell time might focus on attracting urban singles, who may be more likely to visit stores in the evening when they can browse for longer. On the other hand, chains looking to cater to families and children may choose to save the costs associated with an extra hour or two of operations, since this visitor profile is less likely to visit late at night.
So far, we’ve focused on classic off-price brands that sell apparel and accessories from department stores and DTC brands at a discount. But the off-price segment also includes luxury off-price – chains such as Saks OFF 5th and Nordstrom Rack, which started out as outlets for their full-price sister chains (in this case, Saks Fifth Avenue and Nordstrom, respectively).
Recent foot traffic trends indicate that, in the same way that off-price is outperforming the wider apparel category, luxury off-price chains are also pulling ahead of their full-priced sister chains. Comparing monthly visits in 2023 to a January 2023 baseline reveals that visit growth to Nordstrom Rack and Saks OFF 5th outpaced visit growth to Nordstrom and Saks Fifth Avenue, respectively, almost every month this year. The one exception was July, when the Nordstrom Anniversary Sale drove visit spikes to Nordstrom and highlighted the current appetite for promotions even among luxury apparel consumers.
Some of the visit trends are due to the full-price chain rightsizing while the off-price sister chain expands. But the store fleet adjustments along with the foot traffic patterns also point to the high demand for discounts and value-priced merchandise at all levels of the income spectrum.
Diving into the shopping journey for luxury-off price consumers provides some context for luxury off-price’s recent success. When compared with their full-priced sister brands, luxury off-price chains see a larger share of visitors coming from Shops & Services (our general retail category) or going to Shops & Services after their luxury off-price visit.
The relatively casual atmosphere and lower prices of off-price luxury stores may be attracting consumers who are engaging in general shopping and visiting multiple stores in the hopes of finding something that catches their eye. On the other hand, full-priced luxury department stores with their opulent and pampering atmosphere may draw consumers specifically looking for that experience and are not treating their luxury shopping as part of a larger trip to assorted retailers.
The off-price segment, with its affordable prices and thrill of the treasure-hunt, has remained consistently strong amidst the retail roller coaster of the past years. And with some consumers still looking to stretch their budgets – and others looking for affordable luxuries that won’t break the bank – leading off-price retailers are well positioned to continue to thrive in 2023 and beyond.
Visits to off-price apparel chains took off in 2021 and are now back on the rise following a brief lull in 2022. With its affordable prices and treasure hunt experience, the off-price segment outperformed both the wider apparel category and the brick-and-mortar retail average in H1 2023.
Off-price visits were up YoY nationwide, with some larger markets such as California and Texas seeing double-digit YoY visit increases. But the highest visit increases went to smaller markets in the Midwest and Northeast, where traffic in states such as South Dakota and Vermont rose by more than 20%.
Off-price’s current strength is partially driven by recent expansions – Ross, Burlington, and the TJX Chains all opened new stores in recent years. But the average number of visits to individual off-price venues also increased, indicating that off-price brands may have even more room to grow.
Cross-visitation data points to a rise in cross-shopping within the off-price segment, as consumers look to stretch their apparel budget, splurge on affordable luxuries, and tap into the thrill of the treasure hunt. In short, the category is seeing a significant boost.
T.J. Maxx and Marshalls tend to appeal more to suburban families, while Ross and Burlington draw a larger share of urban singles. These differences may also explain why Ross and Burlington see a larger share of evening visits – and why visits to T.J. Maxx and Marshalls tend to be slightly shorter.
Luxury off-price retailers Nordstrom Rack and Saks OFF 5th are also seeing stronger traffic patterns than their full-priced sister chains – highlighting the appetite for bargains across the retail apparel spectrum.
