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.
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.
