– How are stores like Marshall’s, Ross, and TJ Maxx able to sell things for a cheaper than retail price?

Question

– How are stores like Marshall’s, Ross, and TJ Maxx able to sell things for a cheaper than retail price?

In: Economics

Answer 1

Retail prices are hugely marked up — 100-200%. So there is plenty of margin for sales, etc. And if things don’t get sold in regular retail channels (say Macy’s or a brand store), either the manufacturer or full price retailers will liquidate to discounter chains like the stores you mentioned. So they’re paying a discounted wholesale price. They’re also running no-frills stores with fewer employees than a higher end store.

So a $100 Polo sweater might cost Macy’s $50. They might sell it at full price or on sale, say 20% off = $80. Or, when nobody buys the brown ones they sell them to Ross for $40 and cut their losses. Ross then liquidates it for $60.