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Why shoppers are flocking to off-price retailers like T.J. Maxx

Tabitha Dardes dresses stylishly, holds a good-paying job, and lives in tony Newtown. So how come she's a regular at the Langhorne T.J. Maxx?

Lincoln Plaza Shopping Center in Langhorne is an off-price retailers haven. The latest to join the retail roster is Nordstrom Rack, which opens to the public on Oct. 21.
Lincoln Plaza Shopping Center in Langhorne is an off-price retailers haven. The latest to join the retail roster is Nordstrom Rack, which opens to the public on Oct. 21.Read moreSUZETTE PARMLEY / Staff

Tabitha Dardes dresses stylishly, holds a good-paying job, and lives in tony Newtown.

So how come she's a regular at the Langhorne T.J. Maxx?

"It's more like treasure hunting," she said.

As Dardes spoke, she looked at a mirror while holding up a suede, camel Calvin Klein knee-length dress with a $69.99 price tag; it originally retailed for $120. The dress eventually made it into her nearly full cart.

"I love the selection," Dardes, 54, director of public relations at Pennsbury Manor, the colonial estate, said of the T.J. Maxx at Lincoln Plaza, which she visits once a week. "It's cheaper than department stores."

Therein lies the not-so-subtle reason so many department-store chains - from Macy's, J.C. Penney, and Sears to Aeropostale, Victoria's Secret, and the Gap - are shuttering stores.

Internet shopping is one reason for their slide. The Pew Research Center said 68 percent of Americans now own a smartphone - an increasingly popular tool for shopping.

But retail experts say off-price retailers - such as TJX Cos. (which owns T.J. Maxx and Marshalls), Ross Dress for Less, Burlington Coat Factory, and Nordstrom Rack - have replaced mainstream mall players and taken the hearts and wallets of middle-income shoppers.

"The challenge is that American consumers went into frugality mode during the recession, and though the economic news is much better now, they still have largely not emerged," said Garrick Brown, vice president of Retail Research of the Americas at Cushman & Wakefield. "Luxury and high-end retail bounced back within about 18 months of the recession. Discount and off-price thrived" as well, Brown said.

"But mid-priced retail hard-goods players got hammered," he said, "because so many of the goods they offered could be found online, as well with Amazon and other pure-play e-commerce players."

Moody's Investors Service predicts that the same four value-oriented chains will "continue to outperform the apparel retail segment over the next five years."

"Off-price retailers are anticipated to experience apparel revenue growth of 6 to 8 percent, outperforming the broader apparel segment by a collective 4 percent," the August report said.

In contrast, the department-store industry is losing share "as online competition increases and mall traffic continues to decelerate," noted Christina Boni, a Moody's senior analyst.

Even more telling is how off-price retailers are adding stores while the footprint of traditional department stores keeps shrinking. Moody's expects the off-price segment's market share in sales to grow to about 10 percent of apparel sales by 2018, from 8.8 percent in 2015.

"The off-price incumbents are able to purchase high volumes of disparate goods from suppliers through their significant scale, flexible purchasing, strong vendor relations, and adaptable real estate strategies," the Moody's report said.

The home category - which includes towels, pillows, and other furnishings - was cited as pivotal to boosting sales for off-price retailers, as well as diversifying their offerings.

Ironically, according to the U.S. Census Bureau, annual median income growth last year of 5.4 percent was the biggest jump Americans had seen in 49 years, and the job market set a record for its longest consecutive streak of employment growth (71 months in a row and nearly 16 million jobs created).

"Basically, we are at full employment with strong upward pressure on wages," Brown said. "Meanwhile, cheap gas has also benefited the consumer. The only downside is that health care and housing costs have grown since 2010 above historic norms . . . but the American consumer is clearly in the best position he or she has been in for the past seven years, and arguably, the last 20 years.

"Yet, the shopping patterns have not gone back to where they were," Brown said.

Even Nordstrom, a more upscale player, hasn't been immune. The company's growth is all coming from Nordstrom Rack. Outside of a planned New York flagship, the only new full-line Nordstrom department stores that have opened are in Canada. The company closed two U.S. department stores in recent years, including one in downtown San Diego.

Meanwhile, Burlington Coat Factory wants to add 80 to 100 stores this year; Ross, T.J. Maxx, and Marshalls want to open 40 to 60 new stores each; and Nordstrom Rack is planning 35 stores.

A 35,000-square-foot Nordstrom Rack debuted Oct. 6 as an anchor tenant at the new King of Prussia Town Center. The store was at Overlook at King of Prussia, a shopping plaza next to King of Prussia Mall, before Nordstrom Inc., moved it.

Meanwhile, a sign along I-95 north from Center City has been touting the grand opening of a Nordstrom Rack this Friday at Lincoln Plaza in Langhorne for weeks. It will occupy space between a T.J. Maxx and an A.C. Moore Arts & Crafts store.

Madeline Hurley, retail analyst at IBISWorld Inc., in New York, said: "Consumers feel that they are receiving a better value when shopping at off-price stores than at traditional department stores. Especially as off-price retailers expand their online offering, department stores will have an even more difficult time competing."

Frank Badillo, director of research at, which tracks consumer and economic trends, added: "One, there isn't as much price-cutting overall at [discount] apparel stores, and in the category generally this year compared with last year.

"So if you're looking for a good deal, these off-mall, off-price apparel retailers are standing out even more than usual as a good value," Badillo said. "In many cases, they have a smaller percentage of shoppers who are big online shoppers, and in particular who are Amazon Prime members. As a result, they are somewhat less susceptible than department stores to losing sales to the shift online."

At the entrance of the Center City Nordstrom Rack at 17th and Chestnut Streets, a sign reads: "The ultimate treasure hunt destination."

Inside, Smita Patel, 55, of Edison, N.J., was all smiles after paying $159 for a designer handbag, down from $298.

"I got this for half price!" she boasted to husband V.J. Patel, 56, as he leafed through men's shirts. "Look at it - it's a Michael Kors."