How Sustainable are Off-Price Retailers?

By: Ariana Lim

6 min readApr 28, 2021

Racks of clothing in a retail store — Photo by Markus Winkler on Unsplash

Have you ever walked into a store or browsed a store online and found yourself wondering, “how in the world does a brand sell this many items”? I don’t even think I can count the number of times that I’ve pondered this exact question. I’m particularly baffled by the fashion industry — I simply can’t wrap my head around the fact that large retailers like Adidas and Tommy Hilfiger receive huge deliveries of new inventory every season. Stores always have an abundance of products being sold at any given time. Naturally, there will be some items that they just can’t sell. Lots of these brands will choose to sell their excess inventory to off-brand retailers. Let’s take a closer look at off-brand retailers and whether or not they have a sustainable business model.

What are off-price retailers?

Brands that produce clothing, home goods, and consumer-packaged goods often have excess inventory. This can occur for many reasons, including off-season products, overproduction, manufacturing errors, changes in consumer spending habits, and many more. Off-price retailers are stores that buy these items at a discount from brands and sell them to consumers at a lower price than the original. For example, an off-price retailer can buy a shirt for $10 that was originally priced at $20 and sell it themselves for $15 to make a $5 profit.

According to Inturn, off-price retail is growing faster than any other retail sector.

Here in Ontario, there are only a few major players, including Saks Off Fifth and TJX Canada (which owns Winners, HomeSense, and Marshalls). Today, we’ll be focusing on TJX Canada (and Winners in particular), since Saks Off Fifth doesn’t have a public sustainability strategy (ouch).

Winners typically buys inventory from big brand names, boutiques, designer labels, and up-and-coming labels. They buy constantly, with new inventory coming into the store every week or so. Their items are generally priced at 40–80% of the original price.

Why do people shop at off-price retailers?

There are many benefits of shopping at off-price retailers. Items sell at lower prices, there is a constantly changing selection of items, and these retailers are often more accessible than secondhand shops.

In what ways are off-price retailers sustainable?

Off-price retailers are not self-sufficient stores. Their business model depends on other retailers to provide them with the inventory. And as we know, a business is only as sustainable as its supply chain. So, to answer this question, we need to take a few steps back and look at the brands that are producing this excess inventory.

Different retailers have different business strategies. For some brands, it is more profitable to produce in limited quantities. As an example, this strategy is often used for gaming consoles like the PS5 or Nintendo Switch. For other brands, it is more profitable to produce in large quantities and risk having excess. An example that comes to mind is H&M, where everything is almost always in stock and items often go on clearance at the end of the season. This business strategy leads to overproduction — when the supply of an item is greater than the demand for it. If consumers aren’t emptying the shelves, then the excess inventory has to go elsewhere. The fate of the unsold inventory varies widely from brand to brand. It can be put on clearance, thrown into landfills, donated, recycled, or utilized in some other way.

So, for the retailers that would’ve otherwise added their excess inventory to the landfills, selling it to off-price retailers seems to be a perfectly reasonable solution to divert this waste. In this narrow respect, off-price retailers can be regarded as “sustainable”.

But how sustainable are off-price retailers themselves? Let’s take a deeper dive into the sustainability practices of TJX Canada specifically.

On the surface, this company seems to take sustainability pretty seriously. They released a couple of reports for 2019 and 2020, so I took a look at those. Here’s a summary of their sustainability efforts:

In 2019, they used renewable energy sources and purchased carbon offsets to cover all of their operational emissions.
Their office spaces were intentionally designed for sustainability. We’re talking about EV charging stations, produce gardens, and a “’no mow’ zone to support the monarch butterfly migration and bee populations”, among others.
In 2019, they achieved a waste diversion rate of 89%, although they didn’t specify what kind of waste and where it was diverted along the supply chain.
There was no mention of their inventory waste or what they do with the unsold inventory. Practices for unsold inventory were only reported in the U.S., U.K., and Ireland.
They have achieved a 47% reduction in greenhouse gas (GHG) emissions (per dollar of revenue) in 2020 against a 2010 baseline. Their next target is a 55% reduction in GHG emission from direct operations in 2030 against a 2017 baseline.

I have to admit that I was pleasantly surprised by these figures. I’m not an expert on TJX, so the presented information could be (and probably is) biased. However, from what I can tell by looking at these reports, it seems that they are doing more than the average retailer.

In what ways are off-price retailers unsustainable?

Fundamentally, the business model of an off-price retailer relies on brands producing too much inventory. In a sense, these brands may even rely on off-price retailers to buy their excess inventory. They may then ignore the consequences of overproduction because of how easily they can fall back on off-price retailers as a “plan B”.

What’s more, is that some off-price retailers only work with selected brands. Some brands refuse to sell their inventory at a discount for fear of devaluing their brand. In 2018, there was public outcry towards Burberry, who reported that the millions of dollars’ worth of their excess inventory were incinerated. They refused to sell this inventory at a discount, donate it, or even recycle the materials. Unfortunately, many “exclusive” brands also participate in similar practices. So off-price retailers aren’t the be-all-end-all solution to excess inventory.

What we are left with, then, is a flaw in the consumer goods industry as a whole. When retailers scale-up, production grows. As production grows, retailers become less intentional with their supply and end up taking calculated risks. These risks often come at the expense of the environment and ethical practices. This is extremely common in the industry. As quoted from Inturn, excess inventory is regarded as “an inevitable part of the industry”.

A person’s hands using a sewing machine — Photo by Anton Maksimov juvnsky on Unsplash

How can we minimize excess inventory?

There are a ton of businesses that are employing a “made-to-order” or “small batch” business model for their items. These businesses produce their items every time an order is placed, or in small quantities. This can help to cut costs and minimize waste. These business models are generally more common with small businesses because these processes are time-consuming (and sometimes costly) for larger brands. As consumers, we can support businesses that use these models to prevent excess inventory.

What’s the bottom line?

We went through quite a few concepts, so let’s bring it back to off-price retailers. Are they sustainable? Not necessarily. Do they provide a good alternative to large brands that produced too much inventory? If a brand is making the absolute best effort to prevent excess inventory in the first place, then, in my opinion, it’s a good option to fall back on. I think that off-price retailers are a great place to shop for those who want to be more sustainable but are on a tighter budget or can’t buy items secondhand.

The bottom line (in my opinion): Purchasing from off-price retailers is more sustainable than buying directly from those brands. However, there are more sustainable options for those who have the privilege of having access to them.

Phew! I tried to look at off-price retailers from many different angles, and I hope that it didn’t seem like too much. Here are all the sources I used to gather information for this blog post. Feel free to explore them on your own.