How T.J. Maxx gets so cheap: It's not just Nordstrom and Macy's knockoffs.

Discount Retailer T.J. Maxx Doesn't Work the Way You Think

Discount Retailer T.J. Maxx Doesn't Work the Way You Think

Business Insider
Analyzing the top news stories across the web
April 17 2015 5:47 PM

Discount Retailer T.J. Maxx Doesn't Work the Way You Think

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There's more strategy behind T.J. Maxx than just getting Macy's rejects.

Photo by David McNew/Getty Images

This post originally appeared on Business Insider.

T.J. Maxx is the leader of discount retail, offering designer labels for a fraction of department store prices. One of the biggest myths about T.J. Maxx is that the retailer stocks defective or unattractive merchandise that Macy's and Nordstrom couldn't sell.

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The reality is vastly different: Suppliers purposefully create excess merchandise for the retailer, Fortune reports. These products are identical to what you would buy at department stores. T.J. Maxx produces merchandise, too. About 10 percent of its merchandise comes from in-house labels. 

Behind T.J. Maxx's amazing selections are some of the best buyers in the industry, writes Beth Kowitt at Fortune. The company aggressively invests in training for its 900 merchants, making sure that each develops expertise in a certain category (like handbags, shoes, or menswear). 

"It’s pretty hardcore because it has to be," a former buyer told Fortune. "You're negotiating millions of dollars." The company has 3,385 locations after adding hundreds of new stores in the past year and is expected to surpass Macy's in sales.