Will TK Maxx's return to the Benelux be a top or flop?

Best known for its deeply discounted designer label products and home furnishing, which sell at 20 percent to 60 percent under the recommended retail price, TK Maxx has managed to maintain consumer appeal over the years, which has allowed its parent company TJX Companies to hold a strong position within the global off-price retailing market. Now the discount retailer behind the motto 'Big Labels, Small Prices,' hopes to make its big comeback in the Benelux this week, following its devastating exiting after suffering irreparable losses early 2000s.

But what are the chances of the retailer's success in the Dutch market this time round? Will TK Maxx be a big success in the Benelux this time round, or will it leave with its tail between its legs once more? FashionUnited takes a closer look at TJX’s growth in the US and Europe to see what its chances are winning over local shoppers 15 years after hasty exit. (No time to read the whole article? Click here for the 20 second version.)

Will TK Maxx hold enough appeal to win over consumers in the Benelux the second time round?

TJX Companies is probably best known for TJ Maxx and Marshalls off-priced outlets in the US and TK Maxx discount chains throughout Europe. Over the past five years, TJX Companies has continued to grow at an impressive pace, managing an average growth of 7.5 percent in revenue per year. The discounter has seen its market value increase from 19.3 billion US dollars in 2011, when it was first listed in FashionUnited's Top 100 Index, to 51.2 billion US dollars as of today, maintaining an average yearly growth of 26.2 percent.

Although the majority of TJX growth comes from the US and its HomeGoods division, its apparel sector has shown strong signs of growth. Revenue from Marmaxx (TJ Maxx and Marshalls) 2,100 stores increased 4.23 percent from 2014 to 18.7 billion US dollars in 2015, with average annual revenue per store coming in at a smooth 8.9 million US dollars - no easy feat for any retailer.

However, one area of TJX Companies which has shown remarkable room for growth is TJX Europe, the overseas branch of the US based company. With an average yearly growth of 13.2 percent, TJX Europe has seen its revenues increase from 2.5 billion US dollars in 2011 to 4.1 billion US dollars as of January, 2015. In addition, TJX Companies European stores have reported the best development in regards to growth in annual revenue per store, with an increase of 24 percent from 2011 to 9.3 million US dollars in 2015, thanks to their unique combinations of apparel, homeware and accessories.

TJX Europe holds potential room for development for TK Maxx - but does this include the Benelux?

But TJX also shows strong signs of development with its European fashion arm as well, with apparel sales accounting for 1.2 billion US dollars in January 2015. With 407 apparel stores in Europe, TJX benefited from 2.9 million US dollars of annual revenue per apparel store, proving to be a strong area for growth for the company. With TJX Europe poised to become an area of expansion for the US based discounter, what are the chances of TK Maxx making it big in a country it once flopped in?

TK Maxx officially opened its first store in Eindhoven, the Netherlands yesterday, and is set to open additional stores in Rotterdam and Groningen later this year and early next spring. The new store opening comes 15 years after the US company pulled out of the Dutch market, during which TJX Companies reportedly suffered irreparable losses. However, recent signs have pointed to a lift in fashion spend within the country, as well as a growing demand for luxury items, which has encouraged the company to make its return.

The 2,300 square meter store offers TK Maxx's full range of products - including women's wear, children's wear, men's wear, accessories, homeware and footwear, is expected to have annual revenues of 2.4 million US dollars. Although unfashionable Eindhoven seems like an unlikely location for any retailer to open their debut store (or comeback store in TK Maxx's case), the first visitors who attended the VIP preview Wednesday night seemed to be in awe of the store. "What a wonderful store," "Have you seen this?" "I am buying this too," and "Wow, everything so cheap," where just a few of the key phrases that FashionUnited NL overheard - positive indications that perhaps a young generation may be more keen to embrace discount retailing.

TK Maxx makes its return to the Netherlands with first store in Eindhoven

"We analyzed the market and studied the possibilities," said a company spokesperson on TK Maxx's return. "We noticed that Dutch consumers wanted more affordable, but good quality clothing. Quality in general is an important subject here, and we offer that." She added that TK Maxx is even more appealing to the local audience because of it wide assortiment. "You can spend hours here, whether its with your friends or grandmother, there is something here for everyone." But the question remains if the Dutch are prepared to spend hours in TK Maxx finding that one special buy. If we look at consumer expenditure on fashion in the Netherlands it becomes clear that the average Dutch consumer has indeed been spending less on fashion over the past few years - something which could threaten TK Maxx's return or offer opportunity for growth.

In 2011 clothing and footwear spent in the country accounted for 15.166 million euros (5.4 percent of total spend), but by 2015 this amount had dropped to 14.515 million euros (5 percent of total spend). Although recent figures from INretail indicate that fashion sales in the Netherlands are picking up in addition to a growing demand for luxury items, , it has yet to seen if Dutch consumers are also increasing their expenditure on apparel as well. However at the moment it can be said that local shoppers are either a) buying less fashion items or b) buying less expensive items within the fashion category.

If it former turns out to be true, that the Dutch are buying less fashion then TK Maxx may find itself struggling to get a substantial piece of the fashion pie, as it will be other outlet stores as well as fast fashion retailers such as H&M, Primark and Zara. As the latter fast-fashion retailers are all Europe-based companies, they are better known in the Netherlands then TK Maxx with its Americans roots, which could cause problems in the future - although some customers may still remember the discount from its previous foray into the Netherlands.

However, if case b) turns out to be the nugget of truth, then TK Maxx may be able to profit amongst local high street fashion brands with is discounted prices. With the demand for more luxury and premium fashion items on the rise in the Netherlands, TK Maxx will likely win over local consumers with a strong discount designer offering and stands a fair chance of rapidly building a loyal following across the channel as well. With its first store in Eindhoven offering designers labels such as Moschino, Tommy Hilfiger and Calvin Klein, TK Maxx puts itself in a good position to develop in the Benelux.

TK Maxx in Eindhoven is even likely to attract bargain hunters from nearby Germany and Belgium as well - if it invests a chunk in clever marketing that is. However, without the aid of savvy marketing campaigns, online and offline, TK Maxx could risk losing younger consumers to fast-fashion retailers and becoming stale in the eyes of older generations. Although is first store in Eindhoven has a large designer department which takes up about 50 percent of the women's wear area it remains to be seen if the other stores within the Netherlands will follow in suit.

Will TK Maxx sink or swim in the Netherlands this time round ?

At the end of the day TK Maxx's return to the Netherlands could go either way - belly up or head first - but if fashion expenditure and interest in luxury fashion in the country is indeed on the rise then paints a sunny picture for their comeback. Nevertheless, whether TK Maxx becomes a hit with Dutch consumer, or not, TJX Companies still holds strong potential to continue developing throughout Europe. It is established that TJ Maxx, the US version of TK Maxx, is incredibly successful as it currently generates 84.6 percent of TJX Companies total sales. In comparison, TK Maxx in Europe contributes approximately 28.1 percent of EU sales.

This means there is room for TK Maxx to grow another 56.5 percent in apparel sales, as a percentage of TJX Companies total sales, which would see apparel generating 16.2 billion US dollars in sales in Europe. So although there is plenty of room for TK Maxx to grow within Europe, and the Benelux it is up to TJX Companies whether it actually succeeds, or flops.

This is the seventh episode of a new series based on FashionUnited's unique business intelligence Top 100 Index. Stay tuned next week's episode on November 6th, which focuses on French luxury house Hermes.