TJ Maxx, Discount Retail Sector Accused of Shady Supply Chain Practices
According to a recent Boston Globe investigative report, the cheap prices at off-price retail department stores such as TJ Maxx come at the expense of labor rights in factories overseas and here in the United States. Suspicion that clothes at chains such as TJ Maxx, Marshall’s and Ross may come from dodgy sources is nothing new. The problem lies in the nature of their supply chains. A former CEO of TJX, the parent company of TJ Maxx and Marshalls, explained in a USA Today interview several years ago that as much as 85 percent of the company’s merchandise was purchased directly from suppliers. When these off-price chains first started as far back as the 1970s, they were known to offload factory seconds or excess merchandise from other department stores and specialty retailers at extremely low prices, and in turn passed those bargains onto their customers. But with the changing nature of the global apparel sector and the rise of fast fashion, clothes can be made more quickly at a lower price than a generation ago. And due to the fact that TJX sells more clothes than Macy’s now, the company’s ability to scale affords them opportunities to buy branded clothing at an even lower rate than the few remaining department store chains. As a result, while visits and sales at American malls have cratered, TJX has been able to not just survive, but thrive. But those profits, say human rights activists and regulators, come with the human price of low wages paid at factories located as far apart as downtown Los Angeles and Southeast Asia. Last fall, the Los Angeles Times profiled a worker in L.A.’s Garment District making $4.50 an hour. His struggles symbolized a Department of Labor (DOL) investigation that resulted with several garment companies ordered to pay $1.3 million in lost wages and damages to workers - who frequently made $3 an hour less than the local minimum wage. Up to 85 percent of garment factories in downtown L.A., in fact, have been charged with various labor violations. The poor treatment of garment workers has long been a standard practice in Southern California. A previous DOL investigation found that not only were garment factory employees often underpaid, but in many cases, they were even denied their wages; that 2014 inquiry of over 200 factories revealed that on average, workers were shorted $1,900 in wages during that year alone. But chains such as TJ Maxx have not been implicated, nor punished, as a result of the DOL investigations. As is typical across the worldwide apparel industry, these companies do not own the factories from which they source their clothes. Instead, the factories and wholesalers within the supply chains of TJX and its competitors were the companies penalized for any wage or human rights violations. When Globe reporter Megan Woolhouse reached out to TJX for comment, the company replied that its vague vendor code of conduct “expressly requires” their suppliers comply with U.S. wage and labor laws. And unlike apparel companies such as H&M, Gap Inc. and Marks & Spencer, which have pledged to make their supply chains far more transparent, off-price retailers like TJX view their supplier base as a competitive advantage. The hyper-competitive nature of the retail sector allows stores like TJ Maxx to defy the laws of retail physics and score brand names such as Polo, and in turn sell them for low, yet profitable prices. Secrecy, from these companies’ point of view, is their ticket to success, so do not look for TJX and its competitors to become more open about its sourcing anytime soon. “TJX is famously tightlipped about its strategy, answering questions on the topic by e-mail only,” wrote Woolhouse in her report. What’s clear is that one reason why TJX has become a Wall Street darling, despite retail’s ongoing woes, is that the company is able to source clothing fast and can nimbly churn those items hanging on a rack into cash. And similar to Zara’s proclivity to source from factories close to its stores, logistics dictate that in many cases, sewing clothes in California is faster and makes more sense than sourcing them from Vietnam or Cambodia. But as Woolhouse’s investigation concluded, L.A.’s Garment District factories are quick to cut corners, and that is where the trouble begins. Nevertheless, TJX can absolve themselves of any responsibility, as a complicated trail of contractors and subcontractors allow the company to profit off of underpaid workers toiling in a basement, without sharing any of the legal responsibility. Working within a TJ Maxx or Marshall’s location may be a better deal, but only because retail workers are more visible and are covered by federal wage laws. The company does not have the most sterling reputation when it comes to its shop floor culture, and only recently boosted hourly wages for its stores’ employees after public pressure nudged Walmart to give its workers a raise. Now the time has come for TJX to turn around its supply chain’s dismal performance, become more accountable, and ensure that the workers making its clothes also gain a fair wage. Image credit: Mike Mozart/Flickr Published earlier today on Triple Pundit.