TJ Maxx's and Marshalls' comparison prices aren't always what they seem (2024)

• Off-price retailers TJ Maxx and Marshalls buy surplus inventory from department stores at discounted rates.
• This is how they sell brand-name merchandise and keep their prices low.
• Comparison prices convince shoppers that they are getting a good deal.

Stores know that the thrill of a bargain motivates shoppers to spend money, and they have many ways to conjure up that instant gratification. TJ Maxx and Marshalls do it with their price tags.

The off-price retailers, which are both owned by TJX Companies, buy surplus inventory from department stores and specialty retailers at discounted rates. This is how they sell brand-name merchandise and keep their prices low. While many retailers have struggled during the economic downturn, TJX has benefitted from other brands' store closures.

Every product in TJ Maxx, whether it's a t-shirt or candle, has a recognizable tag attached. Apart from being notoriously difficult to peel off, these tags show shoppers the deal they are getting.

The large price is what you pay. A small price above gives a "compare at" price, or what the customer would have paid for the product at full price. But how TJ Maxx comes to that price isn't always straightforward. Sometimes an identical product isn't available for comparison, so the company estimates the price based on similar styles.

"Prices vary among other sellers and change over time," TJX states on its website. "But our buying staff's goal is always to provide you with a useful comparison based on prices at which we believe substantial sales of the same or a similar item have been made at full-price department or specialty retailers in the area or online."

TJX Companies did not immediately respond to Insider's request for comment.

These comparison prices reinforce shoppers' confidence in their buying decisions, marketing professor Alexander Chernev told the Wall Street Journal in a recent video explaining TJ Maxx's strategy.

"It's not only that I'm getting a low price, but I'm actually getting a deal," he said. "Which makes people feel good about themselves and that they are smart shoppers."

But the ambiguous approach to comparison pricing has drawn criticism and legal action. In 2015 and 2018, two class-action lawsuits accused TJX of misleading customers with its comparison prices.

The first lawsuit, filed in California, argued that the company used the comparison prices to "trick its customers into mistakenly believing they are saving specific and substantial amounts on name brand items," ABC news reported. The second lawsuit, filed in Florida, alleged that TJX marked products with a "higher, fictional amount" to "advertise a phantom markdown," per court documents. The 2015 case was settled and the 2018 case was dismissed.