Once largely home to closeout and excess inventory, off-price retailers are becoming a distribution channel of choice for licensed brands.

This shift is partly fueled by the expansion of off-price retailers at a time when many other chains are closing brick-and-mortar locations. TJ Maxx Companies is opening 150 stores this year under its many banners—including HomeGoods and Marmaxx—and expanding to more than 5,000 locations. Dollar Tree, which operates under its own and Family Dollar brands, is adding 650 stores to increase to 16,990 locations.

“You are running into a lot of closures and slowdowns from other retailers, so we are becoming even more important to vendors than we were as recently as a year ago,” TJX Companies President Ernie Herrman said. According to Herrman, this shift will support the company’s buying in the long term and is why the retailer has become so brand driven. That includes bringing in fashion brands like Calvin Klein and Ralph Lauren across home goods and other categories.

This change also comes as off-price retailers evolve their image and focus on higher-end items.

Five Below, for example, has 1,340 stores and sells products for up to $10. Canada-based Dollarama, which has 1,500 stores and plans to have 2,000 by 2031, is carrying new products for up to $6, up from the $4 “top end” it first reached in 2017. Dollar Tree raised its entry-level price to $1.25 (from $1) and has more merchandise in the $3-$5 range, CEO Rick Dreiling said. Dollar General, which has 18,774 stores, plans to have about 1,000 of its Popshelf stores by 2025. The Popshelf format targets suburban markets with a treasure hunt format and prices aimed at value shoppers with higher incomes than traditional dollar stores.

And while mass retailers often rely on private label goods, off-price chains focus instead on branded items at lower prices.

“Much of what they are selling is front-line product made for them and they are balancing their assortment in branded products that won’t be found elsewhere,” said Linda Morgenstern, VP of Brand Management at Beanstalk, which represents Proctor & Gamble, Stanley Black & Decker, and other corporate brands. “That gives rise to the treasure hunt concept because they are buying in limited quantities and they are trying to promote impulse purchases by keeping inventory at a reasonable level, so they don’t disappoint consumers, but they are not stocking huge quantities.”

That’s not say the off-price retailers don’t have issues. While Burlington Stores took advantage of some “incredible buys” on branded merchandise in the recent fourth quarter, same-store sales fell 2% despite a 5% increase in revenue, CEO Michael O’Sullivan said. The chain didn’t raise prices last year despite increased costs, which led to it relying “heavily” of expanding the assortment of opening price-point products, he said. Burlington plans to open 70-80 new stores this year and add 500 locations through 2028, according to O’Sullivan.

Many off-price retailers have reduced their same-store sales forecasts for 2023 to the 2-5% range.

“They know what they want and are very specific, and if a brand is doing well in apparel they may bring it across all categories,” said a licensing executive at a textile supplier. “Some of it will be opportunistic buys because of the supply issues, but I think in 2024 you will see what the merchandise looks like on the retail floor, and it won’t be as much of a mishmash.”