Why TJX Is <i>Really</i> So Skittish About E-Commerce

Is TJX about to re-enter E-Commerce? Depending on your point of view, that event is either a ways off (and certainly not imminent) or it has already happened. Yes, TJX CEO Carol Meyrowitz said last month that that the retailer sees a big future in E-Commerce—but she's said that during every earnings call for the past year. And if, as Meyrowitz said, TJX has already assembled its E-Commerce team, what's holding things up?

One answer: Nothing—in fact, TJX has been doing E-Commerce since 2009 in Europe. A different view: TJX really doesn't want to be the next Target.com.

Meyrowitz's comments over the past year suggest that TJX is well on its way to a return to E-Commerce, though not in 2012. (The chain launched online stores for TJ Maxx and HomeGoods in September 2004 and shut them down a year later after racking up at least $15 million in losses. Since then, its U.S. Web sites haven't sold anything but giftcards. The company wouldn't comment on its plans beyond what it has already said in earnings calls.)

Last May, Meyrowitz said the retailer had developed an E-Commerce team and "done a lot of research." In August, she told analysts that TJX was "absolutely hiring top [E-Commerce] talents and getting them involved in our business," but refused to set a timetable for an E-Commerce launch. Then, last November, she sounded a note of E-Commerce caution: "We'll take our time, test and retest," Meyrowitz said. "We've got Europe testing and helping us get some additional information."

That sudden interest in testing and retesting makes more sense when you remember that Meyrowitz was speaking just weeks after Target.com's massive meltdown in September. Like Target, TJX bailed out of online retail in the U.S. years ago. The specter of a Target-style collapse with a shiny new TJX E-Commerce site is the sort of thing that will encourage a CEO to go very slowly.

But unlike Target, TJX didn't hand everything off to Amazon after its first E-Commerce effort ended. TJX has been selling merchandise through its U.K. site TKMaxx.com for almost three years. That operation doesn't run through the sales volume that a U.S. site would likely have. But it has already dealt with issues such as the off-price chain's continuously changing inventory and competition with the full-price retailers that supply TJX with that inventory.

Those are problems that retail analysts have trotted out to explain why TJX still hasn't returned to online selling. But they're solved problems at the U.K. site.

The problems that haven't been solved aren't in the retail model. They're on the IT side. And presumably, the E-Commerce team TJX assembled a year ago has already concluded that the U.K. site can't simply be scaled up for use in the U.S.Presumably, the E-Commerce team TJX assembled a year ago has already concluded that the U.K. site can't simply be scaled up for use in the U.S. That means TJX is looking at a very Target-like possibility: the need to build a world-class E-tail site from the ground up.

Fortunately, there's no Target-like deadline (remember, Target knew exactly when its agreement with Amazon would run out), so TJX's unwillingness to set a date—or even a year—for the new site to go live makes sense. The number and size of schedule slips are directly proportional to how public the go-live date is.

But no matter how much time it has, how could TJX create that new E-Commerce site? It could build from scratch and take its Target-style lumps. That's the option Meyrowitz is clearly trying to avoid.

It could hire the job out to Amazon and really set itself up to become the next Target.

It could buy another retailer's E-tail site (or just buy another retailer) and rebrand the site for TJX. But that's like buying a used car—a second-hand site will have lots of limitations and minor problems, the unavoidable result of having been patched and remodeled over years of use.

Or TJX could make use of its biggest E-Commerce advantage: the fact that its U.K. site is already working, even if it won't scale up. TJX could build the new site as if it were a replacement for the U.K. site, but on steroids. Once it was finished, the chain could keep the existing TK Maxx site running and channel only some of the traffic to the new site. That wouldn't be simple—both sites would have to talk to the same transaction backend—but it would mean some of the more obvious problems could be handled in a low-volume mode.

(The new site might even be built in the U.S. with transactions handled trans-Atlantically, though that could run afoul of tighter U.K. privacy requirements.)

With the existing site always available as a fallback, there wouldn't have to be a sudden flip of the switch to go live. And when the new site is finally ready to completely replace the current site, it will also be ready to return to the U.S.—not quite stress-tested at full U.S. E-Commerce loads, but with many more glitches already worked out.

Would that work? That depends on lots of contingencies that nobody outside TJX knows. And along with technical issues, this is a company that's been burned by E-Commerce before and is still smarting from a massive payment-card security breach. Meyrowitz, who first worked for TJ Maxx in 1983, rejoined the company as president on the same day the original E-tail site was shelved in 2005, and was promoted to CEO just days after the Gonzalez breach was announced in 2007. That, as much as Target's failure, has to be on her mind.

But if TJX wants to get into fill-scale U.S. E-Commerce with as little risk as possible, building in the U.K. first might be the way to do it.