A conversation with Rick Binaco

When I was a teenager, I started to spend weekends charity shop shopping. This was in the early 2000s, in the wake of the 1990s, when stylists like Melanie Ward had made vintage fashionable, and I was hooked. I was a scavenger on the hunt; I heard stories about finding gems and aimed to educate myself to spot something valuable. I loved finding bargains, and when I got something interesting, I would spend hours trying it on with clothes I already had, creating different outfits. At the centre of all this was my want to be an individual; I wanted to have something nobody else had. I found great pleasure in the fact that if someone coveted something I was wearing, they couldn't get precisely the same. This hunting and gathering became a hobby; I was developing my sense of self through clothes.  

In hindsight, I have thought about how well spent this time was. Shouldn't I have used these formative years to think about deeper issues? Instead, I focused on the external. But I was not alone; the commodification of individuality was swelling, now galvanized by social media and the ability to sell and brand ourselves; clothing has become a distinctive marker in letting the world know who we are — or who we claim we are. 

As I wrote two weeks ago, this, along with numerous other factors, has meant the fashion industry has grown exponentially. Last summer, the New York Times Magazine published 'Sweatpants Forever: How the Fashion Industry Collapsed' which focused on the growth of fashion and how it couldn't be sustained. It told a tale of overproduction, a glut of things, a rush to create exclusives and one-offs that the consumer — who wanted to be individual — would be lured to buy. Reading the article, I started thinking about off-price retail, TJ Maxx (TK Maxx in the UK), for example. I wondered if it was some kind of solution to this waste, so to learn more, I interviewed Rick Binaco, a buyer in off-price retail for almost forty years.

To return to my nascent style explorations, the thing that stood out to me after speaking to Rick was that people are drawn to off-price because it is a challenge; they can find something there that nobody else has. "It's a treasure hunt, and people absolutely love it. It's been extremely profitable," he told me. 

TK Maxx in London, April 13th 2021, Image by Joyce Ng

Shonagh Marshall: You began your career working at Macy's in the 1970s. What was the retail industry like at this time?

Rick Binaco: When I graduated from college, my first job was with the telephone company. Back then, there was one telephone company: Bell Telephone Company (laughs). I went through their training squad, and after working with them for about a year — It was terrible; I hated my job — I took a second job working a night shift at Bamberger's, a division of Macy's. After a year, I quit the phone company, but I continued at night at Bamberger's. 

I was fortunate enough to meet a person of consequence, who worked at Macy's — I made a sale to him, and he was impressed by my selling ability. He asked me if I wanted to get onto their executive training squad. This was in 1974. At the time, making the training squad at Bamberger's was equivalent to getting into the highest graduate school in the country. It was difficult, 1000s and 1000s of people wanted this job, and I was fortunate enough. The training took about six months where you would experience all aspects of retail — everything from how to do gross margins to budgeting, sales, and floor presentation. After six months, you would be assigned to a division, either the buying or store divisions. In my class, there were 12 people, and everyone was put up for bid — buyers could choose you as an assistant, and store managers were able to select you as a department head. My first job was as an assistant buyer. I was chosen by Hank Greenberg, the divisional manager who hired me. After working in that position for a year, I was promotable and became an area manager in a store — they would vary your experiences to round you out, hoping that you would climb the corporate ladder. I went to a store in Willowbrook, New Jersey. I worked there for a year and a half. I was promoted again and became a buyer of furniture.

At that time, you would have to go to school again — to learn you're buying abilities in that category. Once I had finished training, I would go on buying trips to North Carolina to visit the Drexel, Baker, and Thomasville factories — furniture was manufactured in the U.S. at the time. There I would learn all the specifics that explained why the product was priced the way it was, so I could understand the qualities of the product. You have to know what you're looking at and what goes into making it to understand the price that you're paying. 

Shonagh: How did you get into working in off-price retail?

Rick: One day, I got a call from Newton Buying — actually, it was a headhunter. They said they had an offer for me at this up-and-coming company called T.J. Maxx (TJX). They called themselves Newton Buying because some people don't like selling to T.J. Maxx.

It took about six months — my wife was pregnant with our first child — and eventually, I was offered a job. I took it. I took it because off-price provided incredible opportunities for people that worked for them, like stock options and bonuses, that department stores didn't. 

Shonagh: What is off-price retail? 

Rick: The oldest off-price company in the United States was probably Filene's Basement, they developed a system where they took excess merchandise, marked it down, and put it into the basement of their store in addition to buying products from other department stores. In New England, there were several department stores, Jordan Marsh was there, for example, and people who had excess inventory that they wanted to sell off would offer it to Filene's Basement at a discounted price. It was highly successful.

Off-price retail is selling quality at a price that equals value. You have to show a comparison. You have to show that the item you're selling is selling somewhere else for more. That it's a desirable product or item that you're able to sell at a lower price, for whatever reason. It doesn't mean you're selling cheap products. If you are selling a cheap product, a cheap product is a cheap product at any price.

A true off-pricer is basically a jobber. Most of the jobbers I worked with came out of Brooklyn and worked on Fifth Avenue. They were merchants; a merchant is a person who buys anything from a manufacturer. A jobber is a person who purchases items from retailers or manufacturers but then sells them back to retailers. So the jobbers would go into a store and buy up excess inventory. Then they would look to sell the product. Usually, they'd have to divide it up because you would buy many products, and it would be mixed, it wouldn't be consistent. You'd have some product that had value, and you'd have some product that had very little value. You had some product that was prestigious or branded; you'd have another product that wasn't. So the jobber breaks it up, they give a $1 offer for everything, and then they go out, and they sell it to whoever's interested. Some of it might go to a high-end store or place that deals and branded items. Some of it might go to a guy who has a very low-end retail operation. 

The off-pricer does the same thing. Back in 1980 or 1981, an off-pricer would go to department stores, look at excess inventories and markdown issues, and they would buy it. Put it into their inventories and, of course, sell it at a reasonable price, but the deal is made on the buy, not on the sell. It's how well you can buy — the percentage dictates the retail it is marked down from the original price. For instance, if you're at Bamberger's and you see something for sale at $10, an off-price retailer has to show at least a 20 to 30 percent savings, first quality. Otherwise, there's no reason for the customer to be there.

When I moved into off-price, the advantage was that you have such an edge over conventional retailers; it's unbelievable. You have the advantage that you don't advertise, and you don't have a consistency of product in your store. Yes, you have pillows, shirts, etc., but you're never sure what you're going to find until you get there. Today, that's an advantage because if you're a conventional retailer, you have to run ads to show people: savings, percentages off, coupon sales, etc., but the customer knows what's there. Today the customer also can go online and find the same item that they see in the sale or the ad, so they know if they're getting a deal or not. Whereas off-price, you have to go to the store. It's a treasure hunt, and people absolutely love it. It's been extremely profitable.

TK Maxx in London, April 13th 2021, Image by Joyce Ng

Shonagh: I know a number of people who love to wander around T.J. Maxx searching for treasure.  

Rick: When I was on the training squad at Bamberger's, a man named JP Meyers, who was in charge of promotion advertising, asked us on the last day of class, What business are you people in? We looked around, and all said, We're in the retail business. He said, Wrong. You're in the entertainment business. 

With shopping, especially today when people love to hunt and forage, it's the socialization that's important. Yes, the internet will be essential, and it's going to take over in many ways. Still, I believe, especially with department stores, that all brick and mortar is in serious trouble unless they learn to entertain and take a different approach. It's happening already; satellite stores that only carry samples. You will go in and maybe have lunch there — the whole concept of a department store was not to let anybody out until they bought something. You can buy it all here in our department store; you don't need to go anywhere else. Well, today, you've got to entertain. You also have to have the product available. Still, it's an economic certainty that unless department stores learn to minimize their stock to sales ratio, they can't continue to operate at cost-efficiency.

Shonagh: To take you back to your early days at T.J. Maxx, how did it work? Where were you finding the product?

Rick: One of T.J. Maxx's founders was Ben Camerata, one of the best merchants I have ever known. He was previously the general merchandise manager of Marshalls. The founders of T.J. Maxx, Zayre Corp., hired Camerata, and together they started T.J. Maxx with the concept of off-price buying. I had been a department store person, and when I went to T.J. Maxx, they schooled me on how not to be a department store person. What does that mean? Well, when I was at Bamberger's and Macy's, I was taught to carry myself to be somewhat arrogant, to be condescending. To give the impression, I'm Bamberger's; you should do everything you can to do business with me. When I went to Newton Buying, I had to get manufacturers, desirable manufacturers, and department stores to sell to me.

That's what we would do; we would go to department stores and buy odd lots, just assorted products. Then, we would merchandise them. We would bring the product back; there, you would see a whole room filled with all kinds of products in your category. In my case, it was comforters, sheets, pillows, all sorts of things. Most of the product was from Jordan Marsh and Filene's. We'd separate it by its quality, and we would merchandise it and determine what we would retail it at. 

Later, as time went on, we had more and more stores, so we needed to do what's called make-ups. This is merchandise that has previously sold well, so you convince the manufacturer to make it for you at the cost you had paid for the closeout or overage. They'll do it for this price if you buy enough. 

When dealing with a manufacturer, off-price buyers were not allowed to accept anything. For example, if a buyer goes to dinner, they must pay for themselves. T.J. Maxx was and still is very strict about this. This rule meant that off-price buyers are paid better and given a much higher per diem, which means we can stay at decent hotels. 

When you have to convince the manufacturer, I use that word loosely because most of the people that we were dealing with and still deal with are not manufacturers; they were also merchants. They don't manufacture, especially brand-name people; they have things manufactured. Or they will go to China and buy something; they'll go anywhere in the world and put their name on it. That came into play later on. Today what's happening is people are circumventing the branding people and going direct to the manufacturers. In ready-to-wear branding is still highly relevant, people associate quality with brands, but more and more retailers want exclusivity. They don't want competition on any product that they have on their sales floor. They'll usually put their name on it, or they'll somehow try to get exclusivity to protect themselves because the worst thing that can ever happen is another retailer is under-selling it.

Shonagh: Did you ever strike lucky and get a product that flew off the shelves? How did you guess what was going to sell well?

Rick: You're required as a buyer, in any instance, to know your responsibilities and the customer you're working for first; you need to understand what your companies mission statement is, what they're trying to do. Are they a carriage trade? Are they a mass merchant? What level of society are they selling to? Are they trying to be low-end? Are they trying to be upscale? The buyer has to know his or her category. They have to know who the players are. You have to be a little bit ahead of trends; you have to have a sense of what's coming into fashion, not what is right now. Then you have to know the timeframe of your cycle of buying because you have markets. And when you go to market, there's a lead time from that day to the day you're going to get that product. You have to know where it's going and what shows value and fashion. 

TK Maxx in London, April 13th 2021, Image by Joyce Ng

Shonagh: Was there a moment when you realized more products were being produced overseas than domestically? 

Rick: Oh, yeah, definitely. In the 80s. I'll use the textile industry as an example. I used to go to Fieldcrest, Martex, JP Stevens, and Springmade, all of these different manufacturers in the Carolinas. I would go down there for weeks sometimes and work with them and buy. When the government changed the quotas, it destroyed the domestic textiles industry. These international trading agreements limited the amount of merchandise in specific categories ( textiles, cars, and lace) allowed to come into the U.S. In the 1980s, the U.S. lifted its quotas of textiles from China and allowed it to ship towels, sheets, table cloths, lace items, and other textiles to the U.S. Overnight, the manufacturing of textiles in the U.S. dropped, the factories closed, and it has not come back. It destroyed the textile industry, and everything went overseas. All of these mills shut down; it was disastrous for the people that manufactured in the U.S. I witnessed it. It also meant the way of buying for retailers and domestic manufactures changed.

But I also saw a growth in certain things. Such as the fashion entity. Factories overseas would show a product to a design house, and they would put their name on it. That was the extent of the input from the fashion design side. I won't mention names, but in some companies, the head designer may never see that item, except when they go to the store, and they say, Oh, that's ours. That's not always the case, but sometimes.

Shonagh: "Fashion" has become so ubiquitous. Are collections designed by celebrities a good example of this?

Rick: I put together a large program for a celebrity, and it was so funny because the celebrity went on Oprah to promote the product; I know when she saw the clothes on television, it was the first time she had ever seen them. 

Shonagh: Does off-pricing work as a way to mop up waste. For example, are you buying things from brands that have produced too much and haven't sold?

Rick: That doesn't happen nearly as much as it used to. It used to happen much more often because you had many more players, especially department stores. What happened back then and still happens today is that someone makes a product and a company becomes insolvent. The company doesn't have the money and can't pay the bill. So the manufacturer doesn't ship the product and is stuck with them. I know with COVID 19, for instance, what happened was people were canceling and delaying orders. Suddenly, all of this inventory in any number of categories drives the price down. It happened to me, I had all of this product, and the orders got canceled. I know one company, who had a substantial amount of product that they didn't know what to do with, and they warehoused it; they just held it. There are several ways to deal with this.

TK Maxx in London, April 13th 2021, Image by Joyce Ng

Shonagh: There was a news story in 2018 where the BBC reported that Burberry had burned or destroyed £90 million worth of clothes, bags, and perfume. Why did they do this?

Rick: I was surprised that this was the way they dealt with it. Obviously, their management thought that that was the best way to protect their label by not decreasing their product value. Gold is gold because of its scarcity and its desirability, and if you all of a sudden increase the amount of gold or reduce the way it's used or perceived, you're killing it. I might have dealt with it entirely differently. 

People over the years have had concerns and misgivings about doing business with off-price retailers. But when you look at the number of units that go to an off-price retailer, it can't be a threat. The off-price retailer does not want more than two or three units on their floor at any one time, and if it's on your floor, it sells so fast. So say Burberry's product did go to an off-price retailer, their item hits the shop floor, there's three, four, or five of them, and that's it. And it's at a phenomenal price. A customer says, Wow, what an opportunity; I have to buy this, and it's gone. Does that bring down the value of that item? I don't think so. I think the person was fortunate enough to be in the right place at the right time to find an extremely valuable item at a bargain. It doesn't diminish the quality or the value. Over the years, I've convinced many of my manufacturers who did not want to do business with off-price to realize the value of doing business with them. 

One thing I've left out that's crucial is there are no chargebacks. Off-price retail picks up their product, and they don't ask you for advertising money. These are the prerequisites that you get from department stores and conventional retailers. You don't get that with off-price. Plus, you get paid on time. Honestly, in 37 years of working in off-price, I have never seen a branded, high-end fashion house being seriously hurt by selling their product to an off-pricer.

Shonagh: I have been wondering if off-price retail saves things from being buried or burned. It unites garments, homewares, and other items that have been overproduced with owners. Do you think off-price saves things from being wasted? 

Rick: That's a good way to look at it, but I don't know if that's necessarily true. Because I would say all off-pricers, not just T.J. Maxx or Marshalls, but Ross Stores, Burlington, Bealls Outlets, Tuesday Morning, etc., all of them are getting a percentage of make-ups — where they have the product made for them. Less and less is getting to their stores because less is available. There are fewer mistakes, and fewer mistakes mean fewer opportunities to buy true off-price.

Sam Gerson, the head of Filene's Basement and the most brilliant off-pricer, and I had lunch, and he asked me what I thought the future of off-price would be. He knew I had come from TJX and started my own company. I said If you think of off-price as a bobcat. If there's enough off-price to go around, you can feed the bobcat and keep it healthy. But there's not, and off-price turns into a tiger or a lion, then there's not enough food to feed it, and it won't stay healthy. By this, I meant there would never be enough markdowns and things that people had to get rid of to satisfy the demand. That's how big the business has become in off-price, so what they had to do was make-ups. They have to go to manufacturers and merchants and have products made. Now that's a massive chunk of their business. Now, why? I know it seems completely counter to the original idea. Well, it isn't because what their buyers are doing in many instances is make-ups. They can do that in any number way, as long as they maintain the quality and they don't allow the manufacturer to take anything out of the product that brings down the cost factor. They want the same product at a better price. And the way they get it is because they don't do chargebacks, where stores will chargeback people for any reason that you can think of — a loading dock issue, a shortage issue — they'll make up stuff. Then you have advertising allowance, in off-price, there is no advertising allowance. When I was at Bamberger's, every week, I was asked to pay an advertising bill, and I had to get that money somehow from a manufacturer that I was doing business with. Off-pricers play fair, and by doing that, people can get it at a better price for the product. 

Shonagh: Thank you so much for talking to me. My final question is, what happens to the products that T.J. Maxx and other off-price retailers can't sell?

Rick: They will usually give it to charity. But there's not that much that doesn't sell because there is a price for everything. Often I will see people at flea markets selling off-price products; they'll go to T.J. Maxx or other places and buy it up. But that aside, these retailers are very good at knowing how to get rid of things.