C4 Dispatches unwraps concerns about pricing and labelling at TK Maxx

9 December 2013

/* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Times New Roman","serif";}

Britain loves labels, with shoppers flocking to stores like TK Maxx and the prestigious shopping destination Bicester Village in search of designer discounts.  It’s a sector that’s boomed despite the recession. Channel 4 Dispatches airing tonight Monday 9thDecember at 8pm) reveals the secrets of the discount stores.

Our investigation found instances of:

·         Despite advertising promising big labels and famous brands, many items sold in TK Maxx are actually own brand “private label” products – using a multitude of names such as like Arabella and Addison, Kenar, Amaryllis Amphora and Frederik Anderson of  Copenhagen

·         Price tags that a trading standards expert says breach government guidelines on Recommended Retail Prices (RRPs), discounts and savings:

-       With some products having a TK Maxx RRP significantly higher than the price we could find the products on sale at elsewhere

-       RRPs on some own brand products in contravention of TK Maxx’s own policy which says that own brands should not carry RRPs

·         Misleading labelling of a  product as ‘Current Season’ at TK Maxx

·         Previous designer products made bespoke for TK Maxx

·         We hear from a former production manager who worked for the Nicole Farhi brand until 2009 when it was under different ownership than it is now , producing a bespoke Nicole Farhi line for TK Maxx. She said the garments were “cheaper level products”

  

TK Maxx

With advertising promising ‘Big Labels, This Season, Always up to 60% less,” TK Maxx is a retail phenomenon.  Whilst others have felt the pinch, TK Maxx has grown and grown, with 260 stores in the UK and 11% growth this year. 

TK Maxx says a typical store has 50,000 items in stock with 10,000 new items a week.

 

TK Maxx Own Brand Labels

TK Maxx advertising and in store signs promise shoppers “big labels” and “big brands”. But Channel 4 Dispatches discovered on the rails, mixed in amongst the well known labels are brands like Arabella and Addison, Kenar, Amaryllis Amphora and Frederik Anderson of  Copenhagen. 

Our reporter found no website for many of these brands and tracked many of them down to a Watford industrial estate which is UK HQ for TJX Companies Incorporated– the parent company who owns TK Maxx and registers the brand names.  

In total we found more than 150 brand names like Frederick Andersen of Copenhagen, Refectory, Kernar, Mark Law were registered as trademarks by TJX Inc, parent company of TK Maxx.. 

What this means is that some brands, despite the exotic sounding labels that are attached to it, are made for TK Maxx. They are own brand labels. 

 

Recommended Retail Prices

Reporter Harry Wallop visited TK Maxx stores to examine their labels.

Government guidelines say “you should not use a recommended retail price if it differs significantly from the price at which the product is generally sold.” (Pricing Practices Guide, Department of Business Innovation & Skills, 1.6.1)

In other words the RRP should be the price the item is generally sold at.   However, Channel 4 Dispatches found instances where this was not always the case at TK Maxx.

 Examples: 

·              TK Maxx RRP for Rohmir Super Lilli Coat = £2,225. But Rohmir’s told us the original selling price was  £800

·              TK Maxx RRP for a Diesel Cardigan = £251. But Diesel told us the price was £200

·              TK Maxx RRP on a French Connection sweater = £115.  But TK Maxx forgot to snip off the original French connection price tag showing the original price was £85.  French Connection confirmed this was the original price

Alonso Ercilla, Lead Officer for Fair Trading at Trading Standards says: “If you want to rely on RRP when showing some price discount, you need to be confident that that RRP really existed, in other words that your competitors are using that RRP and if they’re not you shouldn’t be referring to that RRP… because it is clearly misleading to refer to an RRP that nobody else is using.”

When we asked TK Maxx they told us these RRPs were established after conferring with the seller. They also said they “only cite an RRP which has been provided…independently by the third party seller” and that they carry out “random spot checks” to ensure this.

Our reporters also found own brand products being sold as if discounted. 

For example a Jobis handbag is one of TJXs own brands, yet they tell customers they’re selling it below the Recommended Retail Price. It is sold for £24.99, yet there is a RRP of £68.99 on the label. We found more than 20 examples like this on the TK Maxx website.   

Alonso Ercilla from Trading Standards, says: “When you have a business that’s setting their own RRP… You have to look at the law and the law says you shouldn't mislead with price and to the public, when they look at an RRP, they do not think and do not expect it to be the same business setting the RRP as the business that is selling the product, therefore I would say that by definition that's misleading.”

TK Maxx told us a very small fraction of their products are own label and it is their “policy not to put RRP on own brand products.” In the few instances where this hasn’t happened, it is “a product of human error.”

 

“Current Season”

TK Maxx say that the majority of their stock is ‘Current Season’. 

To put this to the test in one case, our reporter bought a Nicole Fahri jacket from TK Maxx £58.

The TK Maxx label clearly says it’s from this season’s collection, and the original price was £450.

However, when the jacket was shown to the manager of Nicole Fahri’s central London flagship store she said it was just unbelievable that they would ever sell a jacket for £58 when it was originally £450 if it was this season’s. She couldn’t have been clearer. The jacket is not this season’s jacket.

Alonso Ercilla from Trading Standards, says: “If you’re claiming that your clothing is current season, it should be current season, if it’s not, you’re making a misleading or false statement, if you’re making a misleading or false statement it breaches consumer protection law, it’s really, really that simple.”

TK Maxx said this was a single instance of an error in labelling.

 

Big Brand “cheaper level products”

TK Maxx emphasise that they Deal Direct with Designers. 

Channel 4 Dispatches spoke to a former insider at the Nicole Fahri brand who used to produce versions of the designers diffusion line for TK Maxx until she left the fashion industry in 2009. (Since the insider worked there, the Nicole Fahri brand has changed ownership.)

She revealed to Dispatches that TK Maxx would get a bespoke line to fit their price.

The former production manager speaking about her experience up to 2009 explained that at every stage of the process they tried to save money and as a result it was  basically a ‘different product’: 

“Well, you work back the price… So if TK Maxx want to retail something at £10, then we know we’ve got to sell it to them at say £5…. in order to make the money that we need to make…and the money that TK Maxx needs to make, and  then that is like the target price, that I work with all the different factories, someone’s got to hit that price for me to be able to make that garment…

“First thing we look at is fabric- because that’s usually the biggest cost within a garment –  Then you look at the way the fabric is produced, you might look at ways of dying the fabric, that might be less expensive.”

The actual shape of the garment the pattern –- you can simplify the pattern a lot – and that will lower the amount of man hours going in at the factory… Yeah, everything is looked at – the way the garment is branded example - if there’s an embroidery on it you might change that for a printed logo…to save money…you might change some beautiful real shell buttons for some imitation shell buttons or some plastic buttons… It’s a different product basically.”

Since the insider worked there, the Nicole Fahri brand has changed ownership, and the current brand owners stress they do not and never have made products for TK Maxx, indeed they say they don’t make “cheaper level products” for any company whatsoever.

TK Maxx confirmed they were supplied bespoke Nicole Farhi products until July 2010. They told us they buy “from all types of ranges of goods made available… by brands…No-one is being misled…”.  They told us they deliver “high standards of value” and said “we strive to ensure that our customers are properly informed about the products they purchase from us.  Further we work closely with Trading Standards to help us to do the right thing for our shoppers”. 

 

Bicester Village

Specialising in luxury brands and with over 130 boutiques, Bicester village is a huge shopping destination. Last year its owners claimed it had the highest sales per square foot in the world.

The Bicester website tells us that “World-leading brands offer their authentic previous seasons’ collections with savings of up to 60%”

Channel 4 Dispatches did find the majority of items in Bicester to be impressive bargains on unsold previous season’s designer gear. But we learned from staff in some of the shops that they offered products specifically manufactured to be sold in outlet stores, 

Posing as customers we visited over 100 of Bicester's boutiques to ask about the ‘authentic previous season’ claim - almost half that we visited said that at least some of their stock had in fact been manufactured specially to be sold at discount outlet stores.

Value Retail PLC, the Bicester shops’ landlord, told us their marketing described “the broad offering of the village”. They said, “We are satisfied that everything sold at Bicester Village is of the highest quality and value for money. One hundred and thirty of the world's leading brands at the Village ensure they offer the customer great bargains from across their ranges and from their previous season’s collections. In more than ten million transactions last year only one complaint related to the quality of the product.”

 

Secrets of the Discount Stores – Channel 4 Dispatches, Monday 9th December at 8pm