Business model of Ross Stores

Customer Segments

Ross Stores provides apparel products and accessories for the general consumer market, serving customers across multiple demographics. According to a recent investor presentation published by the Company, Ross Stores’s target customers are predominantly female, around 75% to 80%, who appreciate good quality brands, but also enjoy shopping for bargains.

The Company’s core customers are typically from middle income households and make two or three store visits each month. Ross Stores’s chain of dd’s Discounts stores attract a younger customer base, coming from households of a more moderate income.

Through its retail chains, Ross Stores serves a large domestic customer base across the US. This includes the operation of physical retail outlets across 36 US states, with a significant presence in California, Florida, and Texas. The Company does not appear to have any significant international operations.

Value Propositions

Ross Stores provides value to its customers in the following ways:

• Its brand recognition and reputation, with the Company a well-known and recognisable retailer of off-price clothing and accessories, having a reputation for providing good-quality products and customer service;
• Its extensive retail network, with the Company reaching its customers through multiple sales channels, including a network of more than 1,500 physical retail outlets across 36 states under both the Ross and dd’s Discounts brands;
• Its broad merchandising and purchasing networks, with the Company maintaining relationships with a large network of vendors and manufacturers, and implementing an efficient merchandising strategy, to ensure it is able to offer high-quality products and low prices;
• Its reasonable prices, with the Company selling branded and non-branded clothing products at discounted prices, often offering savings of 20% to 60% below department and specialty store regular prices, and comparing favourably to those offered by its competitors; and
• Its broad portfolio of products, with the Company offering clothing products for men, women, and children of all ages, including brand name and designer items as well as accessories, shoes, homeware and bedding, and other products.

Channels

Ross Stores operates a website at www.rossstores.com, through which it provides information on it product catalogue and outlet locations. The Company’s operates a separate website for its dd's Discounts-branded stores at www.ddsdiscounts.com, through which it provides similar product information and a store location tool. The Company does not appear to operate an online or mobile sales channel.

Ross Stores makes its sales through its extensive chain of physical retail outlets, which are staffed by its in-store sales force who serve customers directly. The Company operates a network of more than 1,500 store locations across 36 US states, of which 1,342 are Ross-branded stores and around 193 are dd’s Discounts-branded stores.

Ross Stores situates its stores in community and neighborhood shopping centres in heavily populated urban and suburban areas. Where the size of the market and real estate opportunities permit, the Company groups stores to benefit from economies of scale in advertising, distribution, and field management.

Ross Stores operates its own distribution infrastructure, principally comprising six regional distribution centres. This infrastructure allows the Company to stock its stores quickly and efficiently.

Customer Relationships

Ross Stores does not offer its products to customers on a self-service basis. The extent of its self-service offerings appears to be its online store locator tools, which helps customers find stores in their area.

Ross Stores makes its sales directly to customers through its extensive retail chain, with its in-store sales personnel assisting customers personally with enquiries, questions, and concerns. The Company’s in-store staff are also able to directly handle customer complaints and product returns.

Ross Stores operates dedicated customer services teams for both its Ross and dd’s Discounts brands, with customers able to contact customer support personnel over the phone or via email in order to receive tailored responses to queries and complaints. The Company also provides information to customers through various FAQs, as well as specific information on its product sourcing practices.

Customers are also able to follow Ross Stores’s activities and product lines, as well as interact with the Company directly, through its social media accounts, including with Instagram and Facebook.

Key Activities

Ross Stores operates as an off-price retailer of name brand and designer apparel, accessories, footwear, and home fashions. The Company offers products for men, women, and children of all ages. Ross Stores and its subsidiaries operate principally through two retail brands of off-price retail apparel and home fashion stores: Ross Dress for Less (Ross) and dd's Discounts.

The Company operates a combined chain of more than 1,500 retail outlets across 36 US states. Both Ross and dd's Discounts target value-conscious women and men between the ages of 18 and 54. The Company owns and operates approximately six distribution processing facilities, including three in California, one in Pennsylvania, and two in South Carolina.

Key Partners

Ross Stores works in close collaboration with a broad network of partner companies and organisations in order to ensure its customers are served reliably and efficiently. The Company’s partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, comprising suppliers of products and merchandise that are resold by the Company across its multiple sales outlets, as well as suppliers of services, equipment, and technologies that are utilised more broadly across the enterprise;
• Logistics and Supply Chain Partners, comprising various distribution and logistics service providers that support the Company’s domestic and international distribution operations, ensuring quick and efficient merchandise delivery;
• Social and Community Partners, comprising various charitable organisations and non-profits with which the Company collaborates on social and community projects across the US; and
• Strategic and Alliance Partners, comprising market leading companies across multiple sectors, with which the Company collaborates on a range of joint projects, including marketing, branding, and other projects.

Ross Stores has launched a number of partnerships in recent years. This includes a series of community partnerships with various local and regional arms of Boys and Girls Clubs of America, as well as an education partnership with non-profit Reading Partners.

Key Resources

Ross Stores’s key resources are its products and merchandise, its supply chain and merchandising network, its distribution and storage infrastructure, its extensive network of physical retail outlets, its IT and communications infrastructure, its partnerships, and its personnel.

Ross Stores owns and or leases a portfolio of properties across the US. This notably includes the Company’s network of more than 1,500 retail stores, as well as the Company’s network of six distribution centres, and office locations.

Cost Structure

Ross Stores incurs costs in relation to the procurement of products and merchandise, the operation and management of its storage and distribution facilities, the operation of its network of physical sales outlets, the maintenance of its IT and communications infrastructure, the management of its partnerships, the implementation of marketing and advertising campaigns, and the retention of its personnel.

In 2015 Ross Stores recorded total cost of sales – including buying, distribution and freight expenses, and occupancy costs – in the amount of $8.58 billion, and selling, general and administrative costs in the amount of $1.74 billion.

Revenue Streams

Ross Stores generates revenue through the sale of apparel and accessories across its network of retail outlets, under the Ross and dd’s Discounts brands. The Company derives its revenue principally in the form of point-of-sale fees attached to its products.

In 2015 Ross Stores generated annual sales in the amount of $11.94 billion, up on the $11.04 billion recorded by the Company in 2014. The majority of the Company’s sales were attributed to the Company’s flagship Ross retail chain.