Big Lots Expects Bigger Things as Economy Rebounds
Big Lots, along with many other discounters, benefited as the economy went
into a prolonged tailspin beginning in 2008. Now that times are better, the
closeout specialist is looking to build on its gains.
“We are definitely a fan of an improving economic environment. We believe we
would flourish much more in an expanding economy,” Joe Cooper, chief
financial officer of Big Lots, told attendees at a recent conference held by
Barclays Capital.
Big Lots, according to a Dow Jones report, is opening
more upscale outlets as it finds it easier to get great deals on higher quality
merchandise. Its ability to offer these items at a significant discount has
continued to attract new shoppers to its stores. The chain plans to add 30
higher-end stores that are located in “power
strips” featuring more prestigious retailers.
“There has been a shift towards value and we believe that shift is permanent,” said
Mr. Cooper.
Looking to add to its more upscale appeal, Big Lots recently began accepting
American Express cards in its stores. The chain has also remodeled stores and
added a loyalty program.
Food and consumables represent about 30 percent of Big Lots’ business. Mr.
Cooper called it, “Our single largest category, and it is heavily branded and
heavily closeout.”
The rest of the business is split between five discretionary categories, according
to a report by Home Textiles Today. Home items, including domestics
and home décor, account for somewhere between 12 and 15 percent of Big
Lots’ total.
“Across the retail landscape in the last three to six months, we believe
the discretionary spending environment has improved and we are well positioned
for future sales growth,” Mr. Cooper said.
Discussion Question: How much will Big Lots’ growth be hastened or
slowed by an improving economy? What is your analysis of
Big Lots’ plans to grow its business including expansion of more upscale
outlets, by the chain’s standards?
Big Lots seems to be on a collision course with the likes of Tuesday Morning and Homegoods.
Big Lots, for me, is what I recall seeing years ago at Zayre’s and later, Ames, but without Zayre’s/Ames soft goods clothing, and with a lot more furniture and food items.
Now it wants to be an outlet store for higher-end closeouts. Is there enough of this stuff to go around?
A slightly weaker economy from a couple of years ago helped introduce Big Lots and other deep discounters to a new group of frugal shoppers. Now these frugal shoppers have more money to spend but they have learned they had been throwing their money away at high-priced stores in the past. Big Lots will benefit and so will other good deep-discount retailers.
Shoppers are and continue to be enamored with the “seeking and finding” of great deals at retail. While I am not a Big Lots shopper, I am intrigued by their attention grabbing TV with the Aretha Franklin song! I will be in the market for patio furniture soon and plan to give them a try!
I think Big Lots is poised for longer term success in the same way that TJ Maxx and Family Dollar are. They have worked hard to show shoppers the longer-term meaning of value, their product range is broad, and they work hard at relationships designed to retain shoppers for the long term.
That said, a monthly dose of higher-end shopping at retailers like Coach, Williams-Sonoma and Lacoste still satisfies the urge for that “we work hard and we deserve it” luxury. Even full price purchases feel good in those kinds of environments.
To me, it’s proof that multiple shopper archetypes exist within every human, and that shopper satisfaction is extremely multi-dimensional.
The downturn in the economy we are continuing to experience has opened the eyes of many shoppers who are now more frugal in how they dispense their available money. We have learned it is easier to spend less for the same (or more) and have the change in our pockets for other needed items.
My family is a good example of this new wave of shopping. My wife has a favorite grocery chain she loves here in Florida. Price watching was not what she usually did. She went in with a list, came out with the groceries and deducted the amount from her check book. Then she learned on a visit to another store that she could save a lot of money each week. An example: a certain juice product sells for $3.77 at our favorite store. The same product is 2 for $4.00 at the discount store. That is only one example the weekly grocery shoppers are starting to find. I found out for myself last week when I saw I could save $1.17 on the same salad dressing from store to store. P.S. I was not a good shopper until I learned how much I was spending needlessly.
Grocery retailers for one need to get the message and begin catering to the buying publics’ needs as opposed to their corporate profit expansion. Stores like Big Lots, Sam’s Club and Costco are going to grow and prosper if they maintain their same business models. The buying public has learned a valuable lesson in spending. We will not forget and return to our old ways.
As it expands into a large chain, Big Lots is likely facing the inevitable closeout trap.
This happens when a retailer’s merchandise volume requirements outstrip the available supply of odd lots, closeouts and remainder goods. It is compounded by the operational pressure for chain wide merchandising plans, assortment continuity and the attendant need to maintain working relationships with suppliers (which makes gray market merchandise less appropriate or even impossible to carry).
We’ve seen this happen with several off-price legends. Loehmann’s clothing store comes to mind. It was legendary for its designer closeout, sample and seasonal overstock merchandise in its early years in the Bronx. After it expanded into a chain, its assortment was padded with less unique goods and the delight of discovery was diluted.
Visiting a local Big Lots store, I see some signs of a similar tendency. With the possible exception of short-dated packaged food items, true “odd-lot” merchandise is giving way to items that are available in larger quantities. In what used to be a quirky hardware department, for example, I now see many off brand or private label hand tools from China, and a greatly diminished assortment.
It remains to be seen how this merchandising challenge may impact Big Lots’ ability to keep shoppers coming back as they begin to feel more prosperous. In the short term, savings may be enough of a motivation. Longer term, however, the sense of discovery may become more important for some shoppers, and cheap stuff may not cut it.
Big Lots is doing well, as are all of the Dollar Stores and deep discounters (Family Dollar, Dollar Tree, Dollar General, $.99 Only) in an economy that demands a more frugal shopper. The question remains whether this growth will continue when the good times return and the consumer “forgets” these frugal stores….
Right now, Big Lots is somewhere between the Dollar Store and Marshall’s. In consumables like personal care and cosmetics, they carry a lot of discontinued items or old packaging. It’s a fun store to browse in but I haven’t actually spent much money in there.
I was in Big Lots recently, and saw a very nice art deco chest of drawers–black glossy lacquer screened design on black flat chest, with glass drawer knobs. I thought about buying it and then I opened the drawer. The heavy lacquer paint smell was almost enough to make me knock me over. No way would I bring that into my home.
If Big Lots go more upscale, they have to still watch their prices. Even now, their prices are no better than Homegoods, Target or TJMaxx. People expect a store named Big Lots to be more valued priced than a Marshall’s.
Big Lots should be careful, as I think shoppers tend to go back upscale a bit as more money falls into their pockets. Lots of operational and supply issues, as has been pointed out. Quality will in fact be a big issue in how well this chain succeeds over the long haul. Let a few cheap imports from China or wherever break easily, tear, or taste God-awful, and shoppers will be inclined to spend a buck more for something better.
Shoppers switched to Big Lots and other discounters seeking value for their money, and they delivered. Shoppers trusted Walmart and others to give them the best prices, and sometimes discovered “good enough stuff” in other places.
Shoppers took the time to comparison shop with the help of the internet, coupons, social media, etc, and found new ways to stretch their dollars.
Will it continue? Only if real value is consistently found. As other panelists have reported, lower quality that does not meet consumer expectations will send shoppers elsewhere.
I agree with James. I see more and more Big Lots branded items there and way fewer things I’d consider closeouts. These are exactly the things I avoid since I know the quality is no better than the dollar store. I’ve been a Big Lots shopper since I got my first apartment in 1993. Back then, you could actually go to two Big Lots in the same market and have a wildly different experience since not all stores got all products.
Today’s Big Lots are WAY more uniform and corporate from store to store. That’s fine for people who are looking for that experience, but it’s disappointing to those of us who remember the original concept and the feeling of going on a treasure hunt when we shopped there.
There is a small chain in the PA/OH region called Ollie’s Bargain Outlet that is bringing back the Big Lots concept that I remember and enjoyed shopping. I only wish they’d expand to Wisconsin.
I think people will have the tendency to trade up (swim upstream), yet hopefully we have a renewed focus on value and price. It that is the case, they should do well.
In the old days going to Odd Lots (now known as Big Lots) was an adventure–like panning for gold. A lot of the offerings were truly the remains of closed or bankrupt businesses. In recent years most of what they offer for sale is poor quality junk that isn’t worth the low price they are asking for the time and effort involved in shopping for deals at Big Lots produces little to no return for your effort. On the other hand, I often stop at Target stores and find some 75% markdowns that I can’t pass up. One day I got several packages of 4 3-way GE light bulbs for $1.25/pkg. I won’t have to buy any of those for the next 3 to 4 years. I am also a fan of eBay’s daily deals emails–low prices and free shipping. Only once did I get stuck with an overpriced misrepresented piece of junk. But that wasted $7 was overshadowed by the many real deals.