Closeout retailer Big Lots is a microcosm of Corporate America's missteps, mistakes and ambitions. The seemingly endless supply of new package-goods products-1,561 in 2004, according to Information Resources Inc.-not to mention brand extensions-up 94% last year-has turned Big Lots into a $4.3 billion brand with 1,500 stores.
As head of marketing at the retailer for the last 17 years, Kent Larsson has helped the chain more than double in size over the last decade, up from $1.8 billion in sales and 766 stores in 1995. Even though comparable-store sales were flat in 2004, the chain still plans to open 80 to 90 stores this year.
GETTING OVER `STATUS IDEA'
Jumping out of his Volvo SUV in the parking lot of a suburban strip mall in Columbus, Ohio, Mr. Larsson begins hauling the chain's signature orange carts through Big Lots' sliding doors before heading for the Closeout Wall smack in the middle of the store. Here, Big Lots features front and center the brands it can't advertise, since most manufacturers dictate the chain never utter their brand name.
"We had to overcome the status idea brands had," he said. "There was this idea having your brand in here could dilute it, but we've overcome that. When I started with the company, we were seen as someone to come into the back door. Nobody wanted to do regular business with us."
Today on the Closeout Wall, there's a row of neatly stacked packages of the Tide Stain Brush from Procter & Gamble, priced at $1.99. "That's probably from a test market," Mr. Larsson explains. On the next shelf, rows of shrink-wrapped combo-packages of Aunt Jemima syrup and pancake mix. "That looks like packaging for a club store they probably made too much of." Nabisco looks to be trying out some fanciful flavors. There's an abundant supply of caramel-apple- and cherry-cheesecake-flavored Newtons.
"As good as [marketers] are at projecting, they are always going to be off by half a percent or more and that's enough for us to make a business out of," said Mr. Larsson.
Even though the Big Lots shopping experience is more about luck than a shopping list, the chain has invested in building a consistent, national brand. In 2003, after completing the conversion of three other retail banners, including Odd Lots, into the Big Lots name, it moved to network TV, hiring SBC Advertising, Columbus. It spent 2.3% of sales, or close to $100 million, on TV advertising last year.
At Big Lots, most items have a backstory-the drama of a test-market failure or a good idea gone bad-that's lost on consumers. "They don't really care," said Mr. Larsson. "They just want a deal."
In that respect, Big Lots is a lot like its customer. It doesn't have a lot of money to spend and it wants a deal, too. And like its customers, referred to internally as "treasure hunters," who are more than 70% female, between the ages of 25 and 54, and with an average income of $15,000 it's willing to compromise, especially if a name brand is involved.
Production overruns, packaging changes, discontinued products. Big Lots will take it all, along with the caveats. "If they don't want us to put it in a certain part of the country, we won't," Mr. Larsson said. "If they want us to scratch out something on the back or only put something in the back of the stores, we do whatever it takes."
Michael Tsiakaros, VP-sales at Mattel, based in El Segundo, California, has been selling product through Big Lots for 20 years. "Their image has really changed for the better," he said. "In the earlier days, our concern with the likes of the Big Lots world was that they would take branded merchandise and dump it on a table or a bin. You don't want Barbie to be merchandised in a flop shop, because you don't want it to devalue your brand image."
Big Lots also isn't above copycatting a closeout product that sells well. Following last spring's blockbuster sale of thousands of Coleman four-man rubber boats with oars that sold in the $30 to $50 range, Big Lot's buyers went overseas to have some made.
Unlike rivals in the discount category, such as dollar stores, Wal-Mart and Target, consumers don't expect to get the same thing every time or what's advertised on TV.
Take Kelly Guinn, an avowed bargain shopper, pushing a cart stacked high with garden equipment to the register. There's a 50-foot-garden hose, a bird feeder, a power sprayer and paint rollers. The 46-year-old mother of four drove in from 15 miles away. "I'm always surprised by what I find here," she says. "Everything I have in this cart is a deal."