Big Lots 2010 Annual Report Download - page 95

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• For certain merchandise categories, there is not always an abundant supply of closeout inventory. In
these situations, we may work with vendors to develop product, some of which is imported. Imports
total approximately 25% to 30% of our merchandise sales annually. Categories with the highest
concentration of imports include Seasonal, Furniture, and to a lesser extent the Home category and
the toys department.
• Our merchandise mix also includes replenishable and private label products. This type of
merchandise has a consistent flow and availability so that it can be offered in our stores day in and
day out. It has many of the same characteristics as our closeout business but is replenishable upon
demand. Our prices on this merchandise are still generally positioned below our competition, but to a
lesser extent than the closeout component of our business.
We offer six major merchandising categories in our store: Consumables, Furniture, Home, Seasonal, Hardlines,
and Other. Consumables is the largest category at 29.3% of sales in 2010 and Other is the smallest category at
11.0% of sales in 2010.
In recent years, our merchandising strategies to increase sales have been predominantly focused on growing
the size of the basket, or average transaction value. We have employed two primary methods to accomplishing
this goal: (1) drive more units per transaction, and (2) grow the average item retail by offering our customers
better quality merchandise, better values, and more prominent brand name products. This approach is consistent
with our customer research that suggests that our core customer recognizes quality and brands and is willing to
pay a higher retail price, so long as the value or cost savings is significant compared to what other retailers are
offering. This strategy has resulted in fewer cartons processed by our distribution centers and stores and has
achieved positive comparable store sales.
While executing our WIN Strategy, we have made measurable progress towards our goals of growing sales
per selling square foot (which increased from $146 per square foot in 2005 to $166 per square foot in 2010) and
increasing gross margin dollars (which increased from $1,732 million in 2005 to $2,012 million in 2010).
From a merchandising perspective in 2011, our goal is to continue to provide extreme value, improved
quality, and expand the presence of recognizable brand name merchandise in our stores. We expect our major
merchandise categories will remain the same as prior years but the percentage of business by category may
fluctuate based on customer demand and the availability of compelling deals that we are able to acquire.
Strategically, we anticipate that opportunities exist to continue to grow the basket through the same successful
initiatives that benefitted results over the last few years.
Our marketing efforts involve a mix of printed circulars, in-store marketing, television, email and online
advertising. Much of our marketing is based on information that we have learned about our customers,
principally through customer surveys. Based on this information, we believe over 70% of our core customers
come to our stores without a shopping list or without a specific item or brand in mind to purchase. Value
dominates top of mind awareness as our customers look to us for savings. Nearly one half of the customers
surveyed said their shopping trips to our stores last over 30 minutes, which we believe indicates that they come
to shop our stores looking to find those closeout deals with exceptional value. We have improved, and expect
to continue to develop, our in-store signage and merchandising displays. We continue to market to our Buzz
Club members, by offering a free online membership and alerting them to new merchandise and offerings
in our stores. In 2009, we launched our Buzz Club Rewards program, which is our first true loyalty card
program. After enrolling in the Buzz Club Rewards program, the customer receives a loyalty card which may
be presented and scanned at the register at time of purchase. After making the required qualifying purchases,
the Buzz Club Rewards member earns a coupon on their account for a discount in our stores. Additionally,
members may receive marketing information and other targeted promotional materials.
From a marketing perspective in 2011, there are two primary programs designed to continue to grow sales:
• First, expanding the use of our Buzz Club Rewards program is a key driver to furthering our focus
on our core customers. From March 1, 2010 through February 26, 2011, we expanded our Buzz
Club Rewards membership by 6.2 million, or over 400%, from 1.4 million to 7.6 million members.
During 2010, we implemented technology that enables us to offer our members targeted messages
and promotional offers based on each member’s preferences and buying patterns. By the end of