Big Lots 2012 Annual Report Download - page 84

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purchasing power enable us to source merchandise that provides exceptional value to our customers. We have
the ability to source and purchase significant quantities of a vendor’s closeout merchandise in specific product
categories and to control distribution in accordance with vendor instructions. We believe this ability provides a
high level of service and convenience to our vendors.
We supplement our traditional brand-name closeout purchases with direct import and domestically-sourced
merchandise, which represents merchandise that our customers expect us to consistently stock in our stores
or merchandise that we believe offers our customers a significant value. Our sourcing channels also include
bankruptcies, liquidations, and insurance claims. We expect that the unpredictability of the retail and
manufacturing environments coupled with what we believe is our dominant purchasing power position will
continue to support our ability to source quality closeout merchandise at competitive prices.
We have a merchandising team with extensive closeout purchasing experience, which we believe has enabled us
to develop successful long-term relationships with many of the largest and most recognized vendors in North
America. As a result of our relationships and our experience and reputation in the closeout industry, we believe
many vendors offer buying opportunities to us prior to attempting to dispose of their merchandise through
other channels.
Our merchandise is purchased from a broad vendor base of more than 3,000 domestic and foreign vendors. In
2012, our top ten vendors accounted for approximately 18% of total purchases (at cost) while the largest vendor
accounted for approximately 6% of total purchases (at cost).
During 2012, we purchased approximately 24% of our merchandise directly from overseas vendors, including
approximately 20% from vendors located in China. Additionally, a significant amount of our domestically-
purchased merchandise is manufactured abroad. As a result, a significant portion of our merchandise supply is
subject to certain risks as described further in “Item 1A. Risk Factors” of this Form 10-K.
Warehouse and Distribution
The majority of the merchandise we sell is received and processed for retail sale and distributed to the retail
locations from our seven regional distribution centers. Our U.S. segment is serviced by regional distribution
centers located in Pennsylvania, Ohio, Alabama, Oklahoma, and California. Our Canadian segment is serviced
by regional distribution centers located in British Columbia and Ontario. While a few of our merchandise
vendors deliver merchandise directly to our stores, the large majority of our inventory is managed through our
distribution centers to facilitate prompt and efficient distribution of merchandise to our stores and maximize our
sales and inventory turnover rate. We selected the locations of our distribution centers in the U.S. in an effort to
minimize transportation costs and the distance from distribution centers to our stores.
In addition to the regional distribution centers that handle merchandise, we operate a warehouse in Ohio that
distributes fixtures and supplies to our stores.
For additional information regarding our warehouses and distribution facilities and related initiatives, see
the discussion under the caption “Warehouse and Distribution” in “Item 2. Properties” of this Form 10-K
and the discussion under the caption “Operating Strategy - Cost Structure” in the accompanying MD&A in
this Form 10-K.
Advertising and Promotion
Our brand image is an important part of our marketing program. Our principal trademarks, including the Big
Lots® family of trademarks, have been registered with the U.S. Patent and Trademark Office and are either
registered or pending registration with the Canadian Intellectual Property Office. We use a variety of marketing
approaches to promote our brand and retail position through television, internet, in-store point-of-purchase, and
print media.
The centerpiece of our U.S. marketing efforts is our television campaign which combines elements of strategic
branding and promotion. These same elements are also used in most of our other marketing media. Our highly-
targeted media placement strategy uses national cable as the foundation of our television buys which is then
supplemented with commercials placed with broadcast networks in key markets. In all markets served by