Big Lots 2013 Annual Report Download - page 147

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Competition
We operate in the highly competitive retail industry. We face strong sales competition from other general merchandise,
discount, food, furniture, arts and crafts, and dollar store retailers, which operate in traditional brick and mortar stores and/or
online. Additionally, we compete with a number of companies for retail site locations, to attract and retain quality employees,
and to acquire our broadline merchandising assortment from vendors.
Purchasing
An important part of our business is the sourcing and purchasing of quality closeout merchandise directly from manufacturers
and other vendors typically at prices below those paid by traditional discount retailers. We believe that we have built strong
relationships with many brand-name vendors and our relationships and 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 closeout
merchandise and to control distribution in accordance with vendor instructions. We believe our sourcing model, along with our
strong credit profile, provides a high level of service and convenience to our vendors. We intend to continue to strengthen and
deepen our relationships with our top 200 vendors. 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 significant purchasing power position will continue to support our ability to source quality closeout merchandise
at competitive prices.
We compliment our brand-name closeout purchases with direct import and domestically-sourced merchandise, which
represents merchandise that our customers expect us to consistently offer in our stores at a significant value savings.
During 2013, we purchased approximately 27% of our merchandise directly from overseas vendors, including approximately
23% 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 described in “Item
1A. Risk Factors” of this Form 10-K.
Warehouse and Distribution
The majority of our merchandise offerings are processed for retail sale and distributed to our stores from our regional
distribution centers. Our U.S. segment is serviced by regional distribution centers located in Pennsylvania, Ohio, Alabama,
Oklahoma, and California. We selected the locations of our U.S. distribution centers in order to minimize transportation costs
and the distance from distribution centers to our stores. Our Canadian segment was serviced by regional distribution centers
located in British Columbia and Ontario, which were closed during the fourth quarter of 2013 in connection with our Canadian
Wind Down. While certain of our merchandise vendors deliver directly to our stores, the large majority of our inventory is
staged and delivered from our distribution centers to facilitate prompt and efficient distribution and transportation of
merchandise to our stores and help maximize our sales and inventory turnover rate.
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.
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. We use a variety of marketing vehicles to
promote our brand operations, including television, internet, in-store point-of-purchase, and print media.