Big Lots 2013 Annual Report Download - page 166

24
U.S. Segment
Merchandising
The goal of exceeding our core customer’s expectations will be driven by the delivery of a product assortment that is
meaningful to our core customer, combined with the quality and ease of the shopping experience. Our Edit to Amplify strategy
focuses on the two separate “Edit” and “Amplify” components to achieve our goal of exceeding our core customer’s
expectations. The “Edit” component focuses on continuously evaluating our product mix and downsizing, or potentially
eliminating, those departments within our merchandise categories and product offerings which we believe are not top of mind
with our core customer and we do not maintain a competitive advantage. The “Amplify” component of our Edit to Amplify
strategy seeks to expand the assortment of those departments within our merchandise categories and product offerings that we
believe are important to our core customer’s shopping experience and with respect to which we believe we have a competitive
advantage in pricing and sourcing. In the fourth quarter of 2013, we made significant changes to our merchandising team to
execute our new strategy and we restructured our merchandise categories to: Food, Consumables, Soft Home, Hard Home,
Furniture & Home Décor, Seasonal, and Electronics & Accessories. We believe the restructured merchandise categories better
align our business with how our core customer shops our stores. Our restructured categories place differing emphasis on
essential items (needs) and discretionary items (wants).
• Our Food and Consumables categories will focus primarily on catering to our core customers’ daily essentials, or
“need, use, buy most” items. We believe our competitive advantage in the Food and Consumables categories revolves
around our sourcing capabilities for closeout merchandise. Manufacturers and vendors have closeout merchandise for
a number of different reasons, including other retailers canceling orders, other retailers going out of business,
marketing or packaging changes, or a new product launch that has failed. We believe our vendor relationships along
with the size and financial strength of our company afford us these opportunities. In addition to closeouts, we intend
to expand our everyday offerings, including the roll-out of coolers and freezers in 2014.
• Our Soft Home and Hard Home will address our core customers’ cooking and living essentials, such as tabletop,
bedding, and bath, as well as their home-related discretionary items, such as small appliances, home fashion, and
accents. We believe that our competitive advantage in the Soft Home and Hard Home categories is principally based
around value, which is a combination of the pricing and quality of our goods. In these categories, our merchandise
mix is comprised of replenishable products as the closeout penetration is lower than Food and Consumables. As we
edit to amplify, we will be consistently introducing more fashion based products that our core customer uses to
decorate her home, while editing areas that our core customer has communicated are not important to her, such as
home maintenance, tools, and paint.
• Our Furniture & Home Décor category’s primary focus will be our core customers’ home furnishing needs, such as
upholstery, mattresses, ready-to-assemble, and case goods, as well as discretionary items, such as décor, frames, and
framed art. In Furniture & Home Décor, we believe our competitive advantage is our sourcing relationships and
everyday value offerings. The majority of our offerings in these categories are replenishable products from recognized
brand-name manufacturers or sold under our own brands. Our long-standing relationships with certain brand-name
manufacturers, most notably in our mattresses and upholstery departments, allow for us to work directly with them to
create product offerings specifically for our store, which allows for us to provide a high-quality product at a
competitive price.
• Our Seasonal and Electronics & Accessories categories will focus around our core customers’ discretionary purchases,
such as patio furniture and Christmas trim. For the Seasonal and Electronics & Accessories categories, there is not
always an abundant supply of closeout inventory. As such, we generally work with vendors to develop product for us
based on our merchants’ market evaluations. Much of this merchandise is sourced on an import basis, which allows us
to maintain our competitive pricing. During 2014, we will reduce our offerings in the Electronic & Accessories
category, as we have concluded that we do not have a competitive advantage in pricing on products such as
televisions, cameras, GPS devices, or gaming.