Big Lots 2014 Annual Report Download - page 100

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• Our Soft Home and Hard Home categories 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 based on the
quality, brand, fashion, and value of our merchandise offerings, with a particular focus on value and savings. In these
categories, our merchandise mix is comprised of replenishable products or assortments we develop with our vendor
partners. The closeout penetration in these businesses is meaningfully lower than in our Food and Consumables
categories. In 2014, we performed significant edit activities to areas that our core customer communicated were not
important to her, such as home maintenance, tools, and paint. Additionally, in 2014, we began to amplify our
assortment in Soft Home by introducing more fashion-based products that our core customer uses to decorate her
home. In 2015, we will continue to introduce additional fashion-based products as we expand our space allocation and
offerings, while downsizing other categories where we do not possess a competitive advantage.
• Our Furniture & Home Décor category primarily focuses on 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 attributable to our sourcing
relationships and everyday value offerings. The large majority of our offerings in this category consists of
replenishable products either 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 us to work directly with them to create product offerings specifically for our store, which allows us
to provide a high-quality product at a competitive price. During 2014, we rolled out a third party lease-to-purchase
program, to which we refer as Easy Leasing, in approximately 1,300 of our stores. We believe this program increased
our competitive advantage and increased sales by offering a different financing option to a portion of our customer
base. In 2015, we expect to build customer awareness of this program through our marketing efforts and sales training
initiatives to drive additional growth.
• Our Seasonal and Electronics & Accessories categories 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 a result, 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 edited our assortment of offerings in both our Seasonal and
Electronics & Accessories categories in response to reduced customer demand for certain merchandise. Specifically,
we reduced the offerings in our Toy department and our Electronics department, including our tablets, digital cameras,
gaming, and DVD products. During 2015, we expect to continue to edit and narrow our offerings in the Seasonal
category, primarily related to reducing the amount of selling square footage allocated to our toy offerings.
Our merchandising management team is aligned with our merchandise categories and is responsible for introducing and
implementing broader programs associated with merchandise execution. Their primary goal is to increase our total company
comparable store sales (“comp” or “comps”). We focus our performance review of members within merchandise management
on comps by merchandise category, as we believe it is the key metric that will drive long-term company net sales performance.
By focusing on growing merchandise categories, which includes managing contraction in certain departments, we believe our
merchandise management team can address our customer's changing shopping behaviors and implement more tailored
programs within each merchandise category, which we believe will lead to continued growth in our comps in 2015.
Marketing
The top priority of all of our marketing activities is to increase our comps. In the fourth quarter of 2013, we shifted our
marketing efforts to focus on making a stronger connection with our core customer in the forms of media that have become
integral in her daily life. During 2014, we deepened our use of social and digital media outlets, specifically on Facebook®,
Twitter®, Pinterest®, and YouTube®, by conducting entire campaigns through these outlets in an effort to drive increased brand
awareness with our core customer, while also attempting to speak to a new potential customer. These outlets provide us with
the ability to deliver our brand message directly to Jennifer, while also providing her with the ability to provide direct feedback,
which can aid us in better understanding her needs and, in turn, guide us in developing and delivering to her a high-quality
customer experience.