Big Lots 2015 Annual Report Download - page 99

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• Our Soft Home and Hard Home categories address our core customer’s 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 vendors.
Our closeout penetration in these categories is meaningfully lower than in our Food and Consumables categories. 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 continued to introduce additional fashion-based products as we
expanded our space allocation and offerings.
• Our Furniture category primarily focuses on our core customer’s home furnishing needs, such as upholstery,
mattresses, ready-to-assemble, and case goods. In Furniture, we believe our competitive advantage is attributable to
our sourcing relationships, everyday value offerings, and our in-store availability. A significant majority of our
offerings in this category consists of replenishable products sourced 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 stores, which allows us to provide a high-quality product at a competitive price. Additionally, we
believe our ability to carry in-stock inventory of our core furniture offerings that is available to take home at the end of
our customer’s shopping experience positively differentiates us from our competition.
• Our Seasonal and Electronics & Accessories categories focus on our core customer’s discretionary purchases, such as
patio furniture, summer outdoor décor, 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 offerings for our stores based on our market evaluations. Much of this merchandise is sourced on
an import basis, which allows us to maintain our competitive pricing. During 2014 and 2015, 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.
Our merchandising management team is aligned with our merchandise categories. The primary goal of this team 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 the future.
Marketing
The top priority of all of our marketing activities is to increase our comps. Since the implementation of our Edit to Amplify
strategy, we have shifted our marketing efforts to focus on strengthening our connection with our core customer through the
forms of media that have become integral in her daily life. During 2014 and 2015, we deepened our use of social and digital
media outlets, specifically on Facebook®, Pinterest®, Twitter®, 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 a channel to deliver our brand message directly to Jennifer, while also providing her
with the opportunity to share direct feedback with us, which can enhance our understanding of what is most important to her
and improve the shopping experience in our stores.
Given our core customers’ proficiency with mobile devices and digital media, we have continued to expand our communication
to our Buzz Club Rewards® members, which we primarily deliver through targeted email campaigns that promote our most
attractive and unique product offerings. We are continuously learning additional information about our rewards members, and
we will continually refine our methodologies to effectively incentivize their behaviors.