Discount Chain Big Lots Moves Online
The years of rising home prices and cheap money stoked such niche retail chains as Starbucks (SBUX), Coach (COH), and Linens 'n Things. Perhaps the U.S. is now entering what will become known as the era of Big Lots. Thus, if you are in the market for a hair dryer, and you don't want to spend more than $10, Big Lots (BIG) is your kind of retailer. A 12-pack of soda is $3, and sofas can be had for under $300.
"With the way the economy has been going, I really have to stretch my dollars," says Amy Mitchell, 48, a Big Lots shopper in suburban Atlanta. "With three kids, I usually have lots of other kids over at the house, so I've got to find cheap snacks and toys for them." Big Lots' product line runs the gamut from hand trucks to Halloween costumes—and Big Lots deals in the sort of bargains that could make a >Wal-Mart or Target (TGT) look downright extravagant. Just as the economy turns dour (BusinessWeek, 10/23/08), Big Lots has gone online for the first time in its 23-year history.
Deal of the Day
The site, which debuted on Oct. 21, offers discounts and an "online deal of the day." The Oct. 22 deal was a Mansfield 18-volt drill for $29.99. The same drill on Amazon.com is currently priced at $64.95. Other deals the first week were a $50 portable golf driver—down from $250—flat-panel televisions, and an $80 Polaroid digital camera. Each day's deals are posted at 8 a.m. EST, encouraging customers to "shop early and often because the items, brands, and types of merchandise will change daily," according to a company press release. The site aims to be "fun and different," says a release announcing the store.
Big Lots operates more than 1,350 retail stores in 47 states, with yearly sales of $4.7 billion. It sells brand-name closeouts, seasonal products, consumables, furniture, housewares, and toys. At a Big Lots store in Niles, Ill., northwest of Chicago, items crowd nearly every square inch, overflowing into aisles. One wall features everything from decorative mirrors to women's underwear; another aisle has an array of artificial Christmas trees and a display of hairbands and beauty accessories. And while some Big Lots items, such as girls' Disney Halloween costumes, cost about the same as at other discount chains, other deals offer greater value. An Atlanta-area Big Lots this week had a pair of MP3-player speakers, which typically range from $50 to $100, on sale for a mere $10. "We're getting a lot of first-time shoppers," says Mike Jeuk, who manages the Niles Big Lots. "Our customer count is higher this year than last year, and I thought it would have gone down with the economy and everything."
While Big Lots won't disclose development costs or online revenue targets, the Columbus (Ohio) retailer believes the online migration will turn out to be a worthy investment. "The economy doesn't have anything to do with the opportunity here," says Rob Claxton, Big Lots' senior vice-president for marketing. "It's just about getting the best of the values we have online." One reason for the move is a resilience online sales have enjoyed compared with traditional >retailing. "The economy is challenging all channels, but the online channel is being affected less," says Larry Joseloff, vice-president for content at shop.org, a division of the National Retail Federation, which focuses on online commerce. Internet retailing is being helped by factors including pricey gas, free shipping offers, and shoppers' ability to exploit online search engines to find discounts.
Shift to Thrift
On Oct. 21, Standard & Poor's Equity Research upgraded rival Family Dollar Stores (FDO) to a "strong buy," citing the economic slowdown and the likelihood that "cost-conscious consumers" will turn to the chain and those like it. Earlier this month, rival 99 Cents Only Stores (NDN) reported a 9% increase in sales, topping Wall Street's forecast. The same shift to thrift cuts across industries. That's one reason, for example, that McDonald's (MCD) profit for the third quarter surprised analysts on the upside on Oct. 22. Its U.S. same-store sales rose nearly 5%, and net income grew 11%. The fast food chain credited the performance to affordability at all levels of its menu, especially choices such as double cheeseburgers and iced tea priced at a buck. S&P also changed its opinion of McDonald's shares to "buy" from "hold." (S&P, like BusinessWeek, is a unit of The McGraw-Hill Companies.)
While fellow discount retailer Wal-Mart Stores (WMT) reported strong comparable-store sales in September in groceries and health and wellness items, the company saw discretionary spending soften, bearing out more cautious consumer spending. Big Lots executives are hoping their bargains will become the new sweet spot for Americans in straitened circumstances.
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