In a shift from the secondary, low-traffic markets it typically operates in, Big Lots Inc. has opened a store in a relatively upscale market in order to reach higher-end shoppers eyeing bargains in the recession. Compared with the closeout retailer's typical no-frills stores, the Columbus, Ohio location also features wider aisles, improved merchandise presentations, enhanced lighting and new signage emphasizing value.
The 35,000-square-foot store located in a former Linens N' Things location in the Polaris Town Center is across from a mall whose tenants include Saks, Macy's, Brooks Brothers and Victoria's Secret. The move comes as Big Lots is gaining better access to real estate and better lease deals than in the past due to numerous store closings over the last year.
"This is the kind of location we couldn't touch in the past," said CEO Steve Fishman in a statement. "Now that our performance has improved and there is a good supply of valuable real estate available, we can capitalize on prime real estate opportunities like Polaris. We'll feature the same great deals Big Lots customers have come to expect -- in an A-plus location and in our hometown."
Big Lots has also been gradually moving to improve its "rummage-sale image," according to Dow Jones Newswire. Categories including electronics, consumables and toys have been upgraded with better brands.
On a conference call, management said it is testing the prototype, which opened two weeks ago, to see what can be applied to other locations. Three stores opening in August and September will include many features from the Polaris prototype. In particular, Mr. Fishman said the "entire marketing inside the store" is different and should be particularly beneficial to its other 1,300+ stores.
"Our customer comes to us with very limited if nothing in mind to buy, spends over 30 to 35 minutes in our store and those kinds of things," said Mr. Fishman. "How we market to them inside the store and the communication, the message is really important."
The prototype comes as the company last week reported its 10th consecutive quarter of record EPS performance, and raised its full-year estimates. It also plans to open 45 new stores in fiscal 2009 and that number is likely to increase in upcoming years.
"Customer shopping patterns have likely changed, and discounts and saving money are likely here to stay," said Mr. Fishman on the call. "We're more branded today than we've ever been before."
Discussion Questions: Is there a greater opportunity for a closeout retailer such as Big Lots to reach more upscale customers and still maintain their core shopper base? What changes will Big Lots have to make to increase its upscale appeal? Will it need a separate banner, for example, to make this work?
Does the current recession offer a temporary or long-term opportunity for closeout retailers to reach more upscale customers?