Business model of Big Lots Inc.

CUSTOMER SEGMENTS

Big Lots serves the general consumer population.  It targets consumers that fall primarily into the following categories:

• Budget Conscious Consumers, including consumers who want to purchase high-quality furniture and homeware products at affordable prices; and
• Young Professionals and Families, including younger consumers, new home owner, and young families that want reliable homeware and furniture products but cannot afford to spend money on high-end brands.

In 2017, Big Lots announced plans to convert it store layouts to serve the company’s core target customer, which it named Jennifer.  The company stated that its target customer is a younger female consumer who prefers a physical, in-store shopping experience, preferring to be able to touch and feel the quality and comfort of the items before purchasing, a consumer who is looking for value, does not have much time to shop, often needs help decorating, and may want the advice of family members before making big purchases.

Big Lots is based in the US and has a presence across 47 of the country’s states.  The US is the company’s sole market.  It does not appear to have any substantive international operations.

VALUE PROPOSITIONS

Big Lots provides value to its customers in the following ways:

• Reputation and Experience – Big Lots is an established provider of homeware and furniture items with a reputation cultivated over many years for providing excellent customer service and high-quality products to its customers;
• Broad Range of Products – Big Lots offers a wide selection of products to its customers, including furniture, electronics, toys, outdoor products, mattresses, food items, and seasonal products, ensuring that it is able to meet the homeware needs of a broad range of customers;
• Affordable Prices – Big Lots includes among its core values that its provides high-quality products to its customers at affordable prices, ensuring that it is able to compete with other large scale retail chains;
• National Reach and Accessibility – Big Lots operates an extensive network of more than 1,400 stores panning 47 of US states, ensuring that it is able to reach a large customer base and can be easily accessed by regular customers at convenient local locations; and
• Deals and Rewards – Big Lots offers its customers a range of benefits, discounts, and rewards, allowing customers to purchases items at more affordable prices or count purchases towards other rewards.

CHANNELS

Big Lots primarily serves its customers through its network of stores across the US, which currently number more than 1,400 and span 47 of the country’s 50 states.  All of the company’s stores are located in the US, predominantly in strip shopping centres.  These stores have an average store size of approximately 31,500 square feet, of which an average of 22,200 is selling square feet.  These stores are staffed by teams of sales and service personnel make sales to customers directly.

In addition to its brick and mortar stores, which are the company’s core retail channel, Big Lots also operates an online store through its website at www.biglots.com.  This online sales portal allows customers to browse the company’s products, access seasonal deals, make purchases, and schedule deliveries without interacting with any sales personnel directly.  The company also offers a mobile app, through which customers can access coupons and discounts.

Big Lots’ store network and online sales are supported by its network of warehousing and distribution centres.  The majority of the company’s merchandise offerings are processed for retail sale and distributed to stores from its five regional distribution centres located in Pennsylvania, Ohio, Alabama, Oklahoma, and California.

CUSTOMER RELATIONSHIPS

Big Lots seeks to provide excellent customer service to its customers, its sales and support personnel dealing closely with customers in-store to ensure that their needs are met and that they are provided all of the information the require.  The company also has staff on-hand across its stores to handle customer complaints and product returns in person.

In addition to hosting an online store on its website, Big Lots also uses its website to provide its customers with information on its store locations, its products, and delivery services.  The company’s website also includes contact details for the company’s support services.  Customers are able to contact these personnel over the phone or via an online contact form in order to make complaints, ask questions, or rearranged deliveries.

Big Lots aims to secure recurring business from its customers.  In order to attract repeat business, the company employs a rewards scheme through which it offers regular customers discounts, benefits and rewards for in return for purchasing products via Big Lots outlets.  Customers are able to manage their rewards accounts through the Big Lots website.

Big Lots is additionally able to communicate deals and updates to its customers through its various social media accounts, including with Facebook, Twitter, YouTube, Pinterest, and Instagram.

KEY ACTIVITIES

Big Lots operates as a non-traditional, discount retailer with an extensive presence across the US.  The company currently has a network of approximately 1,416 stores spread across 47 states.  The company sells a broad selection of homeware, furniture, and general merchandise products, including across the following categories: furniture and homeware, seasonal products, soft home products, food items, consumables, hard home products, electronics, toys, and accessories.  The company also operates an online sales portal through which it sells the same core products, allows customers to schedule deliveries, and manages a rewards and benefits scheme.

KEY PARTNERS

Big Lots works closely with a network of partners that support the company’s core retail and distribution activities.  These partners include:

• Supplier and Vendor Partners, including suppliers of merchandise that provide products for sale across the company’s outlets and assist Big Lots in enhancing and expanding its product inventory, as well as third-party providers of other corporate services;
• Distribution and Logistics Partners, including distribution and logistics companies that support the company’s storage and distribution infrastructure and operations, ensuring that the company’s stores are stocked quickly and efficiently;
• Import Partners, comprising a number of companies that specialise in the import of merchandise to the US, ensuring that the company has an extensive and varied portfolio of products acquired at affordable prices;
• Franchise Partners, comprising companies that operate Big Lots stores on behalf of Big Lots as a franchise operator;
• Marketing and Branding Partners, including various marketing agencies and communications partners that collaborate with the company on in-store and external marketing and advertising campaigns; and
• Community Partners, comprising a range of charitable organisations and non-profits with which the company collaborates on social and community projects, primarily in the US.

Big Lots has launched a number of partnerships in recent years.  This includes community tie-ups with Nationwide Children’s Hospital, WINGS, and Habitat.

KEY RESOURCES

Big Lots’ ability to procure, distribute and sell high-quality items at affordable prices, and provide excellent customer care are key to the company’s business model and reputation.  The company’s key resources are its products and inventory, its suppliers and supply chain, its network of retail outlets, its distribution and storage infrastructure, its website and online store, its IT and communications infrastructure, its partnerships, and its personnel.

COST STRUCTURE

Big Lots incurs costs in relation to the procurement of products and merchandise, the operation of its supply chain and distribution infrastructure, the operation of its retail outlets – including rental and utility costs, the development and maintenance of its website and online store, the maintenance of its IT and communications infrastructure, the management of its partnerships, and the payment of salaries and benefits to its personnel.

REVENUE STREAMS

Big Lots generates revenue through the sale of furniture and homeware products via its network of retail outlets and through its online store.  The company’s revenue is derived primarily from sales made directly to consumers, as well as through franchising fees from third-party franchise operators of Big Lot stores.

In 2017, Big Lots recorded annual net sales of USD 5.27 billion.  The largest contributor to the company’s sales revenue was the company’s furniture product category, which accounted for 22% of sales.  This was followed by consumables, which accounted for 18%.