When was the last time you thought about Big Lots? This American retail giant has built a legacy of offering diverse, affordable products to cost-conscious consumers. And this may be one of its moments in time with so many consumers fed up with inflationary price hikes. Enter grocery.

Due to the nature of end-of-life products, it appears that the speed of Big Lots’ disposition and liquidation is unique. Here’s an example: They recently purchased 300,000 snack units, picked it up from the manufacturer, had it delivered to the stores, added in-store signage, and individually stickered each package within five days, and sold out within two weeks.

Big Lots’ resilience is no accident. From its humble beginnings to its status as a key player in the discount retail sector, Big Lots has consistently adapted to the ever-changing retail landscape. But the world of discounting has changed and in its latest financial report in March of this year, the company reported a net loss of over $480 million and a comparable sales decrease of 13.65 percent from 2022. The company points to “a challenging macroeconomic environment and well-documented weather challenges” as they continue to cut costs to drive its turnaround. Bruce Thorn, President & CEO underscored in the financial report the importance and expanding its ‘extreme bargains’ offerings.

Who better to sit down with than Seth Marks, Big Lots’ Executive Vice President of Extreme Value who runs the food and consumables divisions to hear about the path forward for this 1,392-store chain that serves 48 states in the U.S. This is Mark’s second stint at Big Lots and today one of his goals is to deliver the ‘surprise and delight’ factor to shoppers and bring them back into the stores to make Big Lots more than just a transaction.

A Brief History

Founded in 1967 by Sol Shenk, Big Lots started as Consolidated Stores Corporation. The company initially focused on closeout retailing, which involved buying excess inventory directly from manufacturers and selling it at discounted prices. A key difference, according to Marks, is that Big Lots set up buying relationships directly with the manufacturers disintermediating jobbers, intermediaries and liquidators. In fact, their relationships are so strong, they commit to overruns which allows the manufacturers to reduce their operating costs and offer the chain even better pricing. Sheik created this business model to offer a wide range of products, including food, beverages, toys, furniture, clothing, and housewares, at significantly lower prices than traditional retailers.

In 1982, the company opened its first Big Lots store in Columbus, Ohio, where it is still headquartered today with over $4.7 billion in annual sales. The 1980s and 1990s were periods of rapid expansion for Big Lots, as the company acquired several other retail chains, including MacFrugals and Pic ‘N’ Save. By the early 2000s, Consolidated Stores Corporation had rebranded itself as Big Lots, Inc. This move aimed to unify its various store names under a single, recognizable brand. Big Lots has a strong tradition of community engagement and philanthropy through its Big Lots Foundation and partnering with Nationwide Children’s Hospital, Feeding America, National Veterans Memorial and Museum, American Heart Association as well as other charitable initiatives, including education, health, and disaster relief.

Changing Retail Dynamics

Marks is the right man for the job to turn around Big Lots’ current losses. His entire 30-year career has been in the extreme value off-price space. In fact, his grandfather and father were in the closeout wholesale business. His enthusiasm for the business is infectious. He says that “the one thing that always wins is the best price on the street, and you can’t refute that!” He proudly refers to Big Lots as the New York Yankees of off-price.

Big Lots’ ability to adapt to changing retail dynamics helped it navigate previously through economic downturns, shifts in consumer behavior, and the rise of ecommerce. But today the retail landscape and consumers are different. According to the Federal Reserve, U.S. total household debt rose to $17.5 trillion in the fourth quarter of 2023 and credit card debt hit a record high of $1.13 trillion this past February. Credit card delinquencies are also on the rise. The New York Federal Reserve reports that as of Q1 2024, 8.9 percent of Americans are behind on their credit card payments. Consumer confidence is more fragile.

All retailers and brands are now faced with a new challenge – the “no-buy movement.” According to the Associated Press, more people are making pledges to stop buying non-essential items for a full year to adjust for overspending or climate concerns. The movement is growing through social media including TikTok where its “No Buy Year Rules” has over 31.7 million views with over 26 million posts. Reddit’s r/nobuy page, with 52,000 members, offers weekly no-buy check-in and accountability discussion boards to help motivate the group.

Big Lot’s Marks says that approximately 90 percent of the products that are in-store are discontinued, especially in grocery and consumables. Which may just be what can get these no-buy non-essentials consumers in the door.

Big Lots’ DNA lies in opportunity, he says “that’s what this company was born from.” Due to the nature of end-of-life products, it appears that the speed of Big Lots’ disposition and liquidation is unique. Here’s an example: They recently purchased 300,000 snack units, picked it up from the manufacturer, had it delivered to the stores, added in-store signage, and individually stickered each package within five days, and sold out within two weeks. With this precise timing, the customer had 30 days to consume the chips before the best-buy date. How do they do it? Marks can write orders in 24 hours, which enables them to get food and beverages with shorter expiration dates (45 days) to the floor quickly to “pounce” on opportunities.

Investing in Store Experience

Marks believes that Big Lots’ future success will be by educating the consumer. He says his Gen Z children are out of the house, and on-trend with their cohort in shopping thrift. He observes they are pragmatic and are trying to save money and be budget-conscious in part to afford those luxury items and luxury vacations. He says that the off-price business sector will continue to thrive as it appeals to younger consumers and executes incredibly well. Sounds like a plan for next gens if the in-store experience delivers.

On that note, the company has undertaken extensive store remodels, aiming to create a more inviting and organized shopping environment. These remodels include updated fixtures, improved lighting, and better product displays, all designed to enhance customer satisfaction and drive sales. Big Lots has also introduced new product categories and expanded its private label offerings. By diversifying its product mix, the company aims to attract a broader customer base and increase its market share. The introduction of categories such as health and wellness, home decor, and seasonal items is its attempt to promote Big Lots as a one-stop shop for consumer needs.

Future Opportunities and Challenges

Big Lots needs to make some fundamental shifts to reverse its financial course. In today’s complex, dynamic marketplace, digital transformation, responding to consumer trends, and understanding how to outcompete the competition are table stakes. Those Gen Z and Alpha future customers need a reason to shop at Big Lots, and everyone else looking for a way around price-gouging retailers needs to get Big Lots on their radar screens. Here’s our brief diagnosis and prescription.

• Ecommerce

While Big Lots has made strides in its ecommerce capabilities, it is making its online presence through its social media presence on TikTok, Facebook and Instagram a priority. Improving the design and user experience on its ecommerce platform could also help the company capture a larger share of the growing online retail grocery market. Its online positioning screams value, but for new and younger shoppers the design seems out-of-touch and dated. As with other retail sectors, younger shoppers are demanding transparency with more information including nutritional information, ingredients, allergens and diets. Big Lots, according to Marks, has a priority to communicate with customers at speed and on point. Their email communications have a 50 percent open rate due to the positioning of its subject line, no surprise, “one-time buyout.”

• Sustainability

As consumers become more environmentally conscious, all retailers are under increasing pressure to adopt sustainable practices. Big Lots can seize this opportunity by at least doing the basics: reducing plastic waste, sourcing eco-friendly products, and improving energy efficiency in its stores. Being part of the sustainability movement is a real thing and consumers increasingly want to do business with environmentally conscious brands.

• Competitive Landscape

The discount retail grocery sector has become highly competitive, with players like ALDI, Grocery Outlet, Dollar General, Walmart, and Amazon vying for market share. For Big Lots to win over shoppers from these other retailers it has to differentiate itself through unique product offerings, exceptional customer service, and, as Marks said, having the best price on the street.  And that goes for next gen thrifters as well as affluent consumers looking for deals.

To the Future and Beyond

Big Lots’ journey from a closeout retailer to a prominent discount retail chain is a testament to its resilience and adaptability. Yes but.  Positioning itself for future success with Marks’ grocery philosophy and deal-making may be its most important tools in reversing its sales decline and shaping its future. Grocery is under pressure to deliver the best price for the value. With no end to a disruptive market in sight and faced by customers calling the shots, Big Lots is in the throes with all retailers reinventing, reimagining, and re-engineering to attract and retain loyal customers.