'National' Big Lots aims to expand: new media blitz focuses on consumer's love for landing a deal

DSN Retailing Today, April 21, 2003 by Debbie Howell

COLUMBUS, OHIO -- Big Lots' conversion last year to a single-store banner and growth into a near-national chain served as the launching pad for the retailer's first national television advertising campaign, which broke earlier this month. The new commercials, produced by Columbus, Ohio-based SBC Advertising, feature the retailer's celebrity spokesman, Jerry Van Dyke, and highlight what Big Lots calls the "closeout moment," when a customer realizes the significant savings from buying a brand-name item at closeout prices. Big Lots is spending $50 million on the campaign, a significant boost from last year's $30 million allotted for spot television commercials.

Kent Larsson, evp of marketing, said the expanded advertising program is aimed at building the Big Lots brand and introducing more customers to the format, which focuses primarily on discounted closeout goods.

"Our objective is to increase our customer base to expose closeout shopping to a broader segment of the population," Larsson told DSN Retailing Today. "Overall, we still feel our top-of-mind awareness is low."

Each spot is somewhat tongue-in-cheek, such as one in which a father gives his 12-year-old son "the talk," which turns out to be a discussion of dad's first trip to Big Lots. The commercials will air in a variety of time slots on network and cable, targeting females ages 25 to 54 with household incomes under $60,000.

Big Lots also produced a Spanish-language commercial for the Hispanic consumer that will run nationally on Univision, Telemundo and TeleFutura.

The chain's customer base is split equally between low-income shoppers seeking discount prices and shoppers of higher incomes drawn in by great deals. Heavier use of spot advertising last year helped grow customer counts, which Big Lots hopes to repeat with its new national campaign.

A national advertising campaign was in the company's plan once all stores were converted to the main Big Lots banner. As of August, all stores formerly called Pic 'N' Save, Mac Frugal's and Odd Lots had been renamed Big Lots.

With nearly 1,400 stores in 45 states, Big Lots is sufficiently large enough to benefit from a national campaign. This year, the retailer will add 90 new stores and begin construction on a fifth distribution center, located in Oklahoma. As Big Lots moves into new markets, the advertising will bolster brand awareness, though the retailer has no plans this year to add a new state.

Coming off a banner year that included a 154% increase in earnings per share and a 7.7% gain in comparable-store sales, Big Lots is in great shape financially to move forward with several other initiatives. They include supply chain enhancements, the remodeling of 200 stores, rollout of productive elements from its Ohio lab stores and the addition of 145 furniture departments to new and existing stores. Currently, Big Lots operates 736 furniture departments, of which 49 are freestanding furniture only stores. This high-profit business accounts for about 15% of the chain's revenue.

Larsson said new fixtures and merchandising ideas tested at its lab stores in Ohio would be added to new and remodeled stores, including a section just inside the entrance that showcases the latest hot brand closeout items.

Meanwhile, Big Lots is adding 20-foot international food sections to all of its stores. Food in general has become a highly successful and important business, generating 13% of the retailer's $3.8 billion in annual revenue.

The Big Lots of today is a dramatic change from the company formerly known as Consolidated Stores, which at one time operated multiple retail formats, including K*B Toys before it was sold in 2000. The chain made a decision three years ago to focus on its closeout business and Big Lots, its strongest banner, and even changed its corporate name in line with the strategy.

Compared with net losses of $380.6 million in 2000 and $20.2 million in 2001, Big Lots returned to profitability last year, growing net income to $76.5 million. The bulk of the losses two years ago related to divestiture of the toy business.

For the current year, Big Lots is forecasting net income growth of 15% to 20%, a mid-single digit gain in comps and total sales up in the high single-digit range. More specifically, Wachovia Securities estimates Big Lots will achieve $4.2 billion in sales this year and generate better than 20% earnings growth over the next four years.

As the largest closeout chain, Big Lots faces little threat from other closeout rivals and has carved out a differentiated format that competes well against other value-oriented formats, including discounters, dollar stores and clubs.