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    Big Lots: A Premium on Being Cheap

    During a period of economic slowdown, discount retailers are all the rage. As consumers are forced to become more frugal, stores like Big Lots are attracting more business. Big Lots is known as a closeout retailer. They purchase discontinued or repackaged products and sell them for up to 70% off the suggested retail price. The range of products is wide-furniture, clothing, health products, and even household appliances such as vacuum cleaners. Because Big Lots is experiencing such success, it has become a favorite on the New York Stock Exchange. Now, the question is whether Big Lots can sustain this level of performance.

    Big Lots does not want to compete with retailers like Wal-Mart. Under the guidance of chief executive Michael Potter, Big Lots is staying true to its roots by offering products that may be slightly less current or lower in quality for the best pricing. This has been a great niche for consumers at this time.

    Michael Potter's goal is to continue growth by focusing on internal procedures, and not acquisitions or new store grand openings. The main company also operates stores under the names of Odd Lots and Pick 'n Save-but now those stores will all be converted to the Big Lots brand name, in order to save on marketing costs. In addition, the stores are now focused on being cleaner, well lit, and more organized, which were not some of its strengths in the past. Low prices were the only lure that was used to draw consumers into the stores. These store makeovers will cost about $80,000 per store, but it is expected that the investment will pay off. That is what investors are hoping for.

    ? Even though Big Lots and Wal-Mart are both discount retailers, explain why they are not in the same retail category?
    ? What do you think is the main difference in service at Big Lots versus Wal-Mart?
    ? Think about positioning, and how Big Lots may have a new place in the minds of consumers.
    ? Why don't all consumers buy on low price?

    SOURCE: Tsao, Amy. "Big Lots: A Premium on Being Cheap." BusinessWeek Online, 14 August 2002.

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    Solution Preview

    1. Big Lots and Wal-Mart are not in the saem retail category for two reasons:
    a. Wal-Mart sells mass of current never before used products while Big Lots sells somewhat out of date repackaged items (even though they also sell some current new products as well).
    b. Big Lots is a closeout retailer meaning they are at the end of the line for the products they sell and probably if the products don't sell there, they will not be attempted to sell anywhere else. Wal-Mart is in the start of the line or pretty much at the start after distribution chains. Products usually start at wal-mart and then go on to places like second hand retailers and big lots at the ...

    $2.19

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