Big Lots, once a prominent player in the closeout retail sector, is now navigating turbulent waters following its bankruptcy filing in 2024. The company, which operates over 1,000 stores across 48 states, has initiated a going-out-of-business (GOB) sales process in a desperate attempt to salvage its operations. This alarming trend not only raises questions about Big Lots’ future but also highlights the broader challenges facing discount retailers, such as Dollar General and Dollar Tree, which have also experienced store closures this year.
As recently as last November, Big Lots appeared optimistic about its future. They launched a new app designed to enhance customer engagement and improve their digital sales. According to Digital Commerce 360, Big Lots’ ecommerce sales are projected to reach $389.36 million in 2024. This endeavor aimed to capture a growing segment of consumers who prefer shopping online. However, the hopes for revitalization quickly faded after negotiations with Nexus Capital Management LP collapsed, pushing the retailer into a precarious position.
Bruce Thorn, the company’s president and CEO, disclosed the tough decision to start liquidating inventory. “We all have worked extremely hard and have taken every step to complete a going concern sale,” he said in a statement. “While we remain hopeful that we can close an alternative going concern transaction to protect the value of the Big Lots estate, we have made the difficult decision to begin the GOB process.” This dual strategy of conducting liquidation sales while searching for potential buyers opens the question of whether the retailer can successfully execute both routes.
According to retail consultant Michael Zakkour, Big Lots has failed to adapt to an evolving market landscape characterized by the emergence of cross-border commerce and changing consumer preferences. Zakkour noted, “They never understood or adjusted to consumers’ emergence and embrace of cross-border commerce, featuring super-low prices that offered convenience with a tolerable wait time.” In doing so, Big Lots neglected to maintain its commitment to offer products that catered to its typical customer profile.
Retailers like Big Lots face a growing challenge in striking a balance between maintaining low prices and providing a variety of affordable items that attract budget-conscious shoppers. Zakkour highlights that Big Lots strayed from its origins by deviating from a dollar-item product mix that had initially defined its brand. Instead, the retailer began to offer products with higher price points, alienating its core customer base. This shift signifies a broader problem in retail where brands fail to understand deeply ingrained consumer expectations.
Moreover, Zakkour emphasizes that Big Lots’ business model is rooted in a system that is over 20 years old, one that did not necessitate significant investment in technology or talent. “They broke the promise of the dollar item product mix and did not understand a completely new asymmetrical online/offline consumer journey,” he explains. As retail continues to evolve, a failure to invest in infrastructure that supports modern consumer behavior can effectively seal a retailer’s fate.
With Big Lots struggling for survival, industry experts are questioning whether the company can find a “White Knight” buyer to turn back the clock on its decline. Zakkour suggests that the chances of a smooth turnaround are slim. “There is little chance of the ‘White Knight’ getting things back on track,” he stated, indicating that if a buyer were to enter the picture, it is more likely that they would buy and dissect the company for parts rather than resurrect it as a whole entity.
This case serves as a cautionary tale for other retailers navigating the complexities of today’s market. The importance of understanding consumer behavior and adapting business strategies accordingly cannot be overstated. As discount retailers grapple with their own set of challenges, they must remain agile and responsive to shifting market trends to avoid a fate similar to that of Big Lots.
In conclusion, the struggles of Big Lots encapsulate the challenges faced by retailers that fail to evolve with consumer demands. While the company’s short-term strategy involves liquidation sales and attempts to engage potential buyers, the long-term outlook appears increasingly grim. Retailers must learn from Big Lots’ missteps and place a renewed focus on understanding their target audiences, maintaining their core offerings, and investing in necessary technological advancements. As the landscape continues to shift, only those willing to adapt will sustain their presence in an increasingly competitive market.
