Big Lots’ Long Road Ahead: Discount Retailer Faces Challenges Despite Acquisition

Big Lots, a once-dominant player in the discount retail sector, faces an uncertain future following an acquisition by Gordon Brothers Retail Partners.

The agreement, finalized Dec. 27, ensures hundreds of Big Lots stores will remain operational, as the assets of the bankrupt retailer are transferred to other entities, including Variety Wholesalers. Under the new ownership structure, Variety Wholesalers will take over 200 to 400 Big Lots locations, maintaining the brand and continuing operations, along with up to two distribution centers.

For Big Lots, the deal with Gordon Brothers offers a lifeline after a turbulent year marked by financial struggles and declining sales. The company initially planned an acquisition by Nexus Capital Management, but that deal fell through, leaving Big Lots facing closure.

While the new agreement brings hope, the retailer continues to face challenges. Big Lots has struggled to adapt to shifting consumer preferences, relying too heavily on traditional brick-and-mortar retailing and failing to compete with discount giants like Walmart and Dollar General, and specialized retailers such as TJX and Ross.

Struggles With Strategy and Real Estate

Big Lots’ struggles are not unique in the discount retail sector, according to Naveen Jaggi, president and global chair of retail advisory services at real estate and investment management firm JLL.

“From a consumer standpoint, Big Lots did not have a clearly defined offering,” Jaggi said in an interview with PYMNTS. “They sold a lot of things to a lot of different people. As opposed to their biggest value competition, they couldn’t compete against Walmart or Target, and at the same time they couldn’t compete against the value discount retailers like a Dollar General for grocery or for fashion with retailers such as TJX and Ross Dress for Less and now Burlington.”

Too much of an emphasis on furniture didn’t help Big Lots’ cause, Jaggi said.

“With housing sales at historic lows and new housing starts at historic lows, no one is buying furniture and buying the kind of things that we were buying during the pandemic,” he said. “Being too dependent on furniture and home furnishings also became an inventory problem for Big Lots.”

To further complicate matters, many landlords view Big Lots as a “tier 2 or tier 3” retailer, which hindered its ability to secure prime locations, Jagger said.

“One of Big Lots’ biggest challenges is to improve their real estate strategy,” he said. “Most landlords looked at Ross, TJX, Burlington and many other retailers of the same ilk as more desirable. For Big Lots to start having premier real estate and catch consumers’ attention, they need to have prime real estate as its No. 1 driver as opposed to getting cheap real estate.”

Is eCommerce a Panacea?

Despite the rising importance of eCommerce, Jaggi said a strong online presence may not be the panacea for Big Lots moving forward.

“Having a strong, powerful eCommerce platform isn’t necessarily a guarantee for success in the region in which Big Lots plays,” he said. “Having a strong eCommerce distribution and direct consumer channel isn’t going to gain them more customers. Ross, TJX and Costco, for example, do not have large eCommerce platforms. They’ve been very successful by having a very clear and defined strategy for what they’re offering the consumers on a day-to-day basis. It’s easy to understand what you’re going to do and what you’re going to buy when you go to a Walmart or Ross or a TJX.”

For Big Lots, however, the lack of such a clear strategy has been a major obstacle, according to Craig Rowley, senior client partner of retail and consumer consulting at Korn Ferry.

“Discount retailers attract customers by providing great deals on everyday products,” Rowley told PYMNTS in an interview. “Today, they all face the challenge that their customer base has been hardest hit by inflation that has grown 26% since 2020 — eliminating all discretionary spending. So, the key is to get the products customers have to have right (like household needs) at a great value.”

Rethinking Merchandise Strategy and Digital Investments

As a result, Rowley said Big Lots must rethink its merchandise strategy and find ways to beat Walmart and Amazon, adding, “having closed their poorer performing stores gives them a chance to invest in the rest.”

One of the mistakes Big Lots made was its failure to adapt to the economic changes impacting its customer base, Rowley said.

“Value retailers have been hit hard by the increased inflation,” he said. “First, it significantly raised the price of the products it purchased. Second, it caused their key customers to shop for mostly basics as their discretionary income was consumed by inflation. This reduced sales of higher margin ‘nice to have’ products. Big Lots faced this even more with their furniture offering.”

Regarding eCommerce, Rowley said he thinks it’s “a tough space for value retailers for two reasons. First, much of their product is bought from factories and other retailers, so it is hard to have a consistent online offering. Second, many value customers are cash customers. They buy products when they cash an income check. But having core product online, as well as specials, can help drive traffic to the store.”

In an interview with PYMNTS, Zachary Robichaud, instructor at the School of Retail Management, Ted Rogers School of Management, Toronto Metropolitan University, said Big Lots “faces a pivotal moment where it must reimagine its approach to customer engagement and experience to remain competitive.”

A Path Forward: Innovation and Consumer Engagement

To elevate the customer experience, Robichaud said Big Lots “should focus on creating value-driven, personalized in-store and online shopping journeys. Investing in a strong eCommerce platform is critical, as today’s consumers expect seamless integration between digital and physical channels. By enhancing digital tools like mobile apps and loyalty programs and offering conveniences such as same-day delivery or in-store pickup, Big Lots can strengthen its appeal to both existing and new customers.”

However, the future will be filled with many challenges for Big Lots, Robichaud said.

“Historically, its lack of significant eCommerce focus and underwhelming in-store experiences may have hindered its growth,” he said. “Rectifying this requires aligning digital investments with omnichannel strategies, leveraging data to tailor offerings, and creating stronger connections with customers through community-driven initiatives and marketing campaigns. With the backing of Gordon Brothers, Big Lots has an opportunity to innovate and carve out a more distinctive identity in the retail landscape.”

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