THINK TankJune 18, 2020

THINK Tank: Will Big Lots’ Partnership With Instacart Bring Bigger Business?

Last week, closeout retailer Big Lots entered the grocery delivery game when it began offering same-day delivery in partnership with Instacart. 

Available at nearly 1,400 Big Lots stores in 47 states, the new partnership brings affordable groceries, as well as everyday essentials, and even home decor, straight to customers’ doors. 

Big Lots remained open during the pandemic and reported comparable sales up 10.3% in the quarter ending May 2. The retailer also saw its e-commerce sales up 45%.

Studies have suggested that the discount category is performing well due to changing consumer behaviors—over the past few years, people started shopping more often with slightly smaller baskets. Discount stores are smaller with limited assortments, which compliments this behavior. 

 

Q: Will Big Lots’ partnership with Instacart bring bigger business for the closeout brand?

 

Thiago Garcia: Vice President of Customer Experience at VTEX
Erik Saltvold: Founder of ERIK’S Bike Shop 

 

Thiago Garcia:
So smart move, right? And by the way, Walmart has a similar strategy, right? Grocery is considered now as essential, therefore all Walmart stores remain open, whereas Best Buy, who does not sell groceries, had to shut their doors and just do curbside limited pickup availability. So smart move for Big Lots. I think it’s also a smart move because Instacart works really well with the type of categories that you want immediately. Things like baby, pet, grocery, and medicine. And that’s a great model for Big Lots to partner with a company like Instacart. To be able to fulfill that and then extend the rest of their categories and availability is smart. And so they will benefit tremendously from not just from this move, but also about their business model.

 

Thiago Garcia:
And as more malls and other retail stores close, the more that stores like Big Lots will benefit from getting that inventory and then bulking up, but they also need to build demand. So, it makes sense for them to look for e-commerce as a solution. But we can also think that Big Lots could benefit from a marketplace model, which is something that is on the rise now, where other independent resellers take the risk of the inventory purchasing, and then they’re able to list their deals on a recognizable retail site. So they could even take a step further in their eCommerce model and look at something like a marketplace as a great fit for their type of business.

 

Thiago Garcia:

Imagine the efficiency of someone who’s closing the stores. And instead of having to liquidate inventory, that store becomes a reseller and is able to sell those products into a marketplace scenario. Or another, a third-party reseller that wants to acquire the inventory risk and then able to sell on something like Big Lots.

 

Erik Saltvold:
I agree. I think it’s smart for them. I think they’re trying to figure out exactly how to use that differential and leverage it over multiple retailers. So, I think it’s really smart that they’re expanding the technologies that they’re working with. I mean, in Minneapolis, so obviously the home of Target, and their partnership with Shipt has been, really successful and they’ve expanded that out rapidly. To me it’s just a trend of physical retailers trying to leverage their inventory out to serve the customer in multiple ways. And I think all of these partnerships, I agree, we’re just going to hear more and more about this since it’s a really smart strategy to compete with Amazon and their strategy of having multiple warehouses across the country with retailers. You’ve got even more warehouses, so it becomes a competitive advantage for people to partner with services like that.

 

Erik Saltvold:
I think there are still is a bit of the haves and have nots in the economy. There’s a part of the economy that’s super successful and we’ve been low on employment, but I think there’s still a part of the economy that has struggled a little bit with wage growth. And so I think that’s been probably attractive for some of the closeout retailers, but what’s interesting is some of the home goods retailers that are focused on closeouts or some of the brands in our space, such as Tuesday Morning. So we see a trend of people looking for visibility of products that are at a discounted price and having those kinds of experiences. The fun of discovery, I think, is a part of the shopping experience. So I think that’s one way they’re successful, and I think another way that they’re successful is just by serving a part of the market that is more value-oriented and can have more focus.

 

Erik Saltvold:
And to your point earlier, there’s going to be, I believe in certain categories, a lot of closeout products as we move through the fall months because the rise in retail has not buoyant across all channels. It’s been buoyant across specific channels, whether it’d be essentials or outdoor activities, or things where people can do it in a way that’s sensitive to the way we’re living in the COVID age.

 

This conversation first appeared on the June 15 episode of the Retail Rundown.