Dive Brief:

• Big Lots will add two more forward distribution centers handling bulk products and furniture to its network next year, President and CEO Bruce Thorn said on the company's Q3 earnings call. The new facilities come in addition to FDCs located in Pennsylvania and Georgia that opened earlier this year.
• The FDCs free up capacity at Big Lots' five regional distribution centers, which were designed for carton flow rather than larger items, Thorn said. They also relieve pressure on the distribution centers most affected by labor challenges, which are primarily located in the northeast U.S., according to its quarterly financial report.
• "As we have grown substantially over the past two years, leaned further into bulk furniture and seasonal businesses, and significantly grown our e-commerce business, we have outgrown our capacity," Thorn said. Compared to 2019 levels, Q3 sales grew for both seasonal items (31%) and furniture (13%).

Dive Insight:

Big Lots is ramping up its supply chain investments to more effectively fulfill e-commerce orders, get ahead of issues like port congestion and ensure popular seasonal products arrive at its stores in time.

Beyond the FDCs, the company has completed its rollout of a new transportation management system to optimize its network, which is growing in complexity. It also set up a "pop-up" DC bypass network to process and ship holiday imports direct to store.

Retailers of all kinds are taking their own measures to minimize supply chain snags. Nordstrom is increasing its use of pack and hold inventory, Gap is spending heavily on airfreight and the largest retailers are chartering ships.

Congestion and delays aren't expected to fade in the first half of 2022, according to Thorn. Big Lots is "planning accordingly" by buying up more inventory in the fourth quarter. Inventory already increased by 17.3% in Q3 from 2020, according to its quarterly financial report.

"It puts us in a very strong position to start the New Year in a big way," Thorn said. "In terms of customer trends, I'll tell you what — she's out there revenge shopping."

Much more of that shopping is happening online since the COVID-19 pandemic took hold and changed spending habits. Big Lots' year-to-date e-commerce sales grew 300% versus 2019, Thorn said.

The bulky and harder-to-handle items that Big Lots' FDCs encounter are also gaining interest online. Cyber Week online orders under the "Home, Furniture" vertical grew 8% YoY while overall orders declined 12%, according to Salesforce.

"Moving to our own brands, in particular, Broyhill and Real Living, we see major upside both with Furniture and beyond," Thorn said. "Most importantly, we have proven that they resonate well with our customer."