FIND "GOOD STUFF CHEAP" AT OLLIE'S BARGAIN OUTLET

Ollie's Bargain Outlet describes itself as "one of America's largest retailers of closeouts, excess inventory, and salvage merchandise."It offers drastically reduced prices that attract hordes of customers to huntfor treasures, prompted by the brand's urgent slogan that "when it's gone, it's gone."

As a regional player, Ollie's is headquartered in Harrisburg, Pennsylvania. In 2004, it operated 30 stores in the Mid-Atlantic region of the United States. Since that time, though, it has been on an aggressive growth trajectory, with 219 stores and counting. It went public in 2015, a move that fueled the pace of its expansion even more. It also has been opening stores to the south and west, such that it now has stores in 16 contiguous states. Its ambitious goal is to reach to 950 stores across the United States in the coming years.

Background and Retail Strategy

Ollie's positions itself as a hybrid of an off-price and an extreme value retailer. However, it isformally classified as a miscellaneous retail store(SIC 5999) rather than an extreme discounter, because itoffers an ever-changing assortment of merchandise.Similar concepts leveraged by Big Lots, Ross Dress for Less, and TJX Companies (i.e., T.J. Maxx, HomeGoods, Marshalls, and Sierra Trading Company) all feature aggressively priced merchandise, designed to sell a lot of discontinued goods or overstock items from other retailers and manufacturers. Anothersimilarity among these retailers is their comparative lack of fastidiousness, compared with department and specialty stores, when it comes todisplaying merchandise neatly. If a customer happens to move a garden hose to the tools section, the retailer does not worry too much because the next customer who encounters the hose might think that she or he found the last one and move to buy it quickly.

To support thisretail strategy,Ollie's highly experienced buying team procures an ever-changing assortment of merchandise,mostly fast-moving consumer goods, housewares, books, toys, tools, and do-it-yourself building materials. (The vast list of the different types of merchandise offered at Ollie's is available on the company's website:www.ollies.us/what-is-ollies/store-departments/.) Vendors of all sorts willingly sell their wares through Ollie's, because the win-win situation helps them liquidate their excess merchandise.The excess might be leftovers from a previous season or inventory remaining due to excessive purchases, as well as poorly selling items, products with out-of-date labeling or packaging, or items that have suffered some minor damage.Ollie's buys merchandise that is not quite fit to sell at higher-end stores and offers the vendors favorable conditions.For example, it pays vendors in cash and does not demand return privileges.

The buying team also leverages its long-standing relationships with hundreds of manufacturers, wholesalers, distributors, brokers, and retailers worldwide. It selectively chooses from among a broad range of brand name and discontinued products, then passes the savings from the opportunistic deals it negotiates on to customers, such that it can offer prices as much as 70 percent below department and specialty stores' levels. Approximately 70 percent of Ollie's merchandise features national brand names; private-label and unbranded stock constitute the remaining 30 percent. Furthermore, the retailer makes an explicit point to not depend on any single supplier for more than 5 percent of its inventory.

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Merchandising

Merchandise placement in stores changes according to how the inventory fits best, rather than being assigned to predetermined locations, as in a typical department or home improvement store. If the buying team purchases a large amount of a particular type of merchandise (e.g., laundry detergent with old labels, patio furniture overruns, discontinued Paula Deen cookware, about-to-expire K-cups), Ollie's stores clear out an area toward the front, near the entrance, and present massive table displays. In addition, handwritten signs, drawn with thick markers and often faded over time by sunlight,hang in the windows to harken the arrival of recent shipments of priced-to-sell merchandise. Toys account for one of Ollie's biggest categories, especially around the holidays; Ollie's also earns a disproportionately high amount of its sales during the holiday period.

A Customer Story

Roger and Emmy Brogan live on themoderate incomesthey earn as a mechanic and hair stylist, respectively. They have two children: Jason, 7, and Jessica, 5. The kids constantly clamor for new toys, and the pressure is heating up as the holiday season approaches. Roger and Emmy struggle to make ends meet, let alone buy the little extras for the children. Having lived their entire lives incentral Pennsylvania, the Brogans are very familiar with Ollie's Bargain Outlet.

Knowing that the store offers "good stuff cheap"and they mean all kinds of stuffthe Brogans make a visit to Ollie's for a family shopping trip in early December. They encounter a vast and changing assortment of consumer goods, from books to carpet remnants to kitchenware to snacks. They fan out across the aisles, looking for bargains. Brightly colored red, yellow, and black signs seek to draw their attention through funny wordplay, such as "Buy something just for the halibut."

Although Emmy finds a treasure-trove of deeply discounted merchandise, including potato chip flavors that she cannot find in local grocery stores and health and beauty supplies from a previous season,the children are disappointed that they cannot find the latest toys and gadgets. Still, Jason is soon distracted by an old-school Battleshipgame that he and his friends can play for hours on end, and he admits that retro board games are pretty cool. Jessica also discovers a collectible doll that she knows would look pretty on her dresser. In the meantime, Roger finds a wrench to round out his tool chest, and the parents consider how nice new laminate flooring would look to help them upgrade the worn-out carpeting in the house they purchased a few years back.

After 45 minutes of trolling the store and checking out one another's finds, the family members congregate near the checkout stations to review their combined basket before making their final decisions. The game and doll make the cut. Emmy purchases beauty supplies that she knows will appeal to some of her customers, but Roger decides against the wrench. He worries a little that he won't be able to find that exact design again in the future, but he and Emmy really want the flooring, so he decides to remove the wrench from the shopping basket and put the money toward this big home improvement project. Emmy agrees with this notion and decides to skip the snack foods for now.

After paying, the family members leave the store smiling, feeling satisfied that they got some great deals. Everybody found something that appealed to them, and if any of their purchases are not quite right,the family feels confident knowing that the store's return policy allows them to return the products for a refund within 30 days, as long as they keep the receipt.

1.Perform a SWOT analysis for Ollie's. If you were able to invest in Ollie's, would you? Why or why not?

2.Describe Ollie's target markets. How are they similar? Different?

3.Compare Ollie's retailing strategy to Macy's and to Marshall's.