Dive Brief:
- Ollie's Bargain Outlet has seen improved sales productivity from offering more furniture, but delivering furniture to customers isn't currently in the retailer's plans, President and CEO Eric van der Valk said on a June 3 earnings call.
- Ollie's lack of home delivery helps keep costs down, per its website. When asked by an analyst about shipping furniture to customers, van der Valk said Ollie's did test a delivery offering at one point, but it didn't gain traction.
- Van der Valk added that free delivery could compress the company's margins, while a delivery fee would spur other hurdles. "When we price delivery to cover the cost of delivery, the customer is not willing to spend it," he said. "For the most part, they're just not willing to spend. So the jury is not necessarily out."
Dive Insight:
Shipping bulky goods like furniture directly to customers can be a costly endeavor for retailers without robust in-house delivery networks. Carriers like FedEx and UPS tack on additional charges for large item shipments, ramping up the pricing pressure. For Ollie's, the retailer decided that focusing on low prices rather than rolling out a free delivery option would be the best path forward, van der Valk said.
However, customers may not have enough space in their vehicle to bring large furniture purchased in stores to their homes, introducing friction to potential sales. Van der Valk noted that Ollie's does let customers buy furniture in advance and pick up the item at a later date. For example, a shopper may purchase a furniture piece on a Tuesday and return on the weekend with a pickup truck to haul the item.
Meanwhile, Ollie's upgraded its warehouse execution system at its Lancaster, Texas, distribution center in Q1 to help boost productivity, its last remaining facility to receive the upgrade, van der Valk said. The company also plans to complete an expansion of the Lancaster distribution center early in Q3, in addition to starting the expansion process for its Princeton, Illinois, facility later in the year.
"The two expansions will increase our network capacity to over 850 stores," he said.
Ollie's also has distribution centers in York, Pennsylvania, and Commerce, Georgia. Inventory is shipped directly from suppliers to Ollie's four warehouses, which process and sort goods prior to delivery to stores, per the company's annual financial report.
