retail watch | Feb 16, 2023 |
Bed Bath & Beyond bought some time. Will it be enough?

Let’s go with the assumption—as much of a stretch as it may be—that Bed Bath & Beyond manages to pull off its Houdini-like magic trick and gets the financing to continue to stay in business (and out of bankruptcy). Then what?

If you consider the company’s original store format in the 1970s and ’80s—back then it was just “Bed & Bath”—as 1.0, and its 1987 expansion into the “Beyond” hard goods categories as 2.0, then the private brand era of the past two years was 3.0. On tap is the next version: BBB 4.0.

The beleaguered retailer—which has secured new funds with the expectation that more are on the way—has sketched out a new strategy that is long on optimism but short on specifics. In a statement last week, CEO Sue Gove focused on the big picture: “This transformative transaction will provide runway to execute our turnaround plan. We continue to put our customers at the center of every decision, positioning Bed Bath & Beyond to meet and exceed their expectations, while resetting our foundation for near- and long-term success.”

On Thursday afternoon, BOH was able to access two calls during which BBB executives provided further details to its suppliers—one call was with conventional vendors, and the other one was with direct-to-consumer brands. Most important, they indicated BBB would begin to pay for merchandise “in advance or COD” depending on the vendor’s preference. They also said DTC suppliers would start getting paid immediately after BBB was paid by shoppers for orders that are fulfilled directly by the vendor.

Executives also said they would be moving to net pricing terms, which would eliminate many of the special charges the store has used in the past to reduce its payments to its suppliers. It’s all part of what Gove called the company’s new “supplier promise.” New interim CFO Holly Etlin was blunter when she said BBB was taking the next few months “to clean up its act.”

Beyond new payment terms, here’s what we know so far about what management has in mind going forward:

Stores: From its high of some 1,500 stores just a few years ago, Bed Bath & Beyond is radically slashing its fleet and says it will end up with about 360 stores, plus another 120 BuyBuy Baby locations. All stores in Canada—about 65 between the two nameplates—are closing as the company exits the country entirely. (Curiously, it has said nothing about its joint venture in Mexico, where it has a handful of locations.) The new U.S. footprint will represent a drastic reduction, with broad swaths of the country having few if any stores left.

E-commerce: The company has not shared what percentage of its overall business is done online, but the last time it did, in the first quarter of 2021, it was 38 percent, albeit during the pandemic conditions when everyone was shopping online. All Bed Bath & Beyond will say now is that “the digital channel is expected to rise to a higher proportion of sales with improved channel profitability.” Yet none of its statements on how the new funding will be used make mention of investment in its subpar digital operation.

Merchandising: Here’s where it gets really vague. “We are prioritizing availability of leading national and emerging direct-to-consumer brands our customers know and love,” said Gove in a press release, which probably means the company will continue to de-emphasize private label merchandise and bring in more DTC brands. But these are the same national brands Bed Bath & Beyond previously carried in its 2.0 era—the same period of decline that led to the pivot toward private label goods. On the DTC front, the retailer already carries Casper and has started to bring in some other digitally native players, but all of these brands are pursuing physical store distribution on their own as well, and it will be hard for the company to stand out.

Physical format and fulfillment: This one is intriguing. “The Company will also be pursuing asset-light inventory management strategies to drive growth, including vendor-direct-to-consumer, marketplace and the potential for innovative collaborations,” said the release. The vendor-direct strategy for online orders is something BBB has been doing for years, as have most other retailers. (Wayfair, in particular, takes very little ownership of goods, relying on its suppliers to handle fulfillment.) But what does that approach mean for stores? Is the company suggesting leased or consignment departments that vendors run and staff? While that is a component of department store retailing for luxury brands and beauty, there’s very little of that in the home space. Only ABC Carpet & Home in New York pursued that strategy in its heyday, and it has never been scaled up to any degree anywhere. “Innovative collaborations” could mean just about anything—or, frankly, nothing.

Operations: Bed Bath & Beyond says it expects to achieve significant cost savings as it drastically reduces the size of the company. “Supply chain, technology, expense structure and business processes will continue to be streamlined as the company realigns its operational foundation” was how Gove put it. That process has already begun with serious layoffs at corporate headquarters in Union, New Jersey, and with hundreds of store-closing sales underway.

Will all of this be enough? And will it be in time? The new financial lifeline investors have extended is not all that long, and in the meantime, current sales have likely been severely diminished—at least one independent source reported that many stores are managing inventory levels off 40 percent from optimum.

All of those bankruptcy headlines can’t have helped customer enthusiasm—or worker morale, for that matter. Bed Bath & Beyond 4.0 is most certainly a work in progress. Grove has to hope it will indeed result in progress.

Homepage photo: ©Sundry Photography/Adobe Stock


Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.

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