Bed Bath & Beyond filed for bankruptcy over the weekend. After all the months of speculation, rumors and financial finagling, it’s almost anticlimactic.

Now that the company’s demise is certain, the real story will begin to unfold. What happens next, and who is going to get BBB’s $5 billion in retail business? Who wins, who loses and what about all the thousands of suppliers who did business with the retailer for as long as 50 years?

In its Chapter 11 filing announcement, Bed Bath & Beyond said it expects to liquidate all of its remaining 360 namesake stores as well as its 120 BuyBuy Baby locations. The company shared that there is a chance it will find a buyer for one or both. It’s also likely that the Bed Bath & Beyond intellectual property will live on as an online ghost brand following the closing of its physical stores, a common occurrence when bottom-feeding branding companies come in for the fire sale and launch e-commerce sites that bear little resemblance to what was before. (If you want a pertinent example, look no further than BBB’s one-time archrival Linens N’ Things, which endures as a zombie-tailer, living on name recognition and not much else.)

BuyBuy Baby has a chance of getting out of this alive. While the parent company never broke out individual divisional numbers, the baby-focused nameplate was believed to be more successful than the flagship in recent years, especially following the demise of its main rival, Kids“R”Us, after its parent company, Toys“R”Us, succumbed to debt and a lack of retail savvy. Sound familiar?

It’s likely somebody will acquire BuyBuy Baby and even continue to operate the brick-and-mortar stores as well as online. Look for a private equity player like Sycamore Partners or a brand aggregator like Authentic Brands Group as the most likely takers, though these are only my educated guesses and neither has expressed any public interest in any of this so far.

Once this meltdown transpires, what about what’s left, which is somewhere between $3 billion and $5 billion worth of home furnishings retail business? The partial answer is that a big chunk of it is going up in smoke. When retailers go out of business, a lot of the revenue they generated was created by their own efforts, all those coupons, promotions, social media posts and marketing. Without that, shoppers don’t shop, and much of those sales transactions are just not rung up.

A similar situation happened when Linens N’ Things went belly up in 2008: It was doing about $3 billion at the time, but none of its key competitors—Bed Bath & Beyond being the obvious one—picked up anywhere near that kind of revenue. An even better example was the crash of JCPenney under CEO Ron Johnson’s ill-fated regime, when the retailer lost a quarter of its business in just 18 months. That $5 billion in lost sales should have gravitated to other midmarket players but it didn’t, and BBB’s revenue won’t either.

So, if there’s $4 billion in play, and let’s say half of it vaporizes in the retail ionosphere, who gets the rest? If I were making an educated guess—and hopefully, I am—there are four main winners:

1. Off-price. The TJX brands and specifically HomeGoods, as well as Ross Stores and Burlington, have been chipping away at BBB for years, and they stand to pick up the most share.
   
   They don’t necessarily get the “Hey, I’ve got to furnish my new apartment” buyers, but they will get the item buyer, particularly in soft home, as well as the browsers, the bargain hunters and the adjacency shoppers who are in to buy some clothing and wander over to the home side of the store. Upside potential: $750 million in plus annual sales.
2. Online. This sector took advantage of Bed Bath & Beyond’s underachieving e-commerce operations, and players like Amazon and Wayfair—as well as Overstock, Macy’s and a thousand other URLs (ironically, one of them being Linens N’ Things)—will become the choice for online shoppers. The dynamic growth of e-commerce during the pandemic may have slowed, but it will continue to gain overall market share in the years ahead. This will speed up the process in home. Upside potential: $500 million in plus annual sales.
3. Mid-tier retailers. Stores like Macy’s, Kohl’s, Target, JCPenney and, to a lesser extent, Dillard’s and Belk will each get pieces of the BBB pie, especially on the bed and bath side of the business. But remember that 60 percent of BBB’s business was in Beyond—housewares—and retailers like JCPenney and Kohl’s have underdeveloped departments in hard goods. Macy’s and Target are in much better positions to get more of that revenue. Upside potential: $400 million in plus annual sales.
4. “Lifestyle” retailers. Retailers like Crate & Barrel, Williams-Sonoma, West Elm, Pottery Barn and CB2 will gain some business, especially Williams-Sonoma for housewares, and the others for soft home and tabletop. Upside potential: $250 million in plus annual sales.

That leaves some scraps for deep discounters like Ollie’s Bargain Outlet, upscale stores like Bloomingdale’s and Nordstrom, and numerous other competitors, such as Ikea, RH, supermarkets, TV shopping networks and even flea markets. Unfortunately for many of these outlets, the potential profit will simply be a rounding error and not much more.

For the vendors who did business for decades with Bed Bath & Beyond, the process of getting what’s owed to them begins, one that usually benefits the lawyers more than the suppliers. From the initial creditors list released with the bankruptcy filing, it appears that merchandise vendors weren’t hit too badly, and most of the debts are for others, trade suppliers like shippers, signage and communications companies, and, curiously, Facebook ($3.4 million) and Pinterest ($2.8 million).

The merchandise suppliers are hoping they don’t get caught up in clawbacks, where creditors try to take back payments made in the closing days before bankruptcy. It’s happened before, and it’s not pretty. A more long-term problem: Where do these vendors go to replace that business? Operating under the assumption that a lot of these sales disappear, small suppliers who were doing a million or 5 million a year with BBB will be challenged. But it’s a massive problem for those doing $20 million, $50 million or even $100 million as recently as a year or two ago. There’s just nobody that is going to pick up that kind of slack.

Then of course there are the estimated 32,000 people who worked at Bed Bath & Beyond and are soon to be unemployed. They will enter a strong job market, true, but many were BBB lifers who made a good living and counted on a paycheck for the rest of their working days. And has anyone mentioned severance, pensions or health care?

Events will unfold over the next days, weeks, months and even years ahead. At some point, just as with Linens N’ Things—but also with Montgomery Ward, B. Altman & Co. and so many, many other one-time well-known retail nameplates—the Bed Bath & Beyond name will fade from the public consciousness.

In a rare interview with The Wall Street Journal in January, Warren Eisenberg and Leonard Feinstein, the retailer’s founders and the two leaders who made it such a great store, admitted as much. “When we left, we shut the door,” Feinstein said, perhaps practicing a little separation technique to make these events easier for him to bear. “Whatever happens, happens. … Plenty of chains have gone out of business.”

But up until very recently, nobody ever thought it could happen to Bed Bath & Beyond.

Homepage image: ©MarekPhotoDesign.com/Adobe Stock

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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.