When Bed Bath & Beyond’s executives and board members were joined by investors, analysts and other observers at its recent annual shareholders meeting in suburban New Jersey, there were few certainties on how it would all play out..The company had had a radical reordering of virtually its entire board and senior management amidst severely declining performance in its stores and online. The upheaval came in response to pressure from an outside group of investors demanding changes from top to bottom in the company.
Those changes were in full view at the meeting, where new independent chairman Patrick Gaston and interim president Mary Winston laid out their plans, while continuing to play it close to the vest on the timing for their implementation. The two have called for increasing sales, cutting costs, trimming its physical footprint and restructuring operations, all admirable goals but still vague in execution.
As a long-time follower of the company from its modest beginnings as a store selling only bedding and bath products to its superstore status as one of the largest and best home furnishings retailers in the country – and then its slow but steady decline–.it is increasingly clear to this observer that very specific things have to happen in order for the company to return to its former glory. Some are in alignment with the company’s stated objectives, but others go beyond what management has said publicly so far.
1. A New CEO and New Management
The company said it is searching for a new leader and this decision is arguably the most important one it will make. We’ve seen other retailers hire the wrong person for the wrong job and pay the price. A new president must come from U.S. retailing, preferably the national chain space, and they must have an appreciation for Bed Bath’s legacy positioning. A category killer superstore pedigree would be a plus. But an operations-centric resume would be a disaster. As much as the company needs to get its house in order, it is in its merchandising and stores that the real work needs to be done. And once in place, that CEO needs to move quickly and decisively to put in a team that thinks like he or she does. The culture at the company has been breached and while keeping some veterans is a plus, new blood is desperately needed. The search needs to be careful, but it also needs to be timely. The clock is ticking…quickly.
2. A Smaller Footprint with Fewer Nameplates
Previous management had a penchant for picking up incongruous pieces over the years that never seemed to mesh correctly…nor were ever scaled up as they might have been. BBB has to eliminate some of these almost immediately and get rid of distractions from the bigger picture. Cost Plus World Market is the most obvious choice to go but so too would divesting Harmon Beauty (sometimes called Face Values) make sense. It plays in a heavily competitive sector and has neither the scale nor gravitas to be a factor. The same can be about Christmas Tree Shops (another terrible name that also does business under an even worse one, …And That). This is a trickier decision as the off-price channel is growing, but again, unless the company is willing to seriously invest in this brand (and give it a new name) it should be discarded. That leaves buybuyBaby as the other major banner and this one should be a keeper. With Toys” R” Us and Babies” R” Us both gone, this brand could own the space…again given the right investment. It’s a sad testament to the company’s go-slow strategy under previous management that it wasn’t able to grab significant market share in the space while all of this was going on.
3. Not Just Subtraction, But Addition Too
While previous management often was taking out its checkbook, it’s inconceivable it never used it to buy anything of substance in the online space. Most every major legacy retailer from Walmart to Target has invested in e-commerce acquisitions — and even the 800-pound gorilla in the space Amazon has bought other digital assets. In order for BBB to get to the promised land online, it needs to buy rather than just build. It just doesn’t have the in-house expertise, assets or personnel to go it alone. This will represent a sizeable use of its capital and credit line, but it’s the only way to make it work. Eight years ago, even three or four years ago, it should have bought Wayfair. Now if a deal were to be done, it would be the other way around. Best bet out there is Overstock.com, which, while it has just been pulled off the selling table, could probably still be had for the right price. If Bed Bath buys some small niche player, as it did with One Kings Lane, it will just be a waste of money. It needs to double down and go big-time.
4. More Private Brands, More Often
Prior management made a big deal when it introduced its first in-house, cross-category private label brand, Bee & Willow, earlier this year. And it was a nice effort. But it was way too late and even way more too little compared to what else was happening in retail. Over the same time period, Target introduced a dozen private label brands, including several with home products, as well as a few pop-ups. The company needs to get much more aggressive on the house brand front, which means it needs to beef up its product development department. It already has a strong brand in soft home, Wamsutta, that it should be pushing harder and expanded. By this time next year, it should have three to four more brands on the selling floor. Proprietary product is the name of the retail game these days and Bed Bath is still not playing that game right.
5. Life After Coupons
This one may be the toughest task of all. Almost since its inception, BBB has used its ubiquitous coupons as its main marketing tool, to the exclusion of virtually any other vehicle. When Mary Winston said their customers are attached to these coupons, she was dead-on right. Junking them outright would be a disaster, but clearly, they have become a monster out of control. Bed Bath says it is testing new variations on couponing and that’s good, but as it cuts back reliance on them, it needs to replace them with other marketing. This is a store that really has never done TV, including during the holiday period when virtually every one of its competitors is on the air. Would a magalog make sense? A couple of years ago, it did a new format catalog that had an editorial aspect and it was terrific. But as with many tests, it never was continued. BBB can’t kill its coupon goose, but it can reform it and add on other advertising and marketing.
The Brave March Forward
The current interim managers and the new board at Bed Bath are smart people, retail veterans who don’t have any emotional attachment to the way things have been done as prior management did. There are no sacred cows. So, while many of these suggested initiatives are dramatic in their approach to doing business, they are no doubt ones being studied internally at this very moment.
Bed Bath & Beyond was once one of America’s greatest and most successful retailers. It can start to get back to that positioning…but it needs to do it quickly and with bold actions. Anything short of that runs the risk of pushing the famed retailer to The Great Beyond.
Warren Shoulberg has covered Bed Bath & Beyond for virtually its entire existence…and much of his too.