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Bed Bath & Beyond was once known as a category killer. But now, it is the home goods retailer that is searching for a lifeline.
Bed Bath & Beyond filed for bankruptcy on Sunday, setting off a string of proceedings that will either leave its 360 stores closed and inventory liquidated, or a new owner at the helm.
While the legal details play themselves out, the industry is left to sift through the wreckage, and take any lessons from how a previously high-flying retailer at the vanguard of new trends in shopping lost its way with consumers.
In particular, industry leaders queried by The Current zeroed in on Bed Bath’s failure to adapt to retail’s digital shift, a private label strategy that didn’t land and mounting competition from a new wave of home goods retailers as the dominoes that fell.
"The downfall of Bed Bath & Beyond serves as a cautionary tale for other retailers, highlighting the importance of adapting to changing market conditions and consumer preferences,” said Jeanel Alvarado, founder of RETAILBOSS.
The missed shift to digital
There was a time when Bed Bath & Beyond was one of the brightest lights in retail, leading the way forward. In the 1980s and 90s, it helped to usher in the era of the superstore, combining a massive selection of goods, category focus and low prices. This model attracted customers who were used to a more limited assortment at department stores, and for a long time it helped Bed Bath & Beyond thrive. Bed Bath also struck strategic gold when it began to mail 20% off coupons that allowed consumers to get a discount on any item in the store. It became a permanent promotion. Before Costco, the coupons helped Bed Bath reach a measure of retail cult status, becoming a staple of homes across America, right alongside products purchased from its stores. It all helped the company reach $1 billion in sales in 1999, and grow to reach 1,142 stores by 2011.
But by the end of the ensuing decade, Bed Bath was no longer at the forefront. Rather than the superstore, the everything store became the dominant model. Amazon built a new machine that offered a wide selection at low prices, and it wasn’t limited by category. Walmart and Target soon expanded their home goods sections, as well. Meanwhile, the rise of ecommerce ushered in a new wave of home goods marketplaces, such as Wayfair and Overstock.
Through it all, Bed Bath & Beyond remained primarily a brick-and-mortar retailer. Its website lagged other competitors that were optimizing for online sales, said Berna G. Barshay of HFG Enterprises, and the retailer’s approach to advertising never embraced digitally-powered performance marketing to the fullest. Eventually, even the iconic 20% off coupons became a liability.
“Because they priced merchandise to account for the fact that consumers might use coupons, they left their everyday pricing high and not promotional. That way, the out the door price – using that 20% coupon – would still be profitable for them,” Barshay said. “When Amazon, Walmart.com, and others started advertising everyday low pricing on the web, Bed Bath & Beyond just didn't look competitive in Google product searches, even if their price would have been in line or even lower with the application of the 20% off coupon.”
Other standout strategies that worked in the store, such as introducing visual merchants and urging impulse buys, also failed to translate online. Bed Bath & Beyond was not only slow to adopt ecommerce, but failed to become a destination for online shoppers.
“Nobody is going to buy online at Bed Bath & Beyond unless it’s a bridal registry. They never shifted to ecommerce easily and they certainly didn’t do it successfully. Frankly it’s not even clear that it was even in the cards,” said Ted Gavin, managing partner and founder of Gavin/Solmonese. “They were selling everything under the sun, and we already have Amazon.”
But this is not only the tale of a company that missed the winds of change. While the disruptor became the disrupted on the retail front, Bed Bath also committed strategic missteps as it sought to introduce new products to stay fresh with consumers.
Private label falls flat
By 2019, Bed Bath & Beyond was already facing pressure, and closing stores. The retailer decided a shakeup at the top was necessary to reinvigorate the company, and brought in then-Target chief merchandising officer Mark Tritton as CEO to lead the turnaround.
Tritton moved quickly to adapt a strategy from Target that emphasized private label products, which are produced by retailers, over name brands. But the push to drive more sales of owned brands ultimately overshadowed a key driver of retail: Paying close attention to what consumers want to buy. Bed Bath made its name on providing selection, but customers suddenly found they didn’t have much of a choice of brands, said Matthew Debbage, CEO of the Americas at Creditsafe.
“By undervaluing customer brand preference and loyalty, Bed Bath & Beyond essentially ended up shooting itself in its own foot by attempting to build its own internal house brand that drove customers away and negatively impacted their bottom line,” Debbage said.
The downfall speeds up
Bed Bath's challenges were only exacerbated by supply chain issues that arrived with COVID, and lacking infrastructure to undergird the shift in product lines. In 2020, the pandemic brought a home goods boom across the industry. But with a once-vaunted assortment that was now depleted and dragged down by a lack of omnichannel capabilities, Bed Bath & Beyond couldn’t capitalize. Ultimately, consumers looking to refresh the homes where they were spending all of their time opted to shop at Amazon, Target and Wayfair. Ultimately, Bed Bath's blunders drove customers into the arms of its competitors, Debbage said.
By 2021, the company was on the roller coaster that led to its demise. It briefly became a meme stock, then issued billions in stock buybacks that proved to be “ill-advised” and in retrospect amounted to a promotional ploy, said Barshay. The next year, Tritton departed, and debt piled up. Supply issues continued to leave bare shelves.
As Gavin put it, "The only thing more ridiculous than 700 square feet of shelves filled with towels is to have 700 square feet of shelves without towels."
Ultimately, falling sales and financial challenges led the company to run out of cash, and it began issuing warnings that bankruptcy was imminent by early 2023.
A Chapter 11 filing does not mean the end of the company, yet. But if it does emerge, Bed Bath will be a “shadow of its former self,” said GlobalData Managing Director Neil Saunders. In a sign that a brush with death brings clarity, becoming an online-only retailer is now an option on the table. Fittingly, Amazon, Target and Walmart are among those poised to pick up market share amid the bankruptcy, Saunders said.
In the end, the fall of Bed Bath & Beyond turned not on a single strategy decision or operational move, but on the retailer’s flagging approach to the customer. Both the products it offered and the modes in which it sold them proved to be out of step with what consumers wanted.
“The key takeaway here should be that companies need to pay attention to what their customers want to buy and focus on how they can meet those expectations,” Debbage said. “Not doing so has had a negative impact on the retailer’s customer satisfaction and revenue growth. Other retailers won’t want to suffer the same fate.”
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On the Move has the latest from Amazon, Lovesac and more.
This week, leadership is changing at GameStop, Sorel and Beautycounter. Meanwhile, key executives are departing at Amazon, Wayfair and Lovesac.
Here’s a look at the latest shuffles:
GameStop CEO fired
GameStop announced the termination of Matthew Furlong as CEO on Wednesday. A brief statement did not provide a reason for the firing.
With the move, Chewy founder and activist investor Ryan Cohen was named executive chairman of the video game retailer. Cohen will be responsible for capital allocation and overseeing management.
It came as the company reported a 10% year-over-year decline in net sales for the first quarter. Meanwhile, the company’s net loss improved by 62%.
In an SEC filing, GameStop further added this “We believe the combination of these efforts to stabilize and optimize our core business and achieve sustained profitability while also focusing on capital allocation under Mr. Cohen’s leadership will further unlock long-term value creation for our stockholders.”
Cohen was revealed as GameStop's largest shareholder when he disclosed a 10% stake in the retailer in 2020. GameStop went on to become a leading name in the meme stock rise of 2021.
Sorel president steps down
Mark Nenow is stepping down as president of the Sorel brand in order to focus on his health.
After rising to the role in 2015, Nenow spearheaded a transformation of Columbia Sportswear-owned Sorel from a men’s workwear brand to a fashion-focused brand that led with a women’s offering of boots, sandals and sneakers.
“Mark led the brand to sales of $347 million in net sales in 2022,” said Columbia Sportswear CEO Tim Boyle, in a statement. “His leadership has been invaluable to this company, and we wish him the very best.”
Columbia will conduct a search for Nenow’s replacement. Craig Zanon, the company’s SVP of emerging brands, will lead Sorel in the interim.
Beautycounter appoints interim CEO
Beautycounter appointed board member Mindy Mackenzie as interim CEO, succeeding Marc Rey. According to the brand, Rey and the board “mutually decided to transition to a new phase of leadership for Beautycounter.”
McKenzie, a former executive at Carlyle, McKinsey and Jim Beam, will lead the company as it conducts a search for a permanent CEO. Additionally, former Natura & Co CEO Roberto Marques will join Beautycounter’s board as chair.
As part of the transition, Nicole Malozi is also joining the company as chief financial officer. She brings experience from Tatcha, Nike, and DFS Group Limited.
Amazon’s North America fulfillment chief departs
Melissa Nick, a VP of customer fulfillment for North America at Amazon, will leave the company, effective June 16, CNBC reported. Nick joined the company in 2014, and oversaw a region that included nearly 300 fulfillment centers. After doubling its supply chain footprint during the pandemic, Amazon recently reorganized its fulfillment operations to take a regional approach, as opposed to a national model that often resulted in items shipping across the country.
Wayfair’s chief commercial officer to retire
Jon Blotner (Courtesy photo)
Steve Oblak will retire from the role of chief commercial officer at home goods marketplace Wayfair. With the move, Jon Blotner will be promoted to chief commercial officer.
"Steve has served as a critical part of our leadership team and played a pivotal role in Wayfair's growth, helping us grow from a $250 million business when he joined to $12 billion in net revenue today,” said Wayfair CEO Niraj Shah, in a statement. “He oversaw countless milestones, from helping to launch the Wayfair brand as we brought together hundreds of sites into a single platform, to launching new categories, business lines, and geographies while overseeing our North American and European businesses, to leading our debut into physical retail.”
Blotner previously oversaw exclusive and specialty retail brands, as well as digital media at Wayfair. Before joining the company, he served as president of Gemvara.com prior to its 2016 acquisition by Berkshire Hathaway.
Lovesac announces CFO transition
Furniture retailer Lovesac said Donna Dellomo will retire as EVP and CFO, and move to an advisory role, effective June 30. Dellomo was with Lovesac for six years.
Keith Siegner was appointed as the next EVP and CFO. He brings experience as CFO of esports company Vindex, as well as executive roles at Yum! Brands, UBS Securities and Credit Suisse.
Additionally, Jack Krause will retire from the role of chief strategy officer, effective June 30. His responsibilities will be divided between CEO Shawn Nelson and president Mary Fox.
“Since joining Lovesac, Jack has played an instrumental role in transforming the Company into a true omni channel retailer by helping expand our physical touchpoints and digital platform as we continue to disrupt the industry,” said Nelson, in a statement.
NRF adds board members
The National Retail Federation announced the addition of five new board members. They include:
- Marguerite Adzick, founder and CEO, Addison Bay
- Harley Finkelstein, president, Shopify
- Ian Kahn, partner, PwC
- Sharon Leite, CEO, Ideal Image
- Carrie Tharp, VP, strategic industries, Google Cloud