Photo: Wikipedia/Tony Webster
Will a new rewards program prove Bed Bath & Beyond’s critics wrong?
Bed Bath & Beyond continues to have a lot of doubters on Wall Street, even as the chain’s management continues to roll out new private lines and programs intended to drive sales and profits.
Analysts at Bank of America, MarketWatch reports, have conducted store checks and discovered that the retailer is turning down the air conditioning at its locations in an effort to cut costs in the face of lagging comps. It has also reduced store hours, opening some locations at 11:00 a.m. rather than 10:00. Associate hours have also been cut and store remodels have been postponed or canceled.
Bank of America has also raised concerns about Bed Bath & Beyond’s financial footing.
“In FY23, we expect Bed Bath & Beyond will burn another $300 million of cash and pay down its $300 million 3.749% notes due August 2024. This will leave Bed Bath & Beyond with total liquidity of roughly $439 million by the end of FY23. Assuming another $300 million of cash burn in FY24, this would imply $139 million of liquidity by the end of FY24,” according to the Bank of America note.
Bed Bath & Beyond has pressed on despite its naysayers. The retailer yesterday unveiled Welcome Rewards, a new loyalty program that allows customers to acquire and redeem points across its namesake banner as well as the buybuy Baby and Harmon chains.
“More than 80 percent of our customers shared that they would be excited for a program that would allow them to earn rewards across all of our banners,” Rafeh Masood, EVP and chief customer officer at Bed Bath & Beyond Inc., said in a statement.
The new rewards program has three tiers, including a subscription option.
For a $29 annual fee, Welcome Rewards+ customers receive 15 percent off their total purchases and earn additional dollars based on purchases. Members also receive free standard shipping for all online orders, and four times a year they are able to take advantage of same-day delivery at no charge. Customers signing up by July 31 will get $10 in points for doing so.
The retailer’s new program doesn’t signal the end of its coupons. Welcome Rewards+ members may choose to use a 20 percent coupon off a single item in their cart and then get 15 percent off all the other products they purchase.
Discussion Questions
DISCUSSION QUESTIONS: What is your assessment of Bed Bath & Beyond at this point in time? Do you think the changes made by the retailer under the leadership of Mark Tritton will eventually pay off?
Poll
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Bed Bath & Beyond continues to face significant challenges. After setting high expectations with new leadership, the impacts of the pandemic, supply chain and finding a new footing have all complicated the turnaround effort. While I’m still generally bullish on Bed Bath & Beyond, they have their work cut out for them, and now time is not on their side. Strategies and vision are great, but you need to ultimately execute and deliver meaningful results.
Really? A loyalty program to solve problems endemic in Bed Bath & Beyond? They should be looking under the hood, rather than putting a shine on the car.
I still have faith in Bed Bath & Beyond because it sits in a niche where no one else really does, and it has so much brand recognition. However like many other retailers suffering right now, Bed Bath & Beyond made its whole identity on coupons and savings, which is not a long-term strategy that can win. It worries me that the retailer is now pursuing a subscription offering because this isn’t typically a store customers shop all that often – it’s more a milestone/occasion-based destination. Plus, this is another coupon tactic. We need to see Bed Bath & Beyond play up its niche and wide assortment within its space.
Just a bad design and it’s very apparent who designed it – finance, not marketing.
Loyalty programs are best for keeping your customer base loyal and incented to shop with you. They’re not great for attracting new customers and growing marketing share. Bed Bath & Beyond has been losing market share for a while. I’m not sure that energizing a shrinking pool of customers will be enough to provide the lift to turn around the business and avoid what seems, at this point, to be the coming inevitability.
Bed Bath & Beyond has been on a $1 billion share buyback spending spree. It is now turning off the air conditioning to save a few dollars. This is not a well managed company. As for Mark Tritton and team, they have made some sensible moves. However I get the impression that, basically, they have been replicating Target’s playbook. The problem is Bed Bath & Beyond is not Target and the moves they have made have not completely paid off. Indeed, some have backfired.
Could be — but Target is way too smart to put out a program like this design. It’s going to create some real whiplash for customers until they fix it with a re-launch and hopefully soon.
With Target, I mean the playbook of developing own brands and and making stores more inspirational, etc. Target’s loyalty scheme — Target Circle — is free and works extremely well — way better than this muddled approach from Bed Bath & Beyond.
I believe in loyalty programs, and this one resonates with their base. Attracting new customers is the big challenge and this is a creative program to do just that. I also believe their cost cutting initiatives are appropriate. The sales generated from 10 to 11 in the morning are negligible. As for AC changes, those too are minor.
That being said, Bed Bath & Beyond’s main challenge is its assortment, which is available everywhere else. So if it has to compete on price, is the best strategy really membership discounts and coupons? It’s a strong brand, so I think they need to leverage that and find a different approach to pricing. Also, they do a huge amount of business around college students. I’d look at these customers (often the parents) and try to increase engagement throughout the year.
Take a peek if you haven’t already done so with what Michaels Stores has done with its marketing and loyalty program. Brilliant. Checks all the boxes. This new design with paid tier is problematical from the start.
There is no doubt that Bed Bath & Beyond is currently facing real issues that may even threaten its long term survival. These continuity of purchase programs (don’t call them loyalty programs) may generate short term sales. The challenge will be to generate profitable sales in light of the discounted merchandise and the current inflationary environment.
Just as an FYI, I read that Target is also reducing air conditioning and lighting in some stores. It’s a cost-saving condition of the times.
Yes, including in Arizona stores. In the summer. Not a good idea.
Bed Bath & Beyond is redesigning the in-store experience and rolling out Welcome Rewards is a smart move right now. The first updated store just opened in NYC and offers online-to-offline shopping, shop-in-shops and curated private label items. Customers already have curbside and in-store pickup, same-day delivery and free shipping as options. Let’s give Bed Bath & Beyond kudos for focusing on the customer, as the company works to offer a more engaging in-store experience.
I’ve watched Bed Bath & Beyond evolve from an over-assorted mess to a store with more edited and focused offerings. Overall presentation and signage is much improved. Yes, it’s very unfortunate that they experienced supply chain problems. And yes, the cash burn sounds problematic. But focused assortments with the right level of owned brands is absolutely the way to go. The rewards program sounds comprehensive, but the equation still starts with the right product offering.
Of course 80 percent said they would be excited by a loyalty program! That’s like asking dogs if you want more dog food. A loyalty program is just another discount.
So retailers struggle yet I never hear a word about training employees to do better and looking at the classic analysis of what’s really going on in the floor. Until retailers do that, they’ll grasp at straws.
Bob, I agree 100 percent! Loyalty design especially with points is a delayed discount and a cheaper one at that. Bed Bath & Beyond has conditioned traffic to respond off of the 6×9 20 percent off coupons. Now they are reducing the coupon value and introducing a paid program. The logic is baffling. I guarantee you focus groups with high value customers did not vote that construct as the #1 choice.
Copy/paste much? There is no innovation here or in the product merchandising unfortunately. The most recent launch of “new” brand Everhome is just rebranding of legacy brand Wamsutta. It just seems like smoke and mirrors at this point and is bringing the retailer further from the core principals that built its original success.
As an expert in loyalty program design and strategy I am going to try my best to be as kind as possible. This is plain awful. It is customer unfriendly – that’s a bad check mark. You pay to join the program and the membership is non-cancellable. Social posts are complaining about that one from the start. If you are going to offer free shipping at a threshold ($39) then how/why is the other free shipping benefit attractive? The points design is confusing and has way too many layers to it. The funding rate – spend, earn and get a reward is exceptionally weak. The guideline is 5 percent in hard + soft benefits.
My prediction: the paid program will go away/exit quickly. The program will be re-designed by an expert in less than a year due to complaints by customers and store operations. Make it easy to understand, easy to play and something that their loyal customers will advocate and suggest to their friends and families. This two-tier (paid and free) design will not accomplish those goals/objectives let alone drive incremental lift on key performance metrics.
Adding another complicated layer to their loyalty program is not even close to a silver bullet. I’d guess that only shoppers with significant need (new home, dorm room, etc.) would expect the 29 dollar fee to pay back.