iStock.com/JHVEPhoto
October 28, 2024
Bed Bath & Beyond Partners With Kirkland’s and The Container Store for a Return to Physical Retail
Beyond Inc. plans to invest $25 million in Kirkland’s Inc. and $40 million in The Container Store Group Inc. as part of strategic partnerships to bring Bed Bath & Beyond back to physical retail.
Bed Bath & Beyond, which was acquired by Overstock.com last August, hasn’t reopened any stores since shuttering all of them in bankruptcy proceedings. Overstock.com rebranded to Beyond as part of the merger.
With the partnership, Kirkland’s becomes Beyond’s exclusive brick-and-mortar operator and licensee for a new, smaller “neighborhood” Bed Bath & Beyond format, with up to five locations scheduled to open next year, according to Chain Store Age. The concept will range up to 15,000 square feet (versus Bed Bath & Beyond’s traditional average store size of 30,000) and feature “a curated assortment of iconic legacy vendor partners.”
Beyond, which also owns Overstock and Zulily, expects to capitalize on Kirkland’s merchandising, product development, and sourcing teams, particularly its expertise in home décor. Under the setup, Kirkland’s would own the inventory and develop the merchandising in the physical Bed Bath & Beyond locations. Kirkland’s is also pausing its website replatforming to collaborate with Beyond and leverage its e-commerce expertise.
Additionally, Beyond is utilizing Kirkland’s 325-store footprint to explore potential opportunities for store conversions or entry into new markets.
Strengthening its capital position, Kirkland receives a $17 million loan, of which $8.5 million is convertible into Kirkland’s stock. The company will also purchase $8 million of Kirkland’s common stock.
Amy Sullivan, Kirkland’s CEO, said, “We expect the investment from Beyond will not only enhance our financial performance but also provide meaningful opportunities to introduce Kirkland’s to new customers in a cost-efficient manner while we continue to re-engage our core customer and extend our reach across multiple formats.”
Marcus Lemonis, executive chairman of Beyond, said the deal fits Beyond’s vision of growing through “asset-light” collaborations with like-minded retailers, which includes foregoing expensive leases.
“We understand that retail is both an art and a science and have vetted the management team and infrastructure of Kirkland’s Home as an ideal organization to help bring the iconic Bed Bath & Beyond brand back,” said Lemonis. “The key to retail is efficiency in assortment, space management, sourcing, and merchandising, all while recognizing that smaller, tighter footprints with significantly lower fixed cost models is a winning recipe.”
Meanwhile, under the Container Store deal, co-branded Bed Bath & Beyond in-store shops will open inside The Container Store’s 103 locations, and the storage-focused retailer will gain access to Beyond’s e-commerce and omnichannel capabilities, similar to the Kirkland deal.
The broader available in-store offerings and online access promise to drive in-store and web traffic to particularly support The Container Store’s high-margin Custom Spaces services business, which is outperforming the retail side.
“This agreement will enable us to harness Beyond’s data platform and analytics to better identify and target customers at critical points in their purchase journeys and enhance communications with new and existing customers,” The Container Store’s CEO Satish Malhotra said in a statement.
The $40 million investment represents a lifeline for The Container Store, which is struggling to return to profitable growth. The Container Store will issue 40,000 shares in a new stock series that will give Beyond a 40% equity stake. The deal is contingent on existing lenders amending borrowing terms.
Lemonis added about the arrangement with The Container Store, “Partnerships like this further support the value of iconic brands leveraging each other’s assets and core competencies while improving customer conversion and retention, enhancing margins, and optimizing marketing expenses which are the principal drivers in delivering value creation and profitable growth.”
Discussion Questions
What do you think of Beyond’s “asset-light” partnership deals with Kirkland’s and The Container Store to monetize Bed Bath & Beyond?
Are in-store shops and smaller physical stores the optimal path to bring Bed Bath & Beyond back to physical retail?
Poll
Loading …BrainTrust
Neil Saunders
Managing Director, GlobalData
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Warren Shoulberg
Senior Contributor, The Robin Report
Recent Discussions
More Discussions
Will an In-Store Retail Tech ‘Confidence Gap’ Create Winners and Losers?
A new survey suggests that in-store retail tech could be a major factor in retailer success…Walmart’s Next CEO Era: From McMillon to Furner
Walmart CEO Doug McMillon will soon be replaced by John Furner. What’s next for the retailer?Which Brands Are Missing the Boat on Advent Calendars?
Advent calendars appear to be trending upward in popularity, with potential to move to other holidays…
When Bed Bath & Beyond had physical stores, consumer awareness was high. The stores provided brand reinforcement and kept the company on the consumer radar. As an online only brand , awareness has dropped away – exacerbated by the fact Bed Bath & Beyond is a generic brand in a relatively infrequently purchased category. This is one of the reasons sales have been so poor under Overstock. Hardly surprising then that Beyond is now looking to bolster its presence in physical spaces with a partnership to put its products in The Container Store, and a deal to open a handful of smaller neighborhood stores led by Kirklands. Physical presence is good for the brand, but execution and the proposition are everything. This will only work if the offer is aligned to demand and the expectations of each brands’ consumers.
Why?
What a confusing value proposition for consumers.
Exactly Cathy. I cannot conceive of a presentation that makes visual or physical sense which leaves storytelling in question.
I don’t understand this hodge-podge of collaborations. Are there not better partnerships that would kind of make sense? I am guessing this will be a curated assortment in both cases?
Beyond’s whole approach is hodgepodge and muddled. They first tried to rebrand their entire business, including overstock, as Bed Bath & Beyond. Then they reversed course when sales tanked. Sales are still tanking so now they’re trying something else. The term grasping at straws comes to mind…
Bed Bath and Beyond (BBY) when in its prime thrived on its unique product mix, its specialization, and it was a fun place to shop because it was cluttered with so many impulse items.
Not surprisingly, the marriage with Overstock is a flop, and most of us could have predicted such. Overstock is a completely different type of business that isn’t even remotely similar or compatible with BBY.
Kirkland’s is a slightly better match for its 325 or so stores in 35 states, and of course, Kirkland’s specializes in bedding. If BBY will own a limited space in the store, they will need to focus strictly on bedding products, and not much else of what they carried.
I have intuitively little hope for the partnership with Kirkland’s but cautiously optimistic about the deal with Container Store. There is more of the right ambience and synergy in tje latter deal. Wait and see…
“Asset-light” is an interesting way to characterize these deals. I suspect that it will be light on results too. I fail to see what these retailers see in Bed, Bath & Beyond – a brand that is well past it’s prime and heading into Sear’s territory. Yes, in-store shops have their place, but putting weak brands together doesn’t produce meaningful outcomes. You never know how things might turn out, but I’m skeptical that these deals will deliver the outcomes the retailers believe they will.
These partnerships are creative, sure, however they both reek of desperation. The Container store had its moment, until everyone realized all of those plastic containers were ugly and how much stuff do we need to store anyway? BB&B is dead and nothing Overstock does is going to bring it back. Just my opinion, of course.
The cash injection for Kirklands has some promise, however the amount of money being invested does not sound like a lot plus they are tied to BB&B’s brand.
This deal is good for the bankers who advised on it but I doubt there will be any serious resurrecting here.
This is a return to the physical space where BBY will have an opportunity to rebuild parts of its brand. Before its exit BBY was just starting to get flush in data and customer data- it can leverage this data to improve its chances outside of Overstock overlords (that purchased the BBY brand for a mere $21.5M in a fire sale) that have primarily tied up the domain and loyalty programs. These investments are still relatively small potatoes on the fringe of retail. BBY’s current state doesn’t allow for larger investments. Smaller players like The Container Store will benefit from the money influx. Kirkland’s has a different focus more in tune with expanding to BBY’s customer demographic which extends their brand. While this is not a giant deal, it’s still accretive for all parties.
Let’s put all of this proper context, shall we. This is five stores from Kirkland that are scheduled to open next year — that’s five. They are small footprints, nothing like the giant emporiums that made BBB famous during its heyday. And the Container Store shop-in-shops are even smaller. Who knows what kind of merchandise will be in these locations, if it’s the BBB brand that is one the original retailer never used and it remains to be seen how much it transfers from the name over the front door to the name on the package. Lemonis is trying everything he can to expand his business, but is he addressing the core issue which is getting the merchandise mix right on the BBB website? Come back in a year and see if this works out. I’m skeptical.
I was a fan of Bed Bath & Beyond, despite the problems that led to its demise at the end, and a “curated assortment” in a much smaller physical space feels untrue to what people liked about the brand. I also don’t understand who’s driving this train — the former Overstock, which operates the BBBY brand online, or Kirkland’s?