Bed Bath & Beyond banks on private brands

Discussion
Getty Images/jetcityimage
Jul 14, 2020
George Anderson

When Mark Tritton left Target to take over as CEO of Bed Bath & Beyond last November, he joined a company with a lot of challenges, including losing its point of difference in a world of competitors competing in the same space. His new company had easily identifiable weaknesses. Bed Bath & Beyond offered an undifferentiated shopping experience and relied on coupons that had trained regular customers to only make purchases when a discount was included.

Mr. Tritton set immediate priorities for changing Bed Bath & Beyond’s fortunes such as improving its omnichannel experience, aligning its assets with its cost structure and “enhancing” its merchandise assortment.

On the first point, Mr. Tritton recently pointed to positive signs for the chain’s “omni-always shopping experience” — strong online sales in the first quarter and Bed Bath & Beyond’s expansion of its buy online and pickup in-store and curbside pickup options.

The retailer has taken a number of steps to get its financial house in order. It has negotiated a new, three-year revolving credit facility, closed unprofitable stores and made changes to its purchasing and supply chain structure to drive out costs and improve efficiencies. This last element is a focus of the retailer’s plan to support sales margins.

On the merchandising assortment front, Mr. Tritton appears to be following a similar approach to the one he successfully led at Target with an emphasis on the development of a portfolio of popular private brands.

Yesterday, Bed Bath & Beyond announced the appointment of Neil Lick as SVP, owned brands. Mr. Lick, who spent 22 years at Williams Sonoma, brings a wealth of experience to the new position. At Sonoma, he served in a variety of leadership positions in merchandising, product development, inventory management and as the head of corporate responsibility.

Mr. Lick will lead Bed Bath & Beyond’s newly created owned brand team in his new role. The chain has said it plans to begin introducing differentiated new brands in key home categories including bath, bed and kitchen next year and expand its portfolio over time.

“Finding new ways to help customers feel at home couldn’t be more relevant or exciting in the current (pandemic) context,” said Mr. Lick. “I look forward to playing my part in rebuilding Bed Bath & Beyond’s authority with customer inspired brands that are truly differentiating.”

DISCUSSION QUESTIONS: What does the current consumer mindset mean for retailers like Bed Bath & Beyond? How big of an effect can new private brands have on Bed Bath & Beyond’s ability to differentiate itself and drive sales and improved margins?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The emphasis on private label is an essential piece of the puzzle that is needed in the re-evaluation of Bed Bath & Beyond’s business model."
"Sure private brands have inherently higher margins, but they don’t get there overnight and the financial market’s patience meter is not kind to turnaround stories..."
"Bed Bath & Beyond was in need of a significant reset – pulling this off in the face of a pandemic is a much more challenging task."

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12 Comments on "Bed Bath & Beyond banks on private brands"


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Mark Ryski
BrainTrust

Bed Bath & Beyond was in need of a significant reset – pulling this off in the face of a pandemic is a much more challenging task. And since there are so many uncontrollable factors that retailers are dealing with, it’s hard to say if new initiatives are paying off or not at this point. Notwithstanding the tumult, I think Bed Bath & Beyond management are making the right moves. Not only is their focus on private brands a smart play that will breathe some fresh life into the product mix, the generally higher margins private brands enjoy are also welcomed.

David Naumann
BrainTrust
David Naumann
CEO and President, Cogent Creative Consulting
4 months 11 days ago

Private label brands are a great way to differentiate stores that historically sold commodity products (branded items that are sold at many other chains or online marketplaces). Target, Macy’s, Costco and Trader Joe’s have realized the need for differentiation to reduce the impact of price comparison shopping and the erosion of brand loyalty. Establishing a private label brand that customers learn to know and expect the perceived quality and value of will help Bed Bath & Beyond develop a loyal following that isn’t based on discount only shopping. At least that is the hope!

Suresh Chaganti
BrainTrust

For the categories that Bed Bath and Beyond operate in, it is hard to compete without strong brand affinity to shop there. IKEA leads the way in that department, in how it shows a kitchen or a bathroom can be transformed. When a brand sells a vision, the decision to buy the underlying products become incidental and they will be bought without as much cross shopping.

When I looked at the Bed Bath and Beyond website, it is a cluttered site with coupons, deals and BOPIS offerings. There is one bathroom makeover section that promptly leads to product listings. How about a before and after and a nudge to shoppers?

The fact is, these categories can be made to be emotional purchases, which lead to higher margins. But sadly Bed Bath and Beyond is not aware or not able to execute.

Richard Hernandez
BrainTrust

The emphasis on private label is an essential piece of the puzzle that is needed in the re-evaluation of Bed Bath & Beyond’s business model as is overstock of assortment, etc. The question I have is, can Bed Bath & Beyond still be relevant with competitors like Kohl’s, Target, and Walmart? I actually got two postcard coupons from Bed Bath & Beyond so I would guess they are still going to use those. They have a long way to go, but so far the scorched earth method seems to be the right direction for them.

Bob Phibbs
BrainTrust

As a TV game show junkie kid from the ’70s I remember bedding brands like Fieldcrest towels and sheets as well as Canon Mills. It seems everything is private label now. I’m not sure it is defining other than price. We’re on the cusp of a new hedonism and places like Boll & Branch seem to have made a brand for that market. I wish Bed Bath & Beyond well and am excited to see them right-sizing.

Mohamed Amer
BrainTrust

The shortcomings identified by Mr. Tritton are spot on. The first two areas are well on their way to being addressed; however, the last one on enhancing the merchandising assortment is problematic.

Mr. Lick’s appointment is apparently linked to “rebuilding Bed Bath & Beyond’s authority with customer inspired brands that are truly differentiating.” That aspiration will take a lot more than launching private brands and a far longer duration than this turnaround might take. Online retailing is more crowded than ever, the bar to compete continues to move higher, and the investment to build successful private brands is not cheap. Sure private brands have inherently higher margins, but they don’t get there overnight and the financial market’s patience meter is not kind to turnaround stories, especially with the increased economic uncertainty.

Bob Amster
BrainTrust

While private label brands can have the effect of enhancing the product mix and make some stores more interesting, the challenge is to make products that are somewhat different while being less expensive than the national or international brands. Barring these two factors, private brands are not going to help.

Raj B. Shroff
BrainTrust

Bed Bath & Beyond is probably not the first place shoppers want to go to get out and find retail relief. And many of their commodity products can be bought on Amazon or shopped for at Target in a much more engaging atmosphere. So I don’t think the current consumer mindset is great for Bed Bath & Beyond. Private brands can have a huge impact if they are strong, we’ve seen that from Kroger, Target and others. However I would argue that BB&B doesn’t have a pulse on what its value proposition is, nor any essence of its reason for being. If the new executive team doesn’t get that right, private label is a near-term feel good solution but won’t make a lasting impact. They could look to Toys “R” Us for a very possible scenario for this business over time. I wish them luck but hope they are going to dig deeper.

Ricardo Belmar
BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader
4 months 11 days ago

It’s great to see BB&B management focusing on developing a real plan to turn the retailer around. They are stuck in a difficult place with competitors like Amazon, Target, Walmart, and others on one end making it easier to shop with them for commoditized items. Then on the other end of the spectrum, they have specialty stores like Williams Sonoma and Crate and Barrel competing for higher-end and specialty products where brand recognition matters more and customers have a different expectation of quality.

BB&B needs to decide how they fit into their customers’ lives compared to these other retailers. Should they be the go-to for the college-bound student outfitting their dorm room or apartment? Are they the default place couples go to set up a gift registry? Are they the value option to those specialty retailers on the high-end? Or a one-stop-shop for commoditized items that otherwise require multiple trips to Target or Walmart?

Once BB&B can answer these questions they will be on a better path to success.

Ananda Chakravarty
BrainTrust

Barring purchasing concerns that drive traffic, the consumer mindset for higher value for cost hasn’t changed. Everyone wants to be a smart shopper. Private label and private brands have been on the uptick and a Nielsen study states 62% good value for the money for private label in North America. The value, however, will be more consigned to control of the product margins more than increased traffic or drive to the store. BB&B will be competing against well-known and established private brands such as Target’s Room Essentials, but the trend has been clear and there is substantial value in introducing private brands. Good move on BB&B’s part to embrace this trend.

Cynthia Holcomb
BrainTrust

With Tritton in charge, this is even more exciting news for both BBBY and consumers. There is definitely room in the market for a new retailer of home goods private brands with the spirit, design, and value of a new proprietary product vision able to compete with Target. To design, execute, and deliver a new BBBY product vision at BBBY price points requires proven talent and experience now at the helm of BBBY. Layered with an “omni-always shopping experience” and the ability for consumers to also shop local, physical stores is a winning value proposition for the low to the mid-price home goods marketplace.

storewanderer
Guest
4 months 11 days ago
Bringing in private label items is a solid move if the items are the right quality for their customer. However, I fear the missteps this chain has taken in the past year with lousy merchandising and poorly stocked stores have sent its customers straight to the Internet. As pointed out here, some home retailers do really well with private label (Ikea), but I think at this point BBBY has lost relevance with so many consumers that it lacks the foot traffic to pull this off. BBBY for years relied on branded items and consumers who wanted branded items went to BBBY and paid their price. Younger consumers who were more interested in private label and wanted lower cost goods just went to Target/Walmart or did a field trip to the nearest Ikea. I am also not sure this chain even has the ability to pull off a private label program. Their merchandising in the store is very … off. Many dusty items in there and it seems like they buy some items that are complete… Read more »
wpDiscuz
Braintrust
"The emphasis on private label is an essential piece of the puzzle that is needed in the re-evaluation of Bed Bath & Beyond’s business model."
"Sure private brands have inherently higher margins, but they don’t get there overnight and the financial market’s patience meter is not kind to turnaround stories..."
"Bed Bath & Beyond was in need of a significant reset – pulling this off in the face of a pandemic is a much more challenging task."

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