2016/10/18

Here's Why An Amazon-Style Loyalty Program Won't Solve Bed Bath And Beyond's Woes


Pedestrians walk past a Bed Bath & Beyond Inc. store in Los Angeles, California, U.S., on Monday, Sept. 19, 2016. Photographer: Patrick T. Fallon/Bloomberg
Bed Bath & Beyond is in an existential bind. It’s 45 years old, so maybe it’s facing a mid-life crisis. And the retailer’s new Amazon Prime-esqueloyalty program —shoppers get a 20% discount and free shipping for a $29 annual fee — likely won’t solve it.

Go back 15 years, and Bed Bath & Beyond was the darling of home furnishings retailing.
The chain, founded in 1971 by seasoned department store merchants Warren Eisenberg and Leonard Feinstein, homed in on a niche and ran with it, offering a breadth and depth of national brands like KitchenAid, Cusinart and Hoover, and every conceivable home product, from toasters and towels to teapots.
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The retailer caused headaches for the home buyers at department stores from Macy’s to J.C. Penney at the time, eating into sales of their comparatively sparse housewares, bedding and dinnerware departments, and gobbling up market share along the way.
Meanwhile, Bed Bath & Beyond emerged the victor among big box home furnishings retailers, which had dwindled to a two-horse race. Linens ‘n Things, its sole head-to-head competitor, ceded defeat in 2008, closed shop, and then there was one.
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But a funny thing happened on the way to the digital revolution. Amazon came along. And while it’s become an industry cliché to blame the nation’s biggest online retailer for every retailer’s woes, Amazon hit Bed Bath & Beyond, in particular, where it hurts.
A hefty chunk of the products that line the home retailer’s shelves sell due to the brand equity associated with them. Consumers rely on brand names to inform the purchase of function-driven products — stuff that’s got to perform, so to speak — like coffeemakers, vacuums and cookware. They turn to brands that have engendered trust.

And while brands matter when it comes to buying clothes, looks matter more, and often the brand name is incidental. (See if you can name the brand names stitched into the collars of the shirts hanging in your closet. You might have some trouble. Now envision what kind of coffeemaker and blender sit on your kitchen countertop. That’s probably a lot easier.)

The problem for Bed Bath & Beyond is that, by definition, national home brands are commodity goods that are widely distributed, and now they’re all available, in one click, on Amazon — often for less.

The notoriously private retailer doesn’t release information on its product mix. But Amazon has been quietly gobbling up market sharefrom old-school brick-and-mortar chains one category at a time, starting with the book business. (Rest in peace, Borders.)
And in a statistic that went semi-viral this year, Amazon is expected to eclipse Macy’s as the largest apparel retailer in the U.S. by 2017, according to Cowen & Company, and it’s already eclipsed Wal-Mart as the nation’s biggest consumer electronics retailer, TWICE magazine says.

So when it comes to the big Amazon elephant in the (home) room, Bed Bath & Beyond has its work cut out for it.
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