Bed, Bath, and Beyond has filed for chapter 11. Analysts and experts are citing and analyzing several reasons leading up to this event. These include

1. Intense competition
2. Slow to adopt digital
3. Lack of differentiation
4. Too much physical inventory
5. Outdated business model
6. Wrong private label product strategy
7. and so on

Many of these reasons are spot on of course, but there is another reason that BB&B failed. And it’s an important one in my view.

No Digital Laggard

If we review the digital innovation that Bed, Bath, and Beyond had been creating, it was indeed equal to, if not ahead of, most leading retailers. 

The following is a quick list I gleaned from their website. It’s almost a digital innovator’s dream checklist!

1. It has a good digital commerce presence, not like Amazon, but not unlike any of the other successful players
2. It offers same day delivery, rapid 2 hour store pickup, price matching
3. It has digital components to engage customers – promotions, buying guides, idea boards, wedding registries 
4. It has the usual promotional components and themes (Christmas, college, school, spring, summer, etc.). 
5. It has recommendations based on latest trends and your buying patterns
6. It has a marketplace of 3rd party curated suppliers to extend it’s range
7. And it has direct B2B selling – something that should be unaffected by what consumers think of it’s stores

It sounds like Bed Bath was doing more than all the right digital stuff.

So why would it run into challenges?

The Red Herring of Falling Sales

Up until 2019, the sales and profitability numbers were relatively flat or slightly declining but not under any significant threat. Competition had heated up but the market was big enough. With the digital changes ongoing and a new CEO who would turn the chain around, the numbers were expected to pick up.

Then Bed Bath introduced their new merchandising changes of going with a private label approach instead of the familiar name brand products.

Soon after COVID-19 hit.

And the quick downfall began. Plummeting sales led to higher inventories, rising debt, and ultimately cash flow challenges,

With all the new digital capabilities and a fresh merchandising approach designed to raise margins, why weren’t customers buying? It’s not like the private label brands are not a successful strategy – they had worked at Target, and almost everyone else was adopting the trend too.

In my view, the private label products were a red herring. They weren’t by themselves the problem. They appeared at the wrong time and would have succeeded if the circumstances were different and if they were introduced with a more deliberate approach.

So, here is my armchair analysis of what potentially could have gone wrong.

 Strong Connections

It can be argued that customers of any business need to have both an emotional and a physical connection with a brand or a retail store.

The emotional connection pulls them to the store and the brands – it’s like a magnetic pull, a feeling of trust, familiarity and comfort. Naturally, brand name products only add to the emotional connections.

On the other hand, a physical connection gives customers the feeling of satisfaction when it comes to physical experiences like availability of the right inventory, the discounts, and the store experience.

Both the physical and emotional connections must feed into each other for success.

Leading up to 2019, the customers knew what Bed Bath was all about. They knew they could walk in, and buy amazing stuff at amazing prices. They could browse for hours and then come back again.

The stores were predictable. They were messy but in a good way.  Customers expected good deals and they got them. And they also often bought stuff they didn’t need.

So while the digital transformation was ongoing, the stores were well stocked with the stuff customers were buying. They had enough of a surprise and novelty built into the merchandising. They had a reasonably strong emotional connection to the products and the Bed Bath brand, and they also had a familiar physical connection to the place. Customers could trust that Bed Bath would deliver when they needed it to.

Loss of Connections Leading to Bankruptcy

Then the inventory changed as the merchandising changed. I would argue that it caused a shock in both the emotional and physical connections. Customers were not connected to the new products and the new strategy. They weren’t primed. And the physical experiences also added to the shock because the familiarity was gone. The stores did not have the same meaning any more.

Bed, Bath & Beyond had changed.

And then COVID-19 hit and there was no time to rebuild the physical and emotional connections. It was time for hunkering down, for blocking & tackling, and Bed Bath was left stranded. The novelty of the new product line wasn’t enough to build familiarity so quickly in a challenging environment.

So customers started to move on. There wasn’t an emotional connection with the brands in the store. Customers didn’t know them, didn’t have experience with them, and didn’t “want” them because they had not heard of them. The digital channels weren’t strong enough to change that. As that happened, customers started to notice the messy stores, and found the previously endearing environment utterly confusing.

This shock in emotional and physical connections happened to customers at Target too. But Target had time to adjust. They were leading for months with physical changes to the stores and making them nicer. They didn’t have COVID cutting off access to stores. And they introduced items slowly with much fanfare. They also re-launched Target Red supported by a private label credit card offering 5% on purchases.

So in my view, the underlying reason for Bed, Bath, and Beyond bankruptcy was that the timing of the new merchandising strategy did not allow for the emotional and physical connections to be re-built. I have no doubt the new products were great, but the customers just weren’t ready. Unfortunately, the pandemic did not allow for a recovery period.

Summary

While it’s easy to regard the new merchandising strategy as the obvious cause of the failure, the underlying issue that perhaps accelerated the demise of Bed, Bath, & Beyond Bankruptcy was a break in emotional and physical connections with customers that didn’t have time to heal. The transition could not have come at a worse time.

Image courtesy: Tony Webster from Minneapolis, Minnesota, United States, CC BY 2.0, via Wikimedia Commons