HBR Case Brief: Bed Bath & Beyond
Problem Statement
The case of Bed Bath & Beyond (BBBY) examines how accurately the investors have integrated information regarding the growth strategy for the company into the share price, mostly considering the changing competitive setting in the housewares sector. BBBY was founded in the year 1971 and had its headquarters in Union, New Jersey (Messner et al., 2019). The company offered a wide range of home furnishings and domestic merchandise with a mission of being trusted by clients as the expert for home and heart-associated life events. The case study reveals certain problematic issues, including the company’s request for protracted payment standings with its suppliers. Other challenges include inventory accumulations, insider sales of merchandise, and increasing short interest in the entity’s stock.
BBBY as a “No-Moat” Company
Analysts consider BBBY to be a “no-moat” company considering the firm’s restricted pricing power, untenable cost advantages, and absent consumer switching costs. The expanding expenses and the declining profits emanating from the company, tend to raise concern about its future and capacity to adapt in the drastically changing retail market. The rapid transition to online sales by BBBY could not cater for the losses in business that previously relied on in-person shopping. In the past ten years, the company encountered progressively declining gross margins, a lot of pressure emanating from shipping expenditures for raising online orders, falling product margins, along rising expenses coming from discount coupons (Messner et al., 2019). In the year 2017, BBBY incurred approximately $264 million in the form of capital expenditure for investments that went into the technology supporting online sales and developments in store settings, and advertisements (Messner et al., 2019). Its employment expenditures also grew. Therefore, the company cannot be deemed as having moat given that the efforts that were pursued could not sufficiently distinguish it from its rivals that are executing the same measures.
Critique of BBBY’s Loyalty and Discount Program
BBY announced its Beyond + app – oriented membership initiative. The program provides subscribers a 20% discount on every purchase they make and a free standard voyage through shipping for a yearly charge of $29 (Messner et al., 2019). At the same time, the company offered coupons to prospective and existing clients for 20% off one single product, $20 off for buying over $75, or just $5 off for any form of purchase that they made (Messner et al., 2019). Such coupons were distributed via email lists, mailing campaigns, and advertisements. The issue here was that many of the brand name products could also be found from other online retailers even at lower prices than those being provided by BBBY. The company also announced this program shortly after having a fall in same-store sales in the first quarter, which was connected in part to the decline in its coupon redemptions. Its earnings outdid estimates, but similar coupon expenditures lowered the gross margins. An emotional equation also arises considering that the perks and savings cannot be categorized as sufficient to raise the shopper experience to loyalty, which would mean that buyers would select BBBY since they love it and not just because they have been positioned to expect a discount.
Customer Journey Model
A customer journey model is a tool that is used to visualize the experiences of associating with a brand from the client’s point of view. Such a map is crucial since it propels a business to study how customers experience a particular brand versus the way an entity thinks about it. The digital era has highly altered the traditional customer journey model. In specific terms, there exists a compelling need for marketers to establish improved comprehension of customer behavior in the digital period. Such an approach will make sure that meaningful interventions can be formulated at critical phases in the decision-making process. In the present digital age, consumers can now buy online or offline or may seem to move shift seamlessly between online and offline sources of information. Furthermore, in case of marketers are in a position to understand the online behaviors of their clients, they can refine and personalize their marketing to predict and satisfy their customers.
Digital-Age Trends in Retailing
Digital-age trends in retailing are the changes that are happening in the retail sector during the digital period. They encompass the invitation that the retail society and networks are providing to their members and those that track the advance of digitization in the retail sector. Nevertheless, it should be noted that such technological developments within the retail sector introduce new questions regarding the nature of associations between retailers and consumers. The digital trends pose challenges to an established retailer such as BBBY. The company is likely to face a challenge of the battle between respecting the privacy of its customers and acquiring data. The subscription-based business model that BBBY adopted can allow it to have a continuous relationship with its clients. However, there is a challenge of having to collect and use the data and at the same time protect consumers’ privacy. Another challenge is facing off against showrooming, especially in an attempt to maintain in-store purchases. In its time, BBBY would face this digital challenge.
Recommended Measures
BBBY can undertake certain measures to adapt to the changing market settings and eventually make sure that it has long-term competitiveness. One of the recommendations is to improve BBBY’s omnichannel experience. In this case, the omnichannel will bring in advantages since it will integrate online and physical shopping practices for customers. In this case, BBBY will manage its online and physical inventories as one unit, and clients would be in a position to select how they want to shop. The main aim is to improve customer experience and be able to tap into many potential ones as possible in an attempt to raise sales for BBBY. The solution would, however, require consultancy or even seeking services from a provider, which may raise the company’s expenses.
The other remedy would be to have a private label merchandising in an attempt to build on customer loyalty. The pros in this are that consumer study depicts that a majority of them trust private label brands just like national ones. Such private labels will enable BBY to expand its reach and outlets in an attempt to reach many customers. Nevertheless, the transition can be tricky and may face resistance from investors as it may adjust share prices. The two solutions are viable, but the most reliable one is to have an omnichannel that will integrate online and physical shopping services. This will help improve customer experiences, which in return improves sales.
References
Messner, W., Ducker, S., & Wilson, C. K. (2019). Bed Bath & Beyond: Is online the solution? Ivey Business School Foundation.
