Bed Bath & Beyond Carves Out Giant Niche

Bed Bath & Beyond has a big niche practically all to itself--much in the same way that Best Buy "owns" the specialty electronics business despite plenty of competitors in the same space. BB&B benefited greatly from the demise of Linens 'n Things but frankly it out-executed LNT to get there. And very few general merchandisers have been able to capitalize on the loss of a key competitor, with the possible exception of Kohl's...certainly JCPenney did not have the kind of growth in its home store that observers expected last year.

Bed Bath & Beyond has stayed focused, is compellingly priced, and takes a "headquarters" position in key businesses like dorm supplies. A good lesson learned for other specialty retailers aspiring to the same kind of dominance in their market space.

Richard Seesel, Principal, Retailing In Focus LLC

Five years is a long time to predict in this environment but Bed Bath and Beyond seems to have a solid platform to build from. They do a great job not with advertising in the classic 6 page insert world, but in their own book with coupons sent to homes giving me a reason to go and explore for things I may not know I need.

They have also done a great job with the expansion of their health and beauty sections so while I may not need a new linen set; I may go in and use my coupon for any number of everyday items that in the past, I may not have ventured into their stores for.

Charlie Moro, President, CFS Consulting Group, LLC

BIGGER, BETTER, FASTER, yet positively BALANCED. This specialty retailer plays the game exceptionally well for all levels of their customer base.

Their consumer is BETTER educated than the general population, yet they attract a cross-section of consumers in a friendly, open and authentic manner when they circle the store. Their consumer has a BIGGER wallet ($67,000 average vs. $52,000 for the general population), but they have price points to serve all socio-economic levels. They bring design to the marketplace in FAST order, as they have a supply chain model that keeps them mere months behind the items that are HOT.

They keep paying attention to the business and their consumers. That's always a winning formula.

Roger Saunders, Managing Director, PROSPER BUSINESS DEVELOPMENT / BIGinsight

Nearly 80% of today's poll respondents feel BB&B will be able to retain its competitive advantage in the next five years. I believe this is true, primarily to Richard's point that BB&B has this niche to itself in the way Best Buy has in consumer electronics.

Given the current state of our economy, it is hard to imagine any brand--new or existing--making a run at BB&B in developing a stand-alone, big-box store network. BB&B has shown a solid footing in execution at areas of retail--product mix, merchandising, marketing, pricing and customer service.

Jeff Hall, President, Second To None, Inc.

Target and Walmart aren't going to cede home to Bed Bath & Beyond and Walmart in particular is poised to pick up a bit of business now that Kmart has transitioned out of Martha Stewart. BB&B's staying power in this highly competitive space is impressive; however, I see opportunities to create even more distance by editing assortments and clearing clutter in the stores.

Carol Spieckerman, President, newmarketbuilders

I don't know about "outclassing" the competition. More like just outlasting the competition. I actually thought Linens 'n Things had a nicer assortment...but the company somehow thought it was in the short lifecycle product business, rather than in the basics business. It really alters your philosophy (sell it out vs. never out).

By the way, the health and beauty aid department is a leased department....

Paula Rosenblum, Managing Partner, RSR Research

Bed, Bath & Beyond has created a brand and niche market possibly even better than Best Buy over recent years. Part of this is as a result of their competitive situation with Linens 'n Things. BB&B learned how to be better at the small things such as having the inventory available, short lines at the registers and in store staff willing to assist the customer find what they are looking for. Pier 1 is working at this but still does not have it down as a regular practice. That, plus the product line is not as varied as BB&B.

I do not see anyone popping up to compete and that is bothersome. Competition keeps us sharp at what we do well. Not having the competition lends to complacency thus diminishing the Customer Service centric model that got them where they are. Once BB&B reaches complacency; the door is open for the Big Boys to come take a chunk out of what to now has been BB&B's pie.

Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Bed, Bath & Beyond has Linen 'n Things to thank for much of its success over the last 3 quarters. These two went head to head, month after month and accepted each other's 20% off coupons hitting each of their bottom lines and increasing advertising costs.

Moving forward, Bed, Bath & Beyond will need to focus on staying ahead of Walmart and Target on both price and assortment. Out of these two, I think BB&B's biggest advantage is their broad assortment. Areas of opportunity include stronger supply chain/inventory control to keep costs in line as well as selective marketing to replace the head on marketing they used to beat Linen 'n Things.

John Boccuzzi, Jr., SVP National Retail Sales, Affinion Group

BBBY likes to build market share during periods of economic weakness. Until the economy recovers, it will hold the advantage over a fading Williams-Sonoma in the specialty home goods field. Target will continue to grab consumers interested in designer-type merchandise and hot trends, but Bed Bath & Beyond will remain a source housewares and home decor staples for years, unless Costco or Walmart makes a major move in this merchandise direction.

Crate & Barrel is another upscale specialist that Bed Bath & Beyond can undercut on price and promotion, while The Container Store would have to broaden its mix to really compete. The rejuvenated Pier 1 Imports will fill Linens 'n Things No. 2 spot.

David Schulz, Contributing Editor, Non-Foods Management

There are two reasons for Bed Bath & Beyond's recent success. First, when your largest competitor goes out of business you should be able to capture a larger share of the business. But the second reason is the most important...BBBY has long been far better at executing their concept than any other merchant in the category. This includes department stores as well as mass merchants like Walmart and Target.

George Whalin, President & CEO, Retail Management Consultants

Part of their recent success has been the failure of their competition. Linens n' Things closing helped. In the market where we live, they have no solid direct competitor.

John Crossman, President, Crossman & Company

I am not surprised by BB&B's success. Go to any store and you'll see consistent execution in customer service, selection, friendliness, and value. What other retailer offers consumers 20% off any item, any time, even if it is on sale? What other retailer allows consumers to bring back their coupon if they forgot it and their receipt tape, and get the 20% discount after purchase?

Linens 'n Things has surely given them a boost, but their focus on the customer keeps them unique in this category.

Odonna Mathews, President, Odonna Mathews Consulting