Will going low lift up Bed Bath & Beyond’s sales and profits?

Discussion
Source: bedbathandbeyond.com
May 12, 2021

Bed Bath & Beyond has launched Simply Essential, an owned brand line of 1,200 bed, bath, home, kitchen and dining, and storage and organization items sold at entry level price points.

The chain, which has produced an impressive turnaround under CEO Mark Tritton since he joined the company in November 2019, has nevertheless failed to compete against a wide variety of rivals ranging from Amazon.com to Walmart in the lower price tier of categories where Simply Essential will be positioned.

CNN reports that Mr. Tritton told attendees at an investor conference last month that the retailer had “zero assortment” of kitchen utensils at the low price end of the category. “We’re giving away the customer in 50 percent of the total market,” he said.

All the SKUs in the Simply Essential line are priced for customers looking for value without big cash outlays. Kitchen basics start at $1 and pillows at $5. No item in the entire line is above $200 and many are under $50. The products can be purchased in stores or online and are available for pickup (in-store and curbside) and delivery (regular or same-day).

“Of all the owned brands that Bed Bath & Beyond will launch this year, Simply Essential represents the largest new product assortment and is intended to attract new customer segments for us,” Joe Hartsig, executive vice president and chief merchandising officer for the retailer, said in a statement.

The launch of Simply Essential follows the recent debuts of Bed Bath & Beyond’s Nestwell and Haven brands. The chain rolled out Nestwell in March, a line of nearly 1,200 high quality bed and bath products at affordable prices. Haven, which it introduced in April, is a line of spa-inspired bath products.

Simply Essential represents the third of eight owned brand lines that Bed Bath & Beyond has said it will roll out by the end of February 2022. The retailer, under Mr. Tritton, is looking to boost owned brands from around 10 percent of revenues when he took over, to around 30 percent within three years. If done successfully, the moves should not only create a point of difference for the chain among its rivals but also lift gross margins in the process.

DISCUSSION QUESTIONS: Will the addition of the Simply Essential owned brand line open up a new customer base for Bed Bath & Beyond and help it gain market share? What is your take on the retailer’s approach to its owned brand portfolio?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"They have fully embraced their strategy of giving consumers – at different levels of the market – a specific reason to shop their brand."
"I like it – it gives me a choice of price points. Key will be that the quality of this new line is at least decent."
"As many have commented, this is a bit of a “no-brainer” approach — BB&B needed a good/better/best strategy in these categories and Simply Essentials is a good start..."

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25 Comments on "Will going low lift up Bed Bath & Beyond’s sales and profits?"


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Mark Ryski
BrainTrust

The approach by Bed, Bath & Beyond’s new leadership is really starting to show, and this is yet another example. Focusing on huge segments of unaddressed markets is a great place to look, and the Simply Essential brand hits the bullseye. As we have seen in countless other examples, when successfully selected and executed, owned brands provide competitive differentiation and often higher margins. Bed, Bath & Beyond’s new initiatives, including owned brands like Simply Essential, are on the right path to success.

Scott Norris
Guest

“Hits the bullseye” — I see what you did there. 🙂

Dick Seesel
BrainTrust

Without predicting a full-fledged “Good/Better/Best” strategy, an assortment of opening-price products feels like a no-brainer in this case. Bed Bath & Beyond can’t expect to win as the dominant big box specialist in its product categories if it can’t offer price-competitive merchandise. If the quality and value are there, Simply Essential provides an opportunity to regain lost market share.

Richard Hernandez
BrainTrust

Dick, I see this as the start of a good/better/best strategy, and you are correct – it is a no-brainer. I don’t want someone in my store to leave and purchase nothing so I give them options. They will have to realize that they can’t be everything to everyone, so they will need to really look at categories in their store where this will make sense.

Cathy Hotka
BrainTrust

A year ago, I would have looked askance at pretty much anything that Bed Bath & Beyond was doing — overstuffed stores, too much discounting, and no distinguishing features. Today though, a world-class team is reimagining retail itself by reimagining an appeal to customers and the role of the store itself. I’m looking forward to all future news coming out of Bed, Bath & Beyond.

Rick Watson
BrainTrust

Right now they are really plucking all the low-hanging fruit. Big obvious moves that even the average observer wouldn’t miss for so long.

The harder part is attracting and retaining key digital talent long-term. I’m not yet sold on this part of the transformation.

Cathy Hotka
BrainTrust

Agreed, but they’ve snagged Walgreens’ Andrea Farris, who’s a star. I’m really impressed so far.

Suresh Chaganti
BrainTrust

Bed Bath & Beyond need to cover Good/Better/Best in dominant categories. So this covers the lower end of the spectrum. It is a complex turnaround where all aspects of the business need to work well. This particular maneuver depends on capable sourcing and supplier base. At the low end of the price point, the market will be there. It then depends on the supply chain to keep the product category from becoming a loss leader.

Ken Morris
BrainTrust

I believe this is a great move by Bed Bath & Beyond. The blueprint for success in this polarized economy, where both ends of the economic scale search for bargains, has been drawn by retail giants like Ross and TJX. If you can follow the script and compete on price you can succeed. This move will drive traffic and increase impulse buys.

DeAnn Campbell
BrainTrust

Interesting point, Ken. Home Goods is not as well merchandised or organized as Bed Bath & Beyond. So positioning them as a better run, better curated version might gain some traction. Although I don’t think there is room in the marketplace for too many of these home goods behemoths, so someone may lose a chair in this game.

Dave Bruno
BrainTrust

Another smart move by the team at Bed, Bath & Beyond. They have fully embraced their strategy of giving consumers – at different levels of the market – a specific reason to shop their brand.

Joel Rubinson
BrainTrust

My guess is that Home Goods has been a big thorn in the side of Bed Bath & Beyond. Home Goods promises exploration, with the idea of finding some really good deals on things you need or on things you didn’t know you needed! This new private label line by Bed Bath & Beyond is probably the best response they could have. I think it is a winning idea.

Christine Russo
BrainTrust

This is definitely from the Target playbook BUT my opinion is that going straight to private label WITHOUT the same level of brand loyalty Target has is a bit of jumping the gun. This should come later.

I would argue that bringing in partnerships with baked-in loyalty would be a stronger move. Like Target’s partnerships with Joanna Gaines and Levi’s with loyal brand enthusiasts, Bed Bath & Beyond could look at a similar playbook. Bed Bath & Beyond is simply still not a big enough draw for a private label launch. And if they think people will run in in droves because of price, there is way too much competition for price to be a big differentiator.

Dr. Stephen Needel
BrainTrust

I like it – it gives me a choice of price points. Key will be that the quality of this new line is at least decent. Don’t want kitchen tools breaking after a few uses.

Lisa Goller
BrainTrust

Yes, Bed Bath & Beyond will profit from demand for an affordable variety of home products and declining brand loyalty. These staples will help consumers hit hardest during the pandemic as well as younger consumers moving into new homes.

As the home category and value shopping boom, Bed Bath & Beyond is wise to seize timely opportunities to grow. Private labels will distinguish the retailer from its larger competitors.

Steve Montgomery
BrainTrust

Price does matter. When we talk about the importance of the customer’s experience we should not forget that price is an element of that experience. Bed, Bath, & Beyond’s recognition that a larger portion of its potential customers find its price points too high is a smart. It is even smarter for them to do something about it. The addition of these items allows its stores to compete with others with similar items at lower price points.

David Naumann
BrainTrust

As evidenced by the tremendous success of off-price and dollar store retail segments, value pricing has a strong appeal for consumers. The Simply Essential value priced line at Bed Bath & Beyond should be a successful strategy, as it may increase the customer base with more value-conscious shoppers.

Gary Newbury
Guest

A common challenge of a product-centered retailer with an inflated store fleet, is how do we boost traffic to “sweat the asset,” rather than becoming customer-centric, relearning our purpose and focusing on this and customer extension?

I am not convinced with this strategy of finding a “market” in which the retailer is undersubscribed is being entrepreneurial. I suspect Bed Bath & Beyond remains in “go large” mode, rather than demonstrating a clear process of market segmentation, developing a format which best appeals to these rarified segments and creating competitive advantage by focusing on delivering consumer value.

It may be that there is a market, but does it not devalue the brand, especially when there are clear alternatives from major players who have a history of competence and scale?

Raj B. Shroff
BrainTrust

I wholeheartedly agree, Gary. IMO your comments are spot on.

Gary Newbury
Guest

Thanks Raj. Whilst I was relieved to see Mark appointed to head up BB&B, however, there have been some “odd directions” that have emerged over the last 6 months suggesting this retailer might be being steered by investors rather than retailers.

Jeff Sward
BrainTrust

Good/better/best is assortment planning 101. Shame on Bed Bath & Beyond if they were leaving 50 percent of the market unaddressed. The new team is pressure testing this business from every possible angle, from product to presentation to process. Hats off.

Gene Detroyer
BrainTrust

The lower priced line means one of two things. Either we will attract a new segment of customer or current customers will trade down.

Hmmm? Will new customers come from the known bargain retailers or Target and Walmart?

Turn-around is historically difficult and rarely successful. Bed Bath & Beyond may just be too deep in too steep a trajectory to pull this off.

Jlauderbach
Guest

Gene, I agree completely. I do not know if this will draw enough new customers to offset the trade down. I am sure with less volume on national brands the marginal cost of those products will rise. If their sourcing of private label is aggressive enough the margin impact may be manageable.

storewanderer
Guest
1 month 10 days ago

Yet another new “exclusive” brand that looks like a direct copy of what Target has. Why go here? Why not go to Target?

I was in the local BBB this weekend and assortment has definitely expanded in terms of number of SKUs/options with these new items added into the store. However it looks like it is a store filled with low dollar private label product now. Before, this was a store that focused on branded products.

Again why go here, why not just go to Target?

Ricardo Belmar
BrainTrust

As many have commented, this is a bit of a “no-brainer” approach — BB&B needed a good/better/best strategy in these categories and Simply Essentials is a good start to that needed approach. However, building a product you know you didn’t have for a customer you were missing out on is not a guarantee they will suddenly walk through your doors. Target’s approach to such private labels involved significant marketing and I expect Bed Bath to do the same to garner attention to this new brand. Customers need to know these products exist and what value they will bring to them if they visit a Bed Bath store or their website. If they can solve that problem first, then having the right product fit will naturally happen.

wpDiscuz
Braintrust
"They have fully embraced their strategy of giving consumers – at different levels of the market – a specific reason to shop their brand."
"I like it – it gives me a choice of price points. Key will be that the quality of this new line is at least decent."
"As many have commented, this is a bit of a “no-brainer” approach — BB&B needed a good/better/best strategy in these categories and Simply Essentials is a good start..."

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