When Bed Bath & Beyond, under a new CEO, announced its plans to expand its private label offerings, reduce some of the clutter in its stores, and rationalize its supply chains, many retail industry experts praised the effort and predicted its great success. They might have wanted to talk to some employees with more first-hand experience with customers though, because the results of these moves have not been as positive as anticipated, at least thus far.
By reducing the assortment overall but adding more private-label options, the company’s CEO Mark Tritton, who joined the firm in 2019, aimed to increase revenues. Private labels tend to increase profits. Furthermore, the crowded stores seemed to induce what he called “purchase paralysis” among consumers overwhelmed by the number of choice options they faced. Rebalancing the ratios, so that consumers encountered fewer products, and so that more of those were owned by the retail brand, seemed like a no-brainer.
As employees in stores have noted though, part of the fun of visiting Bed Bath & Beyond stores was the wealth of options available. Consumers who needed any sort of housewares expressed confidence that their local store would have it in stock, because the stores really felt as if they had everything. Thus they could grab a new oven mitt to replace a worn-out one, but they also could anticipate finding special use items, like a fancy pizza stone, or stumbling upon a product they never realized they needed, like a chopper designed specifically for cilantro.
In reducing the assortment, Bed Bath & Beyond reduced this confidence, though the problem was not only self-induced. When COVID-19 hit, its private-label supply chains, just like nearly every other supply chain, became disrupted. Having already been in the midst of disrupting and shifting its supply chain purposefully though, Bed Bath & Beyond had fewer replacement options available to it. If the private-label version was out of stock, consumers did not find alternative, big-name brands on the shelves for them to purchase. Thus in the holiday shopping season of 2021, stockouts affected an estimated 200 of its most popular items, leading to about $100 million in lost sales.
It made for an ugly combination of planned and unplanned events. The retailer purposely planned to stock fewer items, eliminate some national brands, and offer fewer variations of stock items like towels. Whereas once there might have been eight options, it planned to carry only three under the new approach. But the retailer also could not have predicted the difficulties it would have getting enough of those three types of towels (or potato peelers, or garbage cans, or whatever) into stores during the pandemic.
As a result, same-store sales dropped precipitously, and the retail chain’s stock price fell to half its prior value. According to store employees, the drastic outcomes reflected the drastic changes. Even as the inventory was being radically rehauled, Bed Bath & Beyond was introducing new supply chain operations and technology. Once again, those moves were praised as necessary by observers, and it is certainly hard to argue against updating retail technologies. But according to the retail employees, it meant too much change, too soon, even before the dramatic changes imposed by the pandemic took hold.
Discussion Questions:
- Why might employees and industry observers have different assessments of the changes adopted by Bed Bath & Beyond? What criteria are they using? And who is right, or perhaps just more accurate?
- How should retailers decide on the level of assortment diversity to carry? What are some guidelines they might use?
Source: Suzanne Kapner, “Bed Bath & Beyond Decluttered Its Stores and Ended Up Frustrating Shoppers,” The Wall Street Journal, January 30, 2022