3 Ways Bed Bath & Beyond Is Transforming With Tech

Jamie Grill-Goodman
Editor in Chief
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Bed Bath & Beyond Inc. is in the early stages of its three-year transformation plan, yet “started the year in a position of strength” CEO Mark Tritton said.

Comparable sales in Q1 2021 jumped 86% compared to the prior year quarter. Compared to Q1 2019, total enterprise comparable sales increased 3%, driven by digital sales growth of 84%.

“2021 marks the first year of our three-year transformation following the groundwork we laid in 2020 – a year of historic and necessary change for this organization against the backdrop of unprecedented challenges due to COVID-19,” Tritton said. “For the first quarter, we delivered our fourth consecutive quarter of comparable sales growth with gross margin expansion exceeding our expectations.”

The company raised its full year guidance outlook and Tritton noted BB&B made “meaningful progress” against its transformational pillars.

“We believe growth of 86% over the prior year is solid – although we also note the two-year comparable growth is a more modest 3%, which is a little disappointing,” said Neil Saunders, managing director of GlobalData. “At this stage, it remains difficult to dissect exactly how much of the growth is down to general market conditions and how much is attributable to Bed Bath & Beyond’s transformation strategy.”

Below, RIS looks at three ways BB&B is harnessing technology in its transformation strategy.  

Inventory Improvements

A full technology suite will help the company use artificial intelligence to manage inventory, Tritton said on the earnings call. “We're seeing the curation of the merchandise first at store level, and then the exit of underperforming brands and labels to make way for a cleaner assortment punctuated by a brand. That has resulted in being in-stock at about 95%. And definitely even higher in some of our key items, which is one of our highest statistics in many years.”

As the retailer curates the assortment mix, it’s doing “more sales on less inventory,” he noted. “And this is prior to us implementing a full suite of inventory management and tracking systems and new supply chain. So, we see those being net benefits as we progress through the three-year plan, but the fundamentals what we've put in place is working well for us.”

So are the inventory changes visible?

“On the shop front, some effort has been made to declutter stores and to make them more shoppable,” said Saunders. “However, the results on the ground are variable and too many stores still lack merchandising flair and take a pile-it-high approach to retailing. Again, we appreciate the transformation is an iterative process but there is more work to do here."

Stores & Store Fulfillment

In 2020, BB&B launched buy-online-pickup-in-store (BOPIS) and curbside pickup services. In Q1, 31% of the company’s digital demand was fulfilled from stores, with BOPIS representing 14% and ship-from-store and same-day delivery accounting for 17%.

“Our footprint plays a vital role in our digital-first, omni-always strategy,” said Tritton. To this end, the company will remodel 450 stores over the three years, approximately 60% of its store revenue base. The upcoming flagship Chelsea store in New York City has been transformed new concepts including a “customer-centric layout for easy and convenient BOPIS and checkout.”

Enterprise Resource Planning

Earlier this year, BB&B selected Oracle as its Enterprise Resource Planning (ERP) technology provider. Oracle Cloud will provide real-time financial, supply chain and merchandising solutions, replacing its legacy suite of technology systems and delivering new data, insights and planning capabilities.

Tritton gave an update in the call, noting the next component of the retailer’s IT roadmap is progressing with the appropriate designing and planning for its full ERP migration.

“We're making great strides in all aspects of our transformation, and customers are also recognizing the evolution,” he said. “Our active customer base increased sequentially versus last quarter. Even more exciting, half of these active customers are shopping omni and digital double 2019 levels. These customers shop more frequently, and with a larger basket size.

“Perhaps one of the reasons for a more cautious approach to store investment is that digital sales are up by 86%,” commented Saunders. “This obviously needs to be put in the context of much higher demand from consumers, but it serves as an indication that the online channel is becoming much more significant for the company. In our view, Bed Bath & Beyond does a better job of displaying and showcasing its new own labels online than it stores, so we are confident that new product will continue to drive digital momentum.