Bed Bath & Beyond’s Plan to Reinvent Itself by 2020

Bed Bath & Beyond’s has announced an aggressive investment plan to evolve the foundational structure of the company. This new strategic focus coupled with cutting-edge technology is designed to improve BB&B’s merchandising, pricing, service, and digital experience.

While BB&B turned in a respectable 5.2% increase in net sales in Q4, it endured a .6% drop in comp sales. The retailer has seen traffic slow in its stores and is working diligently to provide a personalized and memorable experience in-store and out.  

On a recent earnings call with analysts, CEO Steven Temares outlined his strategic vision for the future, specifically the technology investments the brand is making to transform its core functionality by 2020. The goal of the 2020 initiative is to grow comp sales, moderate the declines in operating profit and net earnings, and grow earning per share.

Bed Bath & Beyond’s two-year plan is to focus its technological investment on four key areas: merchandising, pricing, service, and digital experience.

In addition to its long-term goals, over the next 6-12 months, BB&B is implementing a number of new systems including a new POS solution, assisted selling, and employee training solutions.

Below is a quick look at the current state of Bed Bath & Beyond’s 2020 initiatives.

Merchandising

Bed Bath & Beyond is working to solve a common problem across the retail industry: differentiating in an increasing crowded and digitally-focused marketplace.

As part of its 2020 initiative the retailer has begun implementing strategic changes to better align its employees and technology to build unique and memorable product assortments both online and in-store, fulfilled from a common distribution network.

“We are restructuring our merchant organization to free up our buyers to focus more of their time on driving a meaningfully differentiated offering and creating a best-in-class digital merchandising strategy,” said Temares. “We will have a merchandise assortment that is substantively and meaningfully differentiated that could be made available in all channels and from all concepts.”

A key component of the new merchandising approach is an improved and varied sourcing model. BB&B has recently established a sourcing office in Shanghai, which will be open for business soon, working in conjunction with the established office in Hong Kong. The addition of another sourcing office in the region will allow the retailer to directly import goods at an increased level.

“Our ability to do more direct importing and sourcing should create a significant opportunity for gross margin improvement,” said Temares.

Pricing

While BB&B is working diligently to build a differentiated product assortment, much of its product array is common among itself and its competitors. One of the most effective ways to stand out in the crowd when selling common products is to offer competitive and dynamically changing prices.

Bed Bath & Beyond has been dynamically pricing its online-only assortment and has begun testing a similar system in-store. The pilot is being conducted in limited product categories, but as the team works out the bugs, the solution will be scaled, which should have a positive impact on both volume and margin going forward.

“We will be in a position to intelligently and dynamically price our assortment across all channels directed by pricing specialists and driven by systems powered by machine learning,” Temares said. “We have invested in our pricing teams and new tools that will enable us to execute multiple pricing strategies to address opportunities in base, competitive and markdown pricing and do it at a much more focused and local level than we were able to do previously.”

Service and Solutions

Bed Bath & Beyond remains committed to providing “best-in-class services and solutions reflecting our leadership and our life stage businesses and strengthening our customer relationships through expanded and faster delivery options,” said Temares.

As a home goods retailer, BB&B has a thriving registry business and continues to invest in the technology infrastructure behind this core capability to attract people celebrating major life events like getting married, having a baby, going to college or moving to a new home.

The brand’s technology group is developing personalization tools to greater connect with registry shoppers and has introduced a host of new functions and features including: an interactive checklist, associate recommendations, favorites badging, and a thank you manager tool.

Digital Experience

The other three key initiatives will all be brought together under the cohesive umbrella of the digital experience. “These advancements in our merchandizing, value and services and solutions will be manifested in our customers’ digital and store experiences,” said Temares. “In our pursuit of delivering a world-class digital experience we are undergoing a major transformation of our digital architecture and a project we call Front-End Optimization or FEO. In short, we are replatforming a large portion of our digital commerce solution into a service-based architecture with a responsive design.”

The FEO solution, which should be live this fall, is designed to increase the speed that BB&B can develop and release new features and cut down on the time and cost for developing them.

The new digital experience will be cloud enabled, personalized, require less inventory, with a focus on fast and seamless fulfillment.