Why Bed Bath and Beyond Failed

WHY BED BATH & BEYOND FAILED

Bed Bath and Beyond was once a popular retail store for home goods, but it struggled in recent years and finally chose to liquidate this year. I suspect the Bed Bath and Beyond story will end up being a mandatory case study in business school as it was a failure of epic proportions.

But the retail giant’s demise didn’t just happen. Mistakes were made over many years. Every business owner (big or small) can learn from BB&Y’s story.

5 Reason’s Bed Bath and Beyond Failed

Here are my top 5 reasons why the company failed:

1. They didn’t understand their customer – Part 1: Failure to adapt to online shopping: Bed Bath and Beyond was slow to adapt to the rise of e-commerce. They were not where potential customers (who preferred to shop online) could find them.
2. They didn’t understand their customer – Part 2: Lack of innovation: Bed Bath and Beyond relied on traditional home goods. With no innovative products, they were less appealing to younger consumers who were looking for more unique and trendy items.
3. Discount pricing means thin margins: Bed Bath and Beyond focused on “promotional” pricing, especially coupons. Basing your business on a Discount Model is fine, but it means thinner margins and less profit per sale.
4. Too many stores: With a singular focus on Brick & Mortar locations, they had too many physical stores, which led to high overhead costs and low profitability.
   

   Combining thinner margins with higher overhead turned out to be the ultimate recipe for disaster.

5. Poor customer experience: Customers complained about the cluttered and disorganized stores, as well as the lack of knowledgeable staff. Company management was constantly struggling against a decline in customer loyalty and repeat business. In 2018 & 2019, their response to the issue was a shift away from their coupon-focused model which further alienated their core customer base. Oops.

Honorable mention should also be given to the reality that as management was trying to “fix” the problem, they were adding massive amounts to their debt load.

What the Company Says vs What Really Happened

According to Bed Bath and Beyond management, their struggles were due to the “retail apocalypse” and the changing retail landscape. However, I believe that the company’s failure is largely due to their own missteps, especially the ones cited above, and these missteps were going on for years. It takes a lot of compounded errors to kill off a multi-billion dollar company.

Don’t Make These Mistakes with Your Business?

If you’re a business owner, it’s important to learn from Bed Bath and Beyond’s mistakes. Ask yourself these questions:

• How well do I know my customer – not only the ones who are loyal to my business today, but the next generation of customer? What are they looking for?
• Are all financial aspects of my business in alignment, or am I trying to run a high-overhead operation with a thin-profit sales model?
• How well is the business prepared to mitigate the risk of changes in the marketplace?
• Is the business over-extended?

There are some basic business rules at play here. Understand your customer. Understand your business model – what it can do and what it can’t do. Prioritize your customer experience. Innovate and stay ahead of trends.

By paying attention to these basics, you can avoid the same fate as Bed Bath and Beyond.