On Saturday, July 13, I visited the Bed Bath & Beyond (BB&B) store on Route 10 in East Hanover, NJ and also the Cost Plus World Market and buy buy Baby stores about two miles east on Route 10 in Livingston NJ.  Here are my photographs and observations on the East Hanover Bed Bath & Beyond store:

This store is one of the earliest next generation lab stores.  It is larger than the typical BB&B store and has some features (such as an oversized kitchen classroom) which are somewhat unique to its store size and to the demographic profile of its customer base. While some BB&B stores may replicate the East Hanover model, the majority probably will not. Even so, the East Hanover store has many of the features that will be carried in the majority of future BB&B store upgrades.

Store personnel told me that the store had been remodeled over one year ago.  The inside of the store looks very different from a typical BB&B location.  Specifically, there are several departments – a general reception area at the store entrance, window treatments, bedding, home décor and small appliances – that have desks where category experts can review with customers their specific wants and needs, make suggestions and/or create custom orders.

Here is my tour of the store:

Store entrance – this covers both the bridal registry, back-to-college and custom home décor.  The woman manning the desk said that, among other things, she was responsible for the bridal registry and was currently tracking orders and purchases for 30 customers.

The “Find More” theme is prevalent throughout the store.  Here it is at the entrance.  It emphasizes that BB&B has a greater selection than other stores, which allows you customize your purchases and help you get exactly what you want.

The “Find More” theme is in other departments, such as Tablecloths. . . .

and Cookware . . . .

and Giftware . . .

and Mattresses . . .

There are desks for personnel to discuss personalized selections with customers are in key departments, such as Bedding . . .

and Window Treatments.

There is a section for Small Appliances . . .

with a seating area . . .

where customers can try before they buy . . .

and participate in product demonstrations.

There is a kitchen demonstration room . . .

which hosts cooking classes, including summer cooking camps for kids.

The store has expanded sections for health and beauty aids . . .

and food . . .

and a small section for clearance items.

With its emphasis on selection and customization, the store is meant to appeal to a consumer who is willing to pay more (up to a point) to get exactly what she wants.  Yet, this seems at odds with the company’s long-time emphasis on 20% discounts, either mailed directly to the home or now available through the Beyond Plus membership.

As I noted in my previous article on Bed Bath & Beyond, Inc. (BBBY), however, the Beyond Plus membership program, as currently configured, makes sense only as a vehicle for the company to build a membership base.  To be consistent with the strategy expressed in the next generation prototype, BBBY will eventually need to convert Beyond Plus to a true membership loyalty program, where members can utilize its custom designer services, receive notices of special offers or receive (modest) discounts for large volume purchases.

So far, the company has said almost nothing about its future plans for Beyond Plus. Nevertheless, the strategy seems clear and logical, if BB&B is to maintain a defensible market position against the big box retailers, like Wal-Mart and Target, or against the online behemoth Amazon.com.  One key question is whether BB&B still plans to target the price sensitive shopper who cares less about selection and customization.  In that regard, it may want to bring down its list prices some, but also reduce substantially its 20% discount offers.  This process appears to be already underway.

July 18, 2019

Stephen P. Percoco
Lark Research
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