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DEAR Bed Bath & Beyond (BBBY) – Home & Baby Care Need Subscriptions

Bed Bath & Beyond Home & Baby Care Subscription Strategy

Bed Bath & Beyond | Sagar Mandal

Disclosure : DEAR is the acronym for Digital Earnings Analysis & Review. Comments, opinions & recommendations are personal and based on analysis of SEC filings , press releases & earnings call transcripts. I do not have any investments or business relationship with BBBY .

On Apil 15th 2020, Bed Bath & Beyond Inc. (NASDAQ : BBBY) USA’s largest chain of home & baby care retail stores, reported results for the fourth quarter ended February 29,2020. The retailer reported a net loss of $65 Mn or 53 cents per share while revenue dropped 6% to $3.1 Billion, a little better than $3.07 Bn as analysts had predicted.

Though BBBY are physical-first business, their latest digital outcomes are nothing less than commendable. With COVID19 pandemic two important worth-noting behaviors are happening in the US and across the world.

One, digital adoption is breaking all industry standards and we are doing all of our shopping online. Second, we are spending more than ever time at home and our discretionary spends are now focused on home-care & home based activities such as cooking,home repairs etc.

With the above factors at play , digital capabilities today & $250 Mn technology focused investments, BBBY have the potential to build home & baby care subscriptions offerings within the business. It may sound redundant to Amazon, but BBBY has competitive advantages of wider merchandise mix, store footprint & partner network.

In my experience, it can be rolled out for a minor category in 2 phases and then scaled across the enterprise.

  1. Convert Product Categories into Consumption LifeCycle Buckets : BBBY carries a wide merchandising mix with varied consumption lifecycles. For eg. average lifespan of an espresso coffee machine is 8 years while the 48 count coffee pods last a month or based on your consumption patterns. Hence consumer who have an espresso coffee machine have a monthly coffee pod consumption cycle. On the similar lines, BBBY reported increased demand for water filtration, air purifiers, vaporizers and humidifiers and kitchen electric cleaning. Each of these categories have a lengthier core product consumption lifecycle and smaller associated product consumption lifecycle. They should find similar trends in transaction data for loyal customers who have started & completed the lengthier consumption cycles at BBBY.
  2. Develop Subscription Offers Based on Product Categories : With activities limited to home, retailers who bring newness to the consumers home are the winners. Subscription offers would include a new relevant product including the essentials or usuals to help customers explore the entire product category. For a Pepsi, Coke or Nescafe, it would present the perfect opportunity to get customer feedback about their newer products. These offers would be personalized based on the behavior , purchases & demographic factors delivered through omni-channel capabilities.

Once implemented across various phases, I expect the following key outcomes for Bed Bath:

  1. Right Merchandising Mix : BBBY had lost multiple opportunities during the holiday season due to lack of right merchandising mix. The subscription model would ensure that the right products are in place ahead of time to fulfil the demand. Additionally with the transaction & behavior data available, merchandising needs can be predicted for their supply partners.
  2. Reduced Shipping Expenses : With more user data and order information available early, shipping procedures would be cost – optimized to reach the customer quickly and inexpensively. Overall as more of these operations are automated the dependencies to fulfil & deliver would be reduced

Stay well & stay safe!

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