Bed bath.edited

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Bed bath & beyond Q1. Bed Bath & Beyond’s (Bb&Bs) Competitive Analysis Based on Michael Porter’s Five Forces Model Although BB&B has been a leader in the domestic supplies retail market, it faces stif competition from established and emerging retailers who have more innovative ways of selling and maintaining customers. Emerging retailers have established online channels where they sell directly to customers. TJ Maxx, Walmart, Amazon, and Target are some of the competitive rivals for BB&B and they have reduced its market share. According to the case study, about 70% of BB&B’s merchandise or supplies were selected by store managers as opposed to a centralized team. The fact that the store managers selected merchandise means that there must have been a higher number of suppliers from whom to obtain merchandise, reducing supplier power. The fact that BB&B lost its market share to competitors shows that buyers have a relatively higher power to switch between brands. Customers switched to brands that provided more seamless ways of buying goods through e-commerce such as Amazon. The presence of discounters such as TJ Maxx and Wayfair's aggressive advertising campaigns are indicators that the buyers had greater power; therefore, brands were adopting the most efective strategies to attract them. The strong buyer power can put downward pressure on prices. The greater switching power of customers also indicates that the threat of substitution was higher in the market. Most of BB&B’s product catalog was similar to the competitive rivals’ catalog. This aspect implies that customers would easily obtain the products from rival brands in a more convenient way. Furthermore, if it is relatively less costly to enter a market, the competitive position of an existing company is threatened. The entry of newcomers using e-commerce to market and sell goods to customers indicates that the threat of new entrants was high but this threat is more apparent in e- commerce. Q2. Competitive Strategies BB&B Attempted to Use BB&B used a low-cost leadership strategy to increase its market share and profitability. The company expanded its IT team to integrate its systems and have a more comprehensive understanding of customers’ needs and interests across all its channels. The systems integration aimed at consolidating data at a central point to enable predictive modeling for optimization of pricing in response to customers’ needs and preferences. Predictive modeling would enable the company to monitor market trends and use dynamic pricing, which is the setting of flexible prices in response to the changes in market demand but keeping them lower compared to the current market prices. Setting prices according to market demands would enable the company to identify the most cost-efficient strategy to use to deal with competition and optimize market share and profitability. In addition, dynamic pricing with emphasis

on lower prices would minimize the threat of substitute products since customers would experience a higher cost of switching. In addition to the low-cost leadership strategy, BB&B used product diferentiation by integrating e-commerce and in-store shopping. The company sought to reduce the inventory in its stores and expand the product assortment on display in the store and online. As such, customers would be encouraged to make purchases of certain products online or in the store. Making the channel of shopping flexible through a robust e-commerce platform integrated with the store would make shopping seamless. In addition, the company introduced diferent in-house furnishing decorative brands. These products would be more personalized and distributed through warehouses linked to e-commerce systems to improve deliveries and efectively fulfill online orders. Providing an omnichannel shopping experience would reduce the potential of switching among customers because this experience would ofer them a unique value. As such, the company diferentiated products by expanding product assortment on display both online and in the store, personalization of products, and enabling an omnichannel shopping experience. Q3. Major Issue BB&B Dealt With and the Technological, Organizational, and Management Factors Involved The major issue BB&B faced was the inability to compete in the new digital environment. The majority of employees did not have laptops and the ones issued by the company were outdated. In addition, the company’s website took a long to be rolled and it was largely inefective in boosting sales and customer service management. The company’s new e-commerce platform had clumsy and outdated functionality. Fulfilling online orders was therefore difficult employees had to manually enter product descriptions and orders instead of being automatically uploaded. Moreover, the company’s e-commerce platforms are tiny and ofer specialized products which are not profitable. In a world where consumers were gravitating towards online shopping, BB&B was unable to improve sales and therefore its revenue declined in 2018. The inability to compete in the new digital environment was aggravated by the organizational preference for a frugal culture. The management and employees were not allowed to use Post-it notes because the company considered them expensive. The company’s frugal culture was also demonstrated by the refusal to invest heavily in technologies such as e-commerce that would improve the company’s competitiveness. The investment in technology was $200 million in 2018, which was lower than rival companies’ investments. The company management was therefore less aggressive and less decisive in convincing the shareholders about the value of taking risks and investing in technology. This behavior was evidenced by the fact that rolling out the website took two years and managers rarely rolled out new store concepts in the entire chain after testing them. The risk aversion among the managers and the organizational frugal culture increased the potential for a decline in market share and revenues. Q4. The Solutions BB&B Tried to Implement BB&B turned 40 stores into working labs in which they would experiment with various retailing innovations. Innovations related to visual merchandising, assortment, and enhancing customer in-store

experience were the main focus of the working labs. The findings from the working labs would be applied in other stores to optimize customer experience. Working lab experiences were evaluated based on customer behavior, inventory, sales and profitability, space productivity, and new, existing, and reactivated customers. The company also invested in the improvement of digital services by making more inspirational content for customers to improve engagement. In addition, the company sought to expand its product assortment in online stores and enabled the use of images to search for products more conveniently. A virtual coupon wallet, My Ofers, was introduced with the ability to organize and store print and digital coupons to be accessed online or in stores. The company also brought in new directors with experience in e-commerce and retailing to boost the growth of e-commerce. This was a decisive move because the former directors were the obstacles to investment in technology due to their risk-aversive behavior. As such, the company management attempted to move away from the frugal culture, increased investment, and changed management to build a more robust e-commerce platform integrated with the stores to enhance customer experience. Q5. Current State of BB&B BB&B filed for bankruptcy in April 2023 and its brand and intellectual property were bought by Overstock.com at the value of $22 million (Blair, 2023). Following the acquisition, BB&B became an online-only brand dealing with domestic products including furniture but customers were directed to the store through Overstock.com. The move to acquire BB&B was driven by the need to upgrade BB&B’s business model which as the case study demonstrates, had weighed it down culminating in bankruptcy. Overstock.com has an asset-light, drop-ship business model which means that BB&B does not have to keep a large inventory. The product catalog for the company has grown significantly since its acquisition. The almost- zero inventory model has enabled the company to expand its product oferings because the cost of managing inventory has significantly reduced (Blair, 2023). Most of the products on the company’s catalog are what customers have grown to love since BB&B’s beginnings. The increase in product catalog has also been stimulated by the rebranding of Overstock.com following the acquisition. Suppliers who were reluctant to supply a wide range of catalogs to Overstock.com due to its association with liquidation can now do so. In addition, BB&B still uses the low-cost strategy in addition to coupons. In the first quarter since the acquisition, Overstock.com, lately branded as Beyond Inc. reported a 20% drop in sales and a 30% drop in active customers (Fonrouge, 2023). However, BB&B hopes to reverse this trend in the years ahead. Q6. Strategies BB&B Could Have Implemented BB&B should have monitored industry trends through market research to identify its competitive situation. The company’s reluctance to proactively introduce e-commerce models can be attributed to the failure to evaluate the market trends. As Rodriguez-Pardo et al. (2017) explain analyzing market trends in retail enables companies to identify the best approach to take in fulfilling customers’ needs. Had the company evaluated market trends, they would have discovered that other competitors in the market were using e-commerce technologies to sell and market their products. A thorough market

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research would have enabled BB&B to know that the brick-and-motor model was becoming outdated. The company would have had prior insight about the magnitude of e-commerce and its impact on customer behavior and striven to be a pioneers in e-commerce in the market. More specifically, the low-cost leadership strategy did not help the company to remain competitive. As Kapner (2019) explains, the company found it difficult to provide quick deliveries at no cost. Customers were unwilling to sacrifice quick delivery for zero cost. The company should have put in place mechanisms for quick delivery at a relatively lower price. Research indicates that customers have diferent preferences for online delivery services in the retail sector diferentiated according to time, convenience, and price (Nguyen et al., 2019). As such, BB&B should have established their customers’ preferences before providing delivery options.

References Blair, A. (2023). Does the ‘New’ Bed Bath & Beyond Have the Right Formula for Success? Retrieved from: https://www.retailtouchpoints.com/features/industry-insights/does-the-new-bed-bath- beyond-have-the-right-formula-for-success Fonrouge, G. (2023). As the new Bed Bath & Beyond launches, here’s what shoppers can expect. Retrieved from: https://www.cnbc.com/2023/08/01/bed-bath-beyond-relaunches-as-online- only-retailer.html Kapner, S. (2019). Amazon Didn’t Cripple Bed Bath & Beyond. Its Own Leaders Did. Wall Street Journal . Mansaray, H. E. (2019). The role of leadership style in organizational change management: a literature review. Journal of Human Resource Management , 7 (1), 18-31. Nguyen, D. H., De Leeuw, S., Dullaert, W., & Foubert, B. P. (2019). What is the right delivery option for you? Consumer preferences for delivery attributes in online retailing. Journal of Business Logistics , 40 (4), 299-321. Rodriguez-Pardo, C., Patricio, M. A., Berlanga, A., & Molina, J. M. (2017). Market trends and customer segmentation for data of electronic retail stores. In Hybrid Artificial Intelligent Systems: 12th International Conference, HAIS 2017, La Rioja, Spain, June 21-23, 2017, Proceedings 12 (pp. 519- 530). Springer International Publishing.

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