CSA Exclusive: Bed Bath & Beyond COO talks about elevating the customer experience
Bed Bath & Beyond’s plans to accelerate its omnichannel transformation doesn’t mean the home goods retailer has given up on brick-and-mortar. Far from it.
“We view our stores as a real strategic asset,” John Hartmann, executive VP and COO, Bed Bath & Beyond and president of its BuyBuyBaby business, told Chain Store Age. “Stores are the anchor of our omni-always promise.”
Bed Bath & Beyond stores have come under a harsh spotlight in recent years, called out for being stale and cluttered and not reflective of changing shopper behaviors and marketplace trends. Hartmann, who joined the company in May from True Value Hardware where he served as president and CEO, said that the stores had clearly suffered from under-investment. But under the company’s new leadership team, headed by CEO Mark Tritton, who took the reins about one year ago, that is about to change.
In an October presentation to the investor community, Bed Bath & Beyond unveiled a comprehensive three-year strategy https://chainstoreage.com/bed-bath-beyonds-three-year-plan-includes-store-remodels-tech-investments that includes plans to invest approximately $250 million to remodel about 450 stores, which represent 60% of the company’s revenue, with a goal of making shopping easy and inspiring.
“We want customers to have the elevated experience they expect but are not getting today,” Hartmann said.
Bed Bath & Beyond has already started the journey, piloting new concepts to enhance the experience at its remodeled prototype store in Watchung, N.J. (The company is based in nearby Union, N.J.) The store has a more open feel than the retailer’s traditional box, with better signage, destination rooms and clear, wide-open sight lines.
“We’ve taken the customer experience to an incredibly new level based on their feedback, addressing some very fundamental things they told us,” said Hartmann. “We used a data-driven approach to analyze our past remodels and tested and tweaked a number of different changes in the Watchung store during the past six months before landing on this model.”
In another big change, the store has about 25% less inventory than the standard Bed Bath & Beyond.
“It’s a refined approach that is much more shoppable,” Hartmann said. “We’ve struck a great balance of finer curated assortments and reduced inventory that improves working capital and declutters the store for the customer.
The response to the store has been fantastic, according to Hartmann, even amid the pandemic. Sales have increased 7% and gross profits are up 10%.
“When you get increased sales from a lower amount of inventory, it’s a great outcome,” he said, noting that the positive results have occurred before Bed Bath & Beyond’s owned-brands initiative kicks in this spring.
As to the biggest takeaways from the prototype store, there are three, Hartmann said, starting with clear wayfinding.
“Customers told us many times they couldn’t find what they were looking for in our stores,” he said. “The experience is entirely different in Watchung.
Also, category adjacencies have been rethought.
“We did a much better job around adjacencies — the way the categories flow through the store makes sense to the customer,” Hartmann said.
The value messaging has also been improved.
“The customer can clearly see a value orientation to the products on display,” Hartmann said.
The Watchung model — a full remodel that touches 100% of the store — represents the highest level of investment that Bed, Bath & Beyond will make in its stores during the next few years. In addition, the chain will test two other levels of investment, including a remodel, or “room reset,” that touches about 50% of the store.
Locations that don’t require the full- or mid-sized remodel will receive a “light-touch” remodel that includes an omni-refresh, updated signage and a few other items. The company will bring all three concepts to life in the Houston market.
“By early next year, we will have touched 12 stores in the Houston market, with four full remodels, three room resets and five light-touches,” Hartmann said. “We will continue to test, iterate and learn as we roll out remodels across the country.”
As noted in its October announcement, Bed Bath & Beyond expects to remodel about 450 stores during the next three years. How does it determine the type of remodel each store will receive?
“We conduct an analysis and look at the demand in the marketplace, how much we are addressing it and the opportunity that exists for us to gain market share,” Hartmann said. “It’s truly a store-by-store build in each of the DMAs across the country.”
While Bed Bath & Beyond stores comes in a variety of sizes and shapes, the preferred footprint ranges from 25,000 sq. ft. to 30,000 sq. ft. The retailer is “contemplating” an alternative format, Hartmann said, but that is separate from the remodel project, which involves stores that it will continue to maintain as part of its ongoing fleet.
Bed Bath & Beyond also continues to invest in the digital side where, among other things, work is ongoing to make its e-commerce site more attractive to the customer.
“When we look at the big opportunities to elevate the customer experience, it’s a combination of digital initiatives and physical remodels,” Hartmann explained. “And the work being done by our merchandisers benefits both our online and store customers.”
The digital and store investments are key to the company’s “omni always” promise, with options for customers who shop online as well as those who shop in-store, according to Hartmann.
“There are still a substantial number of customers who continue to enjoy the store environment, he added.
Along with transforming its namesake brand, Bed Bath & Beyond is also committed to the growth of its $1 billion BuyBuy Baby banner, increasing sales to $1.5 billion in fiscal year 2023.
“We strongly believe in the baby business,” Hartmann said. “It’s been very growing very well and has shown excellent momentum during the past several years.”
BuyBuyBaby’s business, similar to that of many other retail brands, has been interrupted this year amid the pandemic.
“Pre-COVID, our store-based business was very strong,” Hartmann said. But the COVID moment has seen new and expectant parents a little less comfortable when it comes to making store visits, which is not surprising.”
The brand was the first in Bed Bath & Buy’s portfolio to offer buy-online-pick-up-in-store and curbside pickup options. The new options strengthen BuyBuyBaby digitally while complementing the overall business.
“Fifth percent of our sales are now digital, so we have become a true omni business,” he said.
According to Hartmann, data reveals that the brand not only enjoys deep relationships with its customers, but dominates the markets where it operates stores. That, along with changes in the competitive landscape, has led BuyBuyBaby to embark on a store expansion plan that calls for opening a minimum of 50 new stores during the next three years.
“This is a business we love and are doubling down on,” Hartmann said.
Bed Bath & Beyond’s presentation to the investor community in October was well-received, according to Hartmann.
“Our presentation made it clear that we have a well thought out strategy,” he said. “We also have an incredibly strong team whose members have very transformational experiences in their background. And we are focused and disciplined on driving execution.”
While it’s still early on in Bed Bath & Beyond’s transformation, the company is starting to see some “early green shoots” of the work that has gone on during the past 12 months, Hartman said.
“And we are just getting started,” he added.