Target, Walmart and Ikea Were Killing Bed Bath and Beyond. Here's the Really Smart Announcement They Just Made In Response

 inc.com  10/12/2019 05:52:00 

Poor Bed Bath and Beyond, out there trying to compete with the likes of Target, Walmart and Ikea.

True, their brand has been around for almost 50 years. And Bed Bath and Beyond did more than $12 billion in revenue last year.

Plus, their most loyal customers love their coupons, collecting them and splurging -- stacking coupons that are good for $5 off or $10 off or 20 percent to gain big discounts. (There's also been an open secret that Bed Bath and Beyond would usually even accept expired coupons.)

But the brand is struggling. As some of Bed Bath and Beyond's biggest investors put it earlier this year, the company has "lost touch with modern retail."

They say Bed Bath and Beyond stores are cluttered, with confusing pricing. They rely too much on deep discounts and coupons. They say management has demonstrated an "inability to deliver ... a viable omnichannel strategy." 

One big investor called Bed Bath and Beyond's performance "horrendous," and said it's to blame for an $8 billion drop in  value. 

Meanwhile, those bigger competitors like Walmart, Target and Ikea are leaping forward, deep into 21st century technology. And they're not only bigger -- they're way more efficient. 

Here's some recent data. (These are rough numbers, in part because they're not all on the same fiscal year, but should be pretty accurate):

  • Walmart:  Nearly $518 billion in annual revenue, with 4,769 stores and 2.2 million employees. That works out to about $109 million in revenue per store, and $235,454 per employee.
  • Target:  About $77 billion in annual revenue with just under 1,900 stores and 360,000 employees. That puts them at about $40.5 million per store, and $213,888 per employee.
  • Ikea: Roughly $44 billion, with 423 stores worldwide and about 208,000 employees. That works out to about $104 million per store, and $211,538 per employee.
  • Bed Bath and Beyond: About $12 billion, with 1,500 stores and 65,000 employees. That works out to just $8 million per store, and about $185,000 per employee.

The investors look longingly at some of the things those big competitors are doing -- including the more seamless way they've blurred the line between brick and mortar retail and digital. More data points:

Suddenly, paper coupons don't seem so cool.

After the investor revolt earlier this year, Bed Bath and Beyond turned over part of its board, removing even your co-founders and the company's chief executive officer. They brought in an outsider to serve as interim CEO.

And they wondered: Where can we get someone who can lead this company in the same direction that say, Target, seems to be going?

This week, they announced the answer: They poached the chief merchandising officer from Target, Mark Tritton, to become the new CEO of Bed, Bath and Beyond.

"We are thrilled to announce a President and CEO with one of the most impressive resumes in the business," Bed Bath and Beyond's chairman said, adding: "As an integral contributor to Target's impressive transformation, we will benefit from his vision, leadership, and creativity to successfully transform our business."

It's Day 1 at Bed Bath and Beyond, so it's impossible to say how this will turn out. But it's surprising, and seems like a smart lesson for any business. (For what it's worth, Wall Street liked it; the company's stock jumped 20 percent in one day after the announcement). 

If your competitors are killing you, and you can't figure out a way to keep up, maybe don't try to reinvent the wheel.

Instead, do what takes to hire away the competition. And have the confidence try putting the wheel in their hands. 

Published on: Oct 12, 2019

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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