Digital retail spend is more than decorative for Bed, Bath & Beyond
- Summary:
- Customers are choosing to shop in a digital world and if retailers like Bed, Bath & Beyond don't deliver that ability to them, then they'll shop elsewhere, says CEO Steven Tamares.
We do see the movement to the digital world and I think it has been more aggressive than most people had anticipated.
Among those ‘people’, Steven Tamares, CEO of home decor retailer Bed, Bath & Beyond, would presumably include some of his firm’s rivals who have underestimed the impact of digital tech on retail:
Coming out of the fourth quarter, I guess there was a number of our competitors who are all great competitors, the William Sonomas, the Targets, the Macy's, the Kohl's, the Restorations, all these people had not great quarters…We don't have finite numbers to know those answers, but clearly our digital space is growing at a rapid pace and we believe we are gaining market share.
In fact, Bed, Bath & Beyond has just turned in full year 2016 numbers that show year-on-year sales from customer-facing digital channels growing in excess of 20% while sales from offline stores declined in a low single-digit percentage range.
But that sort of digital growth does come at a cost. In 2016, around half of CapEx went on tech investment, including enhancements to digital capabilities, ongoing investments in the firm’s data warehouse and data analytics functionality, spend on new Point of Sale systems in-store as well as new systems to support expansion of the firm’s online offering.
This is all necessary spend, says Tamares:
While retailing continues to change, introducing so many new ways to engage and interact, we continue to focus on providing a great customer experience across all our channels. For example, recent enhancements to our digital channels include improvements in search and navigation to enhance the relevancy of customer search results.
We have enhanced the functionality of an existing search feature to make it easier for customers to search the Bed Bath & Beyond and Buy Buy Baby websites to determine availability of products in their local stores. For our registry customers, we have recently launched an interactive checklist on these Web-sites which serves as a helpful guide throughout the online experience in providing a well-rounded gift-able registry. This new tool complements the high-quality one-on-one registry service our in-store searches provide to our customers every day.
Tamares also points to a new feature called Shop the Room as a powerful new addition to the Bed, Bath & Beyond website:
This online guide contains a series of curated rooms for the living room, bedroom and bathroom that showcase an array of different design styles. The initial collections include at least five different lifestyle trends for the home. These collections are intended to engage and inspire customers as they think about their home decor options.
Over the coming weeks, we are partnered to begin piloting a new service online that will connect our customers to quality professionals for home installation and other home improvement projects. As our assortment of home furnishings continues to grow, we remain committed to providing the services and solutions to excel in this category.
Buying digital
The retailer is also in acquisition mode to expand its digital footprint, last month purchasing online interior design firm Decorist. Tamares explains:
Decorist is an online interior design platform that connects users to affordable, acceptable and personalized home design services.n Through the Decorist platform, consumers and businesses can directly connect with top-tier designers, including nationally-renowned celebrity designers to collaboratively work through the design process.
To increase customer confidence in purchasing furniture pieces, Decorist has developed and offers photorealistic 3-D renderings of how these items look in their actual homes. Decorist also offers additional online services, including a Design Bar advice tool which provides free expert design advice within 24 hours, inspirational boards, an editorial blog, designer tips and latest trends to further enhance customer engagements and develop deeper customer ties.
There are synergies to be exploited here, adds Tamares:
We look forward to supporting Decorist in its efforts to continue building brand awareness of their online business, increasing their revenue opportunities and developing their technology to further their leadership in the online interior design space. At the same time, as the interior design arm for Bed Bath & Beyond, we plan to leverage Decorist online platform to initiate and/or enhance our design consultation offerings for some of our concepts.
Earlier in the year, another acquisition took place, with the purchase of e-commerce firm Chef Central. The rationale for this deal was to enhance Bed, Bath & Beyond’s ablity to deliver more personalized shopping experiences for customers, says Tamares:
As a specialty retailer, Chef Central has been a trusted brand among cooking and baking enthusiasts for more than 15 years. We plan to leverage Chef Central's strength in merchandising and marketing to increase our ability to serve these customers. This includes leveraging their know-how and providing a more experiential omni-channel shopping environment in-store, including activities such as cooking classes and demonstrations.
We anticipate continuing to support the Chef Central e-commerce Web-site and opening Chef Central inspired specialty departments within Bed Bath & Beyond stores and potentially freestanding stores.
Personalization is a holy grail that Tamares is pursuing across the company’s various brands, using data analytics to help shape communication with customers:
Even with the right merchandise and the best services and solutions, we strive to communicate with our customers in increasingly meaningful ways. We have always used our marketing programs as a tool to forge these bonds but today our customer-centric marketing strategy is also supported by our enhanced analytics capabilities as we develop deeper relationships with our customers to personalize target marketing, including e-mail and direct mail campaigns.
We are leveraging our improved predictive modeling tools to optimize our direct mail and print campaigns, including our newest seasonal home catalog, titled Spring Refresh, which was mailed a few weeks ago to a select group of customers and prospective customers.
The catalog is in its own way emblematic of the balance that Bed, Bath & Beyond needs to strike in an omni-channel world, with the physical print volume being accompanied by a virtual version online. On a wider scale, this brings up the challenge for so many retailers - how to balance the online and offline worlds to best effect? Tamares is highly aware of the issues this raises:
The digital world is ramping up and ramping up quickly and the bricks-and-mortar world will suffer for it. There will be ramifications, and one of those ramifications will be reduced occupancy cost…The [store] format is changing also over time as we are looking to add more experiential aspects to the store, give customers more reasons for being there.
We benefit from the fact that we have a [physical] presence in the market, for reduced advertising expense, convenience for the customer to reserve online pickup in store, for people to start or schedule appointments and initiate registry services in stores for other people to shop online for them. So there are so many benefits that go both ways.
But the question remains, how to avoid digital cannibalizing the offline business? Tamares doesn’t have the definitive answer here:
That's a tough one to say because, whether we do it or somebody else does it, the movement is to digital. So the fact that we are getting better at digital, that we are adding to our assortment, that we are improving our search, that we are improving our content, that we are improving the speed at the backend, if everything is improving with our site, that's great.
The notion that it increases cannibalization is a tough one to really assess because, again, that customer is choosing to shop in a digital world. If they didn't shop us, they would shop someplace else.
My take
That last point is a crucial one. Digital investment isn’t an option for a retailer like Bed, Bath & Beyond; it’s compulsary. Against that backdrop, Bed, Bath & Beyond is making some pragmatic moves with its digital thinking and, as Tamares notes, to date has avoided the unforced errors of some of its contemporaries.