Slow digital transformation makes it hard to see beyond Bed, Bath and Beyond's troubles
- Summary:
- Bed, Bath and Beyond just saw its share price plummet to an 18 year low as Wall Street shows signs of losing patience.
The Campus Ready push is, says CEO Steven Temares, built around “an important life stage” and that Bed, Bath and Beyond wants to “make the move-in process more convenient and less stressful for students and their parents”. It also means that, if successful, the firm is catching a new generation of potential customers early. Or as Temares puts it:
We’ll remain committed to making the investments necessary to engage with the college customer and then leveraging analytics and marketing personalization to build our relationship with them over time.
So what’s the bait for catching these new buyers? Temares points to an Interactive Checklist tool to assist students and their parents in developing and managing a tailored list of campus-ready items based on individual responses to a few simple questions:
Through early September, tens of thousands of Interactive Checklists have been created.
We also expanded our social media efforts this year, including the creation of fun college shopping Snapchat filters, which garnered more than 6 million swipes to use a filter and resulted in more than 300,000 photos and/or videos taken with the filter during the period from June through August. We have also evolved our College Savings Pass Program. For a limited period of time, we offered registered students with a valid .edu email address, access to our program, which includes a 20% discount on entire purchases both in-store and online, and free standard shipping for an entire year, so students can benefit from the savings as they continue to settle into campus life.
It’s just one example of how the retailer is looking to digital transformation to create a more potent omni-channel mix. Temares says that this is starting to pay off:
Over the past 18 months, we have bolstered the strength of our existing team with individuals with strong expertise in areas including data analytics, supply chain, customer fulfilment, merchandising, life stages, e-commerce, portfolio management and IT…As retail continues to be reshaped, we are undertaking and embracing significant change at a rapid pace while embedding best practices for continuous improvement, all while running our day-to-day business.
This is a long game, he admits, and one with which investors are showing signs of running out of patience. Last week, the firm’s share price collapsed by 25% in one day to its lowest point in 18 years, triggered by dismal sales and growth. But as Temares argues:
There are no shortcuts for long-term success.
Looking beyond
So work continues regardless, including on improving personalisation capabilities:
With regard to marketing personalization, the team has launched over 50 tests to date. The agile structure of the team has setup the time it takes to build and run a test and identify its effectiveness. We can now determine and scale the winners more quickly to recognize incremental revenues. The team is continuing to launch tests in the range of about 5 every 2 weeks.
We’re also investing in the technology and people to automate the most impactful tests. We’re on track to deliver on our technology roadmap to support marketing personalization, which includes the implementation of a personalization decision engine and identity management infrastructure and customer data platform among others to leverage our own data as well as other relevant third-party data to develop and scale these tailored and personalized marketing communications.
There’s also a focus on what Temares calls “value optimization”:
In partnership with many functional groups throughout the organization, the value optimization team is working to develop omnichannel pricing and promotion strategies, which will include refinements of dynamic pricing algorithms, and online and in-store pricing philosophies and messaging.
We’re utilizing new price optimization software tools that are enabling us to among other things, deploying markdown strategies at a much more focused and local levels than we were able to do before. In addition, based on preliminary results, we expect the implementation of markdown optimization software and processes to accelerate sell-through and profitability of our ever-changing fashion and seasonal assortments. We’re also in the process of replacing our current pricing execution platform with an internally developed system, designed to give a greater flexibility to build and execute new pricing strategies more quickly and efficiently.
Our goal is to accelerate the speed of cost and price changes for our buyers and store associates. And this new tool should significantly reduce the time a buyer spends, implementing price changes as we continue to work to free-up our buyers’ time to focus more on core merchandising activities including assortment strategy in-store and online and developing meaningfully differentiated products within our assortment.
From a customer-facing perspective:
We’ve been introducing and communicating our new Price Match Promise, which clearly explains our commitment to our customers to give them the best price even when our own prices differ online versus in-store. Also later this year, we’ll be experimenting with the use of electronic shop labels in a few Bed Bath & Beyond stores.
As for those stores, the roll out of so-called next generation outlets continues, with a target of having 40 open by early 2019. Beyond that, Temares says that a further 125 stores have been identified as having the potential for upgrades:
There’s a lot of work to do. These stores are our working lab and we embrace that there are many things that are not right. We will learn from them and evolve quickly. Still, with all of the things not right and with little marketing, we’re seeing favorable trends in these stores. For the next gen stores that have been open for at least 4 weeks, sales and transactions year-to-date through the end of the second quarter increased approximately 4% and 3% respectively compared to the same period last year while our other brick-and-mortar stores across the chain are trending down in these metrics in the mid-single-digit percentage range.
The rest of this year will see the firm deliver :”an unusually large number of foundational technology systems, says Chief Administrative Officer Sue Lattmann:
Earlier this year, we completed the upgrade of our enterprise order management system, which improves the order allocations to our stores and warehouses to increase speed of delivery to our customers and lowers costs.
During the second quarter, we have successfully completed the rollout of our new point-of-sale system to all of the Bed Bath & Beyond, buybuy BABY and Harmon stores. The new POS will be deployed to the remaining concepts in 2019. This new system which has associate-friendly touchscreen monitors will create a new foundation, allowing us to advance our future promotional activity, including the ability to collect customer email addresses at the point-of-sale and promote our co-branded credit cards.
In addition, we completed the rollout of a human capital management system in the second quarter, which will allow us to be more efficient in on-boarding, managing and training our associates and for our stores to be more productive. This new system will allow us to automate work that was previously done manually. We can now access online job applications, conduct video training and leverage more robust labor analytics.
Looking further ahead:
We are also in the process of testing our improved customer-facing websites for Bed Bath & Beyond, and buybuy BABY, which will be fully deployed in the second half of this year. This state-of-the-art architecture will enable us to deliver a faster and more intuitive digital experience to our customers…we are on track to deliver on the technology roadmap to support our marketing personalization initiatives. Furthermore, we will be able to cost-effectively support most of these capabilities going forward, using our dedicated offshore technology office in India that we opened earlier this year. We are looking forward to leveraging these systems and capabilities to improve our profitability in 2020 and beyond.
My take
All the right buzzwords are here, but there’s a sense that they’re being articulated (a) too late and (b) too slowly. The brutal reaction from Wall Street doesn’t bode well for Temares and his team being given the time needed for the long-term success he mentions.