Bed, Bath & Beyond looks to customer data analytics to reverse digital and offline retail decline

Back in July I despaired that beleagured US retailer Bed, Bath & Beyond was offering up a ‘word salad’ of empty management-speak instead of a desperately-needed coherent omni-channel rescue plan that would restore confidence sadly lacking among angry activist shareholders.

Flash forward three months and sadly all that seems to be on offer is another helping of salad from interim CEO Mary Winston, who declares:

We are pursuing a multi-pronged approach that includes both near-term and long-term strategies to create a noticeably different shopping experience and a differentiated value proposition for our customers.

Well, that’s nice, but in practice the reality of the firm’s plight isn’t concealed by flowery words. For its most recent quarter, Bed, Bath & Beyond pulled off the double. Its real world store sales declined. That’s hardly an unfamiliar story in retail these days of course, but it’s usually countered - in messaging terms at least - by pointing to rising digital sales numbers. Not so at Bed, Bath & Beyond where digital sales slid as well.

Winston owns up to the embarrassment here and as interim CEO she’s able to pass the buck back to the previous management regime under predecessor Steven Temares when she calls the problem “somewhat self-inflicted”. She argues:

We’re still suffering the ramifications of decisions that were made earlier where we were focused on profitability at the expense of sales. So for the online business, we did things like eliminate some of the SKUs (Stock Keeping Units) online because of their level of profitability. We put a minimum order quantity on some of the online sales. We increased our free shipping threshold. Collectively, all of those things have put pressure on that business.

What we’re trying to do about that is we’re reversing many of those decisions. Our top priority now is to focus on sales, and to manage the cost line…and so we are re-investing in our online. We’re investing in improvements in our search and recommendation capabilities on the website. We’re streamlining the checkout process. We’re about to be rolling out our BOPIS, Buy Online, Pickup In Store. So we’re doing a number of things to change the tide and change the direction of that and we’ll start to move that in the right direction.

Tech spend 

Certainly there looks to have been some effort to invest in digital with 50% of CapEx for the first half of this year having been allocated to technology programmes, particularly around digital capabilities and data analytics, the second of which is particularly important, suggests Winston:

Our transformation overall is based on new data-driven insights that we are using to identify opportunities for improving our customer value proposition…Our new customer data platform allows for the faster launch of new personalized experiences while providing greater reach across channels. Our personalization efforts in email have reached more than 85% of our total email subscribers within the past five months, and customers receiving personalized emails are engaging at an average click through rate of between 20% and 40%. Similar to our approach with marketing personalization, we are forming a cross-functional agile team focused on driving customer acquisition and sales within social media channels through rapid cycle testing of new content and targeting approaches.

That supports the expansion of the firm’s loyalty program, she adds:

Increasing enrolment in our BEYOND+ membership program will be a critical focus during this time as well, including special promotional offers to drive increased customer acquisition and engagement. Our BEYOND+ members today shop on average 2x more frequently than our average non-member customers and spend on average 4x as much.

The analytics focus also reaches into logistics and into pricing:

We continue to make strategic pricing decisions to deliver noticeable value to our customers. These strategies include refining our dynamic pricing algorithms, and online and in-store pricing actions to address customer price perceptions. The implementation of markdown optimization software and processes is accelerating sell through, resulting in less aged inventory and optimizing the profitability of our seasonal and fashion assortment. We believe that more effective pricing will drive both top-line growth and profit improvement.

If the marketing works and the price is right, the next challenge is to improve the customer experience, online and offline. Winston says:

Successful transformation will require significant enhancements to both our physical and digital channels to provide our customers a more seamless omni-channel shopping experience.  To start, we will get better at meeting our customers where and how they want to shop and where and how they want to receive their purchases. We continue to invest in our customer-facing digital channels, while material improvements to the search and recommendations functionality of our site and mobile app. We are also systematically working toward removing customer friction throughout the experience by streamlining the checkout process and by adding estimated delivery dates to the product pages for items that we warehouse.

My take

Our goal is to ensure our customers see a meaningful difference this critical Holiday season.

So says Winston and, to be fair, everyone’s entitled to hope that Father Christmas will bring them something nice. I’d like a top-of-the-range sports car. And I suspect I’m as likely to get that as Bed, Bath & Beyond customers are to see any meaningful difference in the short term.

There are a few little reasons to be cheerful - mobile app sales are up 90% year-on-year, but that’s from a negligible base. The “fleet optimization” work - ie store closures - is still underway, but it’s already clear that 60 stores are shuttering this year alone to “create a better balance between our physical and digital presence”.

But the harsh reality is that Bed, Bath & Beyond is in limbo. A new CEO will be coming “shortly” and it will be down to him or her to kickstart the radical omni-channel transformation that’s needed. The Temares stewardship was latterly accused of being a management that was “detached from reality”. Demonstrably dealing with the reality of the firm’s will be the challenge. Whether there’s enough time left to do the necessary remains to be seen.