One hundred percent more vacuum cleaners and 400% more breadmakers than this time last year as well as the coffeemaker equivalent of 10 million cups of coffee - some COVID-19 stats from Bed, Bath and Beyond CEO Mark Tritton as he reflects on the impact on sales of the current pandemic.
Those are some kind of positives to be taken away at present. The retailer had started March expecting to turn in some better-than-expected numbers last week - sales down 6% year-on-year, but the quarterly loss has been slashed from $254 million last year to $65 million - but the virus and its uncertainties has added to the long list of problems that this beleaguered brand has endured for so long. As Tritton observes:
Life as we knew it before March is a distant memory. We are in the moment now.
That moment is, as is the case across the vast majority of the retail sector, an evolving one that necessitates dealing with unknown territory. Tritton says:
In this moment, we are focused on facilitating and co-ordinating our ongoing response to the current pandemic. There is no historical book for this situation. But we have a remarkable team, robust contingency plan and a very strong balance sheet, allowing us to navigate this unprecedented challenge with confidence. We quickly initiated that contingency plan and created an Essential Response Unit with emergency task force groups to focus on several priority areas. including our people, operations, customers, technology, and our finances. While this situation is like nothing was seen before, we’re adapting as necessary and taking decisive actions to keep our people safe, deliver for our customers and strengthen our liquidity and financial flexibility.
Contagion fears resulted in less in-store shopping by customers - a 41% decline year-on-year, far more than the 16% increase in overall online shopping that occurred over the same period. That said orders taken through the firm’s mobile apps are up over 75% year-on-year, notes Tritton:
While a vast majority of our stores are temporarily closed, our customer facing digital channels continue to service our customers and we are seeing an online demand growth significantly For example, the Bed Bath & Beyond digital business is seeing net sales growth of more than 90% for the month of April to-date further strengthening our omni-channel strategic direction. Demand is being facilitated by our agile digital and marketing teams who are working together, responding to consumer data, creating newness and freshness across our sites, highlighting items customers need to make it easy to feel at home and communicating important information about changes in store hours and closures as well safety measures, so that our customers are clear on how we’re operating and how they can shop with us.
This uptick in online activity has been an enforced learning curve, says Tritton:
We are rapidly evolving to meet the changing needs of our customers. They are relying on us more than ever, deliver essential products directly to their home. All four of our e-commerce fulfillment centers are currently operating. And by the end of [last] week, we will have converted approximately 25% of our Bed Bath &Beyond and buybuy BABY stores in the US and Canada into regional fulfillment centers to use our bath inventory resources to assign orders locally and deliver quickly.
With these conversions, we expanded our fulfillment capacity significantly. The regional fulfillment stores have doubled the capacity of our entire fulfillment network, facilitating approximately 44% of our overall daily orders, with almost 40% of these orders being fulfilled within 50 miles of the customers’ home. It has been an incredible learning curve for us. And we continue to optimize our regional fulfillment capabilities to deliver faster and at lower cost.
Our supply chain is moving quickly to support our digital business in real time, rerouting products, and the chain to distribution centers (DC), and regional fulfillment stores. Our technology team is a 24 hour group to continuously refine the order allocation logic between the fulfillment stores and DCs. Our buying team is rerouting store on orders for the regional fulfillment locations and DCs, while at the same time canceling purchase orders and modified people costs to reduce store inventory levels.
From the consumer-facing side, a major digital road bump has been encountered in the stalling of plans to sell Bed, Bath & Beyond’s PersonalizationMall.com business to 1-800-Flowers for $252 million. Tritton says this is now pending legal action:
1-800 was required to close the transaction on March 30th. They breached this obligation to do so. Accordingly, we filed an action to require them to close and intend to vigorously enforce our rights.
That’s clearly a matter that will be returned to. For now, Bed, Bath & Beyond is trying to keep on top of understanding and anticipating what its customers are likely to want to buy:
Our team are closely monitoring top sellers, and adjusting quickly to get products that our customers need and partnering with our vendors to help keep us in stock and well positioned….This kind of strategic action and innovation has allowed us to quickly implement curbside pickup, which was launched April 1st at buybuy BABY. In the first full week alone, we completed more than 11,000 curbside orders. We're also introducing curbside pickup at Harmon stores later this week….we are rolling out Buy Online Pick Up In Store at our BABY stores. We are quickly learning how our customers want to shop with us and we will continue to evolve the process digitally to create a best-in-class experience.
The BOPIS move is another example of the current crisis accelerating omni-channel transformation work that was sorely lacking. As noted back in January, Tritton arrived in his new role to find that Bed, Bath & Beyond was a retailer in 2020 that hadn’t put such a pick-up service in place! As he previously observed, that seems a long time ago now:
Both BOPIS and curbside pickup will be rolled out throughout Bed Bath & Beyond stores as a new service offering for our customers, when we can safely reopen. These new services will fast track during this period and will significantly enhance our fulfillment accountabilities to meet the growing needs of our customers.
We see online acceleration…not having BOPIS versus the rest of the industry has been Achilles' heel. We were set to launch that in full in May in stores and we've maintained that spend and commitment to be ready when our doors do open. Then I have also added in curbside. And now we've stood up store fulfilment, which was something that we had on our agenda, but we wanted to get through the other piece first. We've accelerated those.
As for other priorities in the ‘new normal’, Tritton says these are taking shape:
We now plan to invest about $250 million focusing on our core business and key projects that support the omni-channel feature of our company in 2020 and beyond, which are more relevant than ever, such as our digital and omni fulfillment capabilities, including BOPIS and curbside pickup, omni inventory management, as well as digital marketing and personalization. At a high level, we are reengineering our supply chain and our vendor relationships as well as further strengthening our own brand strategy.
Necessity is, of course, the mother of invention and in the case of Bed, Bath & Beyond, the necessity imposed by COVID-19 looks to be the mother of long overdue omni-channel invention. As Tritton puts it:
If there is a silver lining, I would say that given the monumental changes we've made to our business over the past four weeks, our ability to act decisively, partner up and move with speed and agility has been greatly enhanced….It’s been incredible to come together as one united virtual team across the company to work together in ways that would have not been possible even thought of in the past. We are leveraging this learning opportunity to be more collaborative and flexible in our focused priorities and then move more quickly, so that we are ready to welcome our customers back when we can safely reopen our stores.
At the start of the year, it looked like the firm was Bed, Bath and beyond hope. The ravages that COVID-19 will inflict across the whole retail sector means that it’s clearly not possible to throw off that cynical re-branding. But it is grimly ironic that it took a pandemic finally to kick-start some urgency in doing the omni-channel upgrades that should have been done years ago!