We reformed the past, overcame extraordinary circumstances of the present, and established a firm foundation for the future.
That’s not a bad list of achievements for any non-essential retailer at the end of a year of operating against a pandemic backdrop, but it’s all the more impressive when it comes from the CEO of Bed, Bath & Beyond, a brand that not that long ago most of us were dismissing as Bed, Bath & Beyond Hope.
But as the Vaccine Economy begins to open up and retailers contemplate the future shape of shopping, Bed, Bath & Beyond has furnished itself with solid omni-channel credentials that bode well for its next steps. Sales from the firm’s digital channels now make up around 40% of total revenue, topping $3 billion in the past year with a digital sales growth rate of 80% year-on-year.
Despite the challenges of COVID, the focus has been restoring the fortunes of what CEO Mark Tritton pitches as an “iconic company”. To that end, a great deal was achieved in 2020, he says:
We accelerated change in our operations to create a more competitive omni-always shopping experience, with the introduction of new services like BOPIS (Buy Online, Pick-up In Store), curbside pick-up, same day delivery, and over 100 meaningful improvements to our digital experience. With this improved omni-channel offering, in 2020 we registered more than one billion visits to our websites, and more than three million downloads of our apps.
The stats keep coming to support the firm’s ‘born again’ digital credentials:
- The online conversion rate has increased by 30%.
- 34% of customers have placed two or more digital orders.
- Mobile now makes up half of all digital sales.
- The Bed, Bath & Beyond app alone was launched 21 million times in the latest quarter.
All of this has seen an uptick in new customer acquisition, which has been its own learning experience, suggests Tritton:
They have been behaving differently, coming to us being a digital-first and then an omni-always customer. The good news is that they are, on average, younger and they are less likely to buy promotionally. Category-wise, we're really seeing them kind of delve into all our categories, our core categories in particular, and some growth in the indoor décor area, which for us is really on the rise, and it's something we haven't doubled down in the past, and we're starting to invest and grow in now, which is terrific.
So, we're seeing younger, we're seeing stickier. And for us, we see this as a great avenue to connect with a wider customer base. Particularly because it's digital focused, we're able to kind of use the data and the storytelling to share a plethora of details around the new Bed Bath & Beyond, including the launch of the new owned brands to a wider constituency….It has actually generated a new avenue of growth for us.
Into the vaccinated future of retail
Looking further ahead into 2021, the re-invention will continue, he adds, promising new and unique digital services to enhance the omni-always experience, more store network optimization - aka closures in many cases - to support the omni-channel shopping experience, modernizing technology and operations and reinventing the supply chain to support its digital-first, omni-always growth strategy.
A lot of that will fall to Chief Operating Officer John Hartmann who emphasizes that while the firm is still on target to close a further 200 stores in the coming fiscal year, bricks-and-mortar still has a very important role to play:
In the fourth quarter, our stores fulfilled 41% of total digital sales, including 17% in BOPIS orders. And as we got closer to the Holidays, BOPIS accounted for 48% of our Bed Bath & Beyond digital demand during Christmas week as we highlighted the ease and convenience of these services and customers chose to avoid third-party shipping constraints and ensure they would have their gifts in time. More than 80% of BOPIS orders were ready within our two-hour promise window.
We've experienced about a six-fold increase in BOPIS penetration since first launching the service in April 2020, driven by nearly 4 million customers. In addition, customer feedback is highly positive and our net promoter score has increased further from 79 to 81.
We've had very similar strong customer adoption and satisfaction with our new same day delivery services. In Q4, over 220,000 same day delivery orders were placed, with 78% of orders coming directly from our websites and 22% through a combination of shipped and Instacart marketplaces, which have access to over 80% of American households.
All of this depends in part on using stores as fulfillment channels, but there are other investments underway to shore up the delivery options for customers, Hartmann adds:
We plan to establish four regional distribution centers to more efficiently and costs effectively manage the flow of merchandise to our stores. We believe this is a key first step in vastly improving our store replenishment approach.
As for the technology infrastructure underpinning Bed, Bath & Beyond’s omni-channel vision, there’s a lot of work still going on behind the scenes, says Hartmann:
Having the right retail technology in place is fundamental to our business transformation. Over the past year, we've been laying the foundation for this change, including our expanded partnership with Google to leverage their cloud technologies and personalize the shopping experience for our customers, enhanced fulfillment capacity and optimize merchandise planning and demand forecasting.
In February, we announced the selection of Oracle as our Enterprise Resource Planning (ERP) technology provider to replace our legacy suite of technology systems and deliver new data insights and planning capabilities. This ERP deployment is the first key component in our planed $250 million technology investment roadmap over the next three years to deploy industry leading solutions that enhance the experience for our customers and drive efficiencies across the enterprise.
Last month saw another technology partnership announced, this one relating to modernizing inventory management systems, with Vellum Solutions selected to deliver automated forecasting, replenishment and allocation planning in order to improve inventory productivity and the ability to respond customer demand.
It’s all part of the wider overhaul of the retailer with a set of clear objectives, Hartmann says:
Our technology transformation effort is expressly focused on building proficiencies to reconstruct and modernize, stabilize, and optimize, invest in and construct and operationalize. This technology transformation is further enabling our business transformation and the building blocks for all of our fulfillment, forecasting, inventory management, and sourcing proficiencies.
And that wider transformation work will continue at pace in the Vaccine Economy, concludes CEO Tritton:
With COVID headwind expected to subside, and having our full omni channel suite of options available to us this year, we’ll be able to truly compete fairly and openly with our peers unlike during 2020…In 2021, we'll continue to make bold pivots to re-construct, renovate, and restore our company and deliver on what we said we would do.
There are plenty of examples of CEOs in retail pledging to turnaround the fortunes of their benighted brands with an omni-channel overhaul. There are almost as many who then fail to do any such thing. Against that backdrop - and with COVID adding to the complications - what’s been achieved at Bed, Bath & Beyond over the past 18 months is remarkable. The challenge now, with the foundations in place, is to keep up the pace.