Bed Bath & Beyond (BB&B, www.bedbathandbeyond.com), the power retailer of domestics and home furnishings, has annual sales of $7 billion and a net income of $562 million. The firm’s profitability can be explained by its increasing gross profit margins at the same time it decreases selling, general, and administrative (SG&A) expenses as a percent of sales. BB&B is able to increase its gross profit margins due to its excellent atmosphere, wide assortments, and a deep variety within most merchandise lines. Its control over SG&A expenses is partly due to the outsourcing of its distribution centers to a third party.
BB&B has opened hundreds of stores over the last few years, ranging in size from 30,000 to 80,000 square feet. Because it uses a flexible real-estate strategy, BB&B is able to situate in a variety of locations. BB&B is now also being allowed into large shopping centers. In the past, department store anchor tenants blocked BB&B. In 2004, BB&B had about 630 stores with a total of 20.5 million square feet of store space. By the end of 2008, these numbers had expanded to nearly 1,000 stores with 31 million square feet of store space. Its long-term goal is to operate 1,300 stores. In addition, BB&B plans to remodel and expand many existing stores.
In 2003, BB&B purchased Christmas Tree Shops (www.christmastreeshops.com), a chain of stores specializing in giftware and household items. Although the Christmas Tree Shops’ name suggests that it concentrates on Christmas merchandise, the chain is positioned against Pier 1 (www.pier1.com). In March 2007, BB&B acquired buybuyBABY (www.buybuybaby.com), a retailer specializing in infant and toddler merchandise. In December 2007, BB&B opened its first foreign BB&B store in Ontario, Canada. In May 2008, BB&B purchased a 50 percent equity interest in Home & More, a Mexican home goods retailer that operated two stores in Mexico City.
BB&B management (as well as many retail analysts) attributes the chain’s strong sales performance to its superior customer service. BB&B is obsessive about its consumers receiving a consistently high level of customer service. For example, one recent shopper at a suburban Long Island store reported that a sales clerk was highly attentive: When the shopper asked the clerk where she could find a set of dishes listed on a bridal registry, the clerk immediately dropped what she was doing. The clerk then located the dishes and stood by the shopper as she decided whether to purchase the set and even had the dishes brought to a nearby checkout so that the shopper could continue buying at the store. The sales clerk then met the shopper at the checkout to facilitate the transaction.
In 2008, BB&B was tied for second place in an annual study of the top “20 Most Competitive Retailers” in the United States. The study, conducted by Capgemini (www.capgemini.com) and W Ratings Corporation (www.wratings.com), measured the ability of retailers to beat consumer expectations and deliver superior profitability. Each firm’s rankings were based on its profits over the prior five years and the responses from a sample of 6,000 consumers.
1.Explain how Bed Bath & Beyond practices the retailing concept.
2.Evaluate Bed Bath & Beyond’s growth plans.
3.How can Bed Bath & Beyond further increase the overall quality of its customer service?
4.Explain the concept of value from the perspective of a Bed Bath & Beyond customer.