Madalyn Dunn
Operations Management 357
February 14th, 2014
Bed, Bath & Beyond Inc. Analysis
1
Table of Contents
Bed Bath & Beyond Analysis
Introduction
Porter’s Five Forces
SWOT Analysis
Porter’s Generic Competitive Strategies
Conclusion
References
3
3
5
9
13
14
16
2
Bed Bath & Beyond Analysis
Introduction
When it comes to buying, consumers are looking for quality goods, low prices,
and good customer service. If this consumer is in the market for home goods and
accessories, Bed Bath & Beyond is the place to go. Bed Bath & Beyond was founded in
1971, originally named Bed ‘n Bath, by Warren Eisenberg and Leonard Feinstein. By
1985, there were seventeen operating Bed ‘n Bath stores in the New York metropolitan
area and California. In attempt to surge ahead of other up-and-coming stores in the
industry, Bed ’n Bath opened its first superstore, with much more than just linens and
bath supplies. With the opening of the superstore and in order to properly represent the
size increase of its retail store, Eisenberg and Feinstein changed the name to Bed Bath &
Beyond in 1987. With this expansion, Bed Bath & Beyond became known as a ‘category
killer,’ beating their competition by offering seemingly every possible color, style, and
size of home furnishings in addition to the traditional linens and bath products at
everyday low prices. By 1991, Bed Bath & Beyond had opened an additional eight
superstores around the United States; sales reached $134 million and the number of stores
increased from 24 to 38, with stores in 11 states. With the immense amount of company
growth in the 20 years Bed Bath & Beyond had been opened, Eisenberg and Feinstein
decided to go public on the NASDAQ exchange in 1992, trading at $17 per share
(History of Bed Bath & Beyond).
Through the 2000’s, Bed Bath & Beyond started operating five other stores under
the names of Harmon, Christmas Tree Shops, buybuy BABY, Cost Plus (World Market)
and Linen Holdings. They have also four operating stores in Mexico and an online
wedding invitation venture named Bed Bath & Beyond Invitations. Bed Bath & Beyond
is a leading company in the home furnishing stores industry with over 57,000 full time
employees. Throughout the 2000’s, Bed Bath & Beyond’s stock prices have ranged from
$30-80 a share. They are now selling stock for about $65 a share, are a liquid company
and are facing no debt. Revenues have increased over the past couple of years and these
increases are estimated to continue. Bed Bath & Beyond is the leading company in the
industry with a market capital of $13.5 billion. Below, I have provided a couple charts
displaying Bed Bath & Beyond annual revenues and revenue estimates.
3
Source: Bloomberg Businessweek
Source: Y Charts
Bed Bath & Beyond emphasizes meeting customer needs using different strategies as you
can see below in their mission statement.
Mission Statement:
“The Company’s objective is to be a customer’s first choice for products and services in
the categories offered, in the markets in which the Company operates. The Company’s
strategy is to achieve this objective through excellent customer service, an extensive
breadth and depth of assortment, everyday low prices, and introduction of new
merchandising offerings, supported by the continuous development and improvement of
our infrastructure.” Source: Bed Bath & Beyond
I picked Bed Bath & Beyond because of the wide variety of products they offer to
consumers and their impressive success since the beginning. I have shopped there many
times and when I am looking for home furnishings, Bed Bath & Beyond is often the first
place I go. I think they have a strong competitive advantage over competitors and do a
good job at staying up to date on consumer behaviors and marketing trends. I like Bed
Bath & Beyond because they are smaller than large discount stores and more exclusive to
4
the products I am looking for. I believe their mission statement serves them well because
they have always provided me with good customer service and usually have everything I
am looking for when it comes to home furnishing. Home furnishing stores will always be
around and I hope that Bed Bath & Beyond can continue the success that it has had over
the past 43 years.
Porter’s Five Forces
Industry Rivalry
Although Bed Bath & Beyond has been very successful over its lifetime,
competing in the retail industry is not always easy. Macy’s, Wal-Mart and Target are
among the top competitors. These competitors offer many home furnishing products but
also other products as well. Because of product line differences, many analysts would
consider these stores to be in the ‘discount, variety stores’ industry and Bed Bath &
Beyond to be in the ‘home furnishing’ industry (O’Reilly). Even with the slight industry
difference, according to different finance sites (Yahoo! Finance, CNN Money), these are
the top direct competitors of Bed Bath & Beyond. Macy’s is a well-known department
store, offering home furnishings but also offering an array of other products such as
clothing, makeup, jewelry and much more. Target, similar to Macy’s, offers a large array
of products, including food. The competitive advantage that Bed Bath & Beyond has over
these two stores is lower prices. Wal-Mart, on the other hand, is also known for low
prices. Wal-Mart is the leading competitor for Bed Bath & Beyond because they also
offer everyday low prices and many home furnishing options. What gives Bed Bath &
Beyond a competitive edge is their primary focus on home furnishing supplies, while
Wal-Mart is known for having many other things (O’Reilly). Bed Bath & Beyond is the
preferred home furnishing store by consumers because they have a more specialized
product variety. Because of the wide array of products that these three competitors offer,
they do have a higher overall net income. Bed Bath & Beyond’s returns though, in
reference to the size of the corporation compared to Wal-Mart or Target, are outstanding.
Outside of these main competitors, the most closely industry-related company to Bed
Bath & Beyond is Pier 1 Imports (CNBC). Pier 1 Imports is a much smaller corporation
than Bed Bath & Beyond but does offer a very similar product line. I would consider Pier
1 to be a direct competitor, but because Bed Bath & Beyond is a bigger company offering
a more preferable pricing strategy, they have an advantage over Pier 1. An upcoming
threat to not only Bed Bath & Beyond, but to all of their competitors, is the rise of online
shopping. Amazon and E-Bay are on the rise, as they allow convenient shopping, low
prices, and fast delivery options. With that, Bed Bath & Beyond has to increase its online
image by offering online shopping, coupons, email reminders and benefits to shopping
online at their store (such as unique online coupons and sales available only online)
(CNBC). Below, I have included a direct competitor comparison showing the numbers of
various things explained above (competitors having higher income and Bed Bath &
Beyond being a smaller company but still being able to compete) from Yahoo! Finance.
5
Source: Yahoo! Finance
Power Of Suppliers
Bed Bath & Beyond has a very diverse supplier base. While it was very difficult
to find actual supplier numbers, I did find a lot of information about where majority of
their products are coming from. Most Bed Bath & Beyond products are imported from
countries such as Japan, India, Pakistan, Australia, Bangladesh, Canada, Egypt and
majority coming from China (mainland). Many generic products such as bath towels,
tablecloths and sheets are coming from China, while products such as bamboo are
coming from Pakistan. With over 2,000 manufacturers of these products, Bed Bath &
Beyond has alternative supplier options and does not face a huge risk of running out of
suppliers. Even if a supplier decides to stop selling to Bed Bath & Beyond, the company
would not have too much trouble finding another supplier because the products are not
unique enough that no one else creates the product. What is also good for Bed Bath &
Beyond is that these suppliers provide products for much cheaper than the products
would be if they were purchased in the United States. Although most products are from
other countries, there are many brands that sell at Bed Bath & Beyond that are U.S.
brands, such as Cuisinart, Keurig or Mr. Coffee. Even though many of these Americanowned brand products are still made overseas, American-owned brands do have more
bargaining power. Since these brands already have name recognition by the U.S.
consumer base, Bed Bath & Beyond is going to want these products in their stores. These
brands then have the upper hand and can charge higher prices to Bed Bath & Beyond.
Other suppliers, such as suppliers from overseas, will be more willing to sell for any price
because they just want to get their product in a well-known retailer outlet. Bed Bath &
6
Beyond could integrate forward by making and patenting their own products in attempt to
provide them with more power over supplies but have not yet done so.
Power Of Buyers
In any company, buyers have a lot of power and the company must pay attention
to changing trends and insights in order to keep buyers happy. Bed Bath & Beyond has
stores all over the nation and a dispersed target market. Buyers are not usually buying in
bulk when they come to Bed Bath & Beyond and different buyers are usually looking for
different things. Buyer concentration depends on the area and Bed Bath & Beyond must
collect consumer insights in different areas because different regions may need different
supplies (seasonal). Bed Bath & Beyond focuses on everyday low prices so even if
consumers are price sensitive, they are not turned away by the prices. If anything, Bed
Bath & Beyond is offering incentives to price sensitive consumers because they offer
never-expiring coupons. Buyers have power over Bed Bath & Beyond when it comes
repeat and continual purchases. Once consumers have already bought the main product,
such as a coffee pot, they have to find ways to get these customers back in the store. They
can solve this problem by keeping smaller accessories close to the front of the store and if
sales drop, lower prices to drive sales back up. They have to be very careful when it
comes to pricing because many of the generic products offered can usually be purchased
elsewhere. Buyer’s will always obtain some degree of power and every store will always
be at risk of losing customers to competitors, but I think Bed Bath & Beyond does a good
job of maintaining it’s customer base.
Threat of Substitutes
As I have previously discussed, Bed Bath & Beyond has a few different direct
competitors. Wal-Mart, Target and Macy’s are all competitors of Bed Bath & Beyond,
but unlike Bed Bath & Beyond, provide much more than just home furnishings and
accessories. These stores cause a threat to Bed Bath & Beyond because when consumers
are shopping, they can more conveniently shop for their home goods and other goods
(food, clothing, etc.) at the same time. Wal-Mart is known for low prices so often people
will check at Wal-Mart for their needs while they are also shopping for other things.
What sets Bed Bath & Beyond apart from its peers is the sheer volume of options
available to customers. These include a larger selection of brands, colors, styles, and
textures to match all tastes (Bed Bath & Beyond). Because Bed Bath & Beyond is known
as a store for home furnishings, consumers that are looking for something specific or for
ideas to spruce up their home are more likely to shop at Bed Bath & Beyond. Other stores
specifically in the home furnishing industry, such as Pier 1 or IKEA (privately-traded),
may stand as more of a threat to Bed Bath & Beyond because they also provide the large
selection of various products and home-styling ideas. Similar to Bed Bath & Beyond,
these stores provide full visuals of different rooms and display different products that go
together so they could easily stand as a substitute. On the other hand, there are less of
these stores in the nation and therefore not as convenient for consumers to travel too.
7
Another plus for Bed Bath & Beyond is that these two stores are known to be more
expensive.
Threat of New Entrants
The home furnishing industry is an industry that can be profitable anywhere.
Location is not an issue and access to distribution channels is relatively easy. Many of the
products offered in this industry are also offered in typical retail stores and many are not
unique enough to stand in one industry alone. Because of this, the risk of new entrants is
high. It would not be hard for consumers to switch from Bed Bath & Beyond to another
company if the prices were lower or similar. As it has been explained previously, there
are other companies that carry the same or very similar products. There is a lot of
competition for Bed Bath & Beyond within and outside of the industry and consumers
could easily shop other places to find the same products. Inversely, the threats to entry
may be lowered because Bed Bath & Beyond already has the credibility and is known for
their prices and variety. Another factor that may lower the threat is economies of scale.
Because they are purchasing most of their products from manufacturers in bulk, they are
able to get the products for cheaper, and sell them at low prices while still making a
profit. Inventory costs are low because the company has no central warehouses so goods
are delivered directly to stores, where they either enter on-site inventory areas or go
directly to the floor. Also, the rise of technology and e-commerce has helped Bed Bath &
Beyond prosper when consumers do not have the store in their region. Externally, Bed
Bath & Beyond has expanded the industry by carrying five other stores under their
management, offering a larger array of product lines while still increasing their own
profits. They have also differentiated themselves from normal retail stores with their
selective array of products and distribution of stores all over the nation.
SWOT Analysis
Strengths
Bed Bath & Beyond has many core strengths that have allowed them to thrive in
the industry. First, they have stores located all over the nation, which allows them to have
a broad consumer base and increasing name recognition. As mentioned, they also have
low inventory costs because they have on-site inventory areas and do not spend extra
money on central warehouses. All of Bed Bath & Beyond stores are largely designed so
they can hold a large array of products and also have home furnishing design setups and
“example products” on display for customers to see. As a matter of fact, Bed Bath &
Beyond puts much emphasis into their merchandise layout. Related product lines are
grouped together, giving the impression that the store was 'comprised of several
individual specialty stores for different product lines,' according to company literature
(Bed Bath & Beyond). To encourage impulse buying, seasonal products and other
impulse items are arranged up front and further back, products are grouped on enormous
vertical displays that reach to the ceiling. These arrangements are designed to make it
easier for customers to locate products and also to reinforce the perception that Bed Bath
8
& Beyond offers an enormous assortment of goods. This large and diversified product
selection is another strength. Bed Bath & Beyond has acquired five subsidiaries under its
name, which have added further value and distinction to the company's large array of
home goods products. Customers go into Bed Bath & Beyond with a purpose to buy
home goods and do not have to fight the traffic or confusion of larger department stores
that offer much more than what the customer is looking for (O’Reilly).
Management is strength of Bed Bath & Beyond. From the beginning, the
company has taken a much decentralized approach to management. Store managers are
given autonomy to cut prices to meet local competition or to try new marketing plans
with the consent of the district manager. Within each store, new departments can be
created and existing departments can be expanded or reduced as needed to respond to
marketing trends (History of Bed Bath & Beyond). This has allowed each Bed Bath &
Beyond store to thrive in their own way and also increased employee satisfaction. Also,
management is encouraged to work the floor alongside the sales personnel, arranging
merchandise and helping shoppers find and carry products throughout the store. This is
because Bed Bath & Beyond wants to ensure that customers are receiving the best
customer service possible. Associates in all of its stores take part in monthly training
classes to educate employees on the newest products and any details that come with it, so
that customers will receive the information they need to make an informed purchase
every time. Bed Bath & Beyond always strives to treat all customers with upmost respect
in hope that customers will share their positive experience with others and get the Bed
Bath & Beyond name out there. Fortunately for Bed Bath & Beyond, this strategy works
and they are now well known, thus do not need to spend as much on advertising and
therefore can spend more on obtaining quality products.
Another main strength of Bed Bath & Beyond is their pricing strategy. Bed Bath
& Beyond focuses on providing quality products for low prices without the hassle of
having to search all over, as you would at a store such as Wal-Mart. It has been argued
that Amazon.com is giving Bed Bath & Beyond a run for the best prices. To compete
with this, Bed Bath & Beyond offers 20% coupons (that never expire) and it has been
shown that with these coupons, Bed Bath & Beyond items will actually cost about 15%
less than they would on Amazon. Bed Bath & Beyond monitors market prices on all of its
items to make small adjustments and uses its 20% coupons to its advantage.
9
Bed Bath & Beyond coupons may have an expiration date on them, but any frequent customer would know,
the coupons actually never expire! Source: Bed Bath & Beyond
Bed Bath & Beyond is constantly striving to improve their business and beat out
competitors by providing a better customer experience, improving product lines and
holding reoccurring employee training. As you can see from the comparison of returns
below, Bed Bath & Beyond is doing a great job of it, too.
Source: The Motely Fool
Weaknesses
Despite how well Bed Bath & Beyond has done in recent years, there are some
weaknesses that could damage Bed Bath & Beyond’s success. Even though sales
revenues are high, gross margins may be diminishing. This decline is mostly attributable
to more consumers taking advantage of Bed Bath & Beyond's 20% off on one item
coupons (Carter). These coupons can also be used at any one of its stores, such as buybuy
BABY, and not solely at a Bed Bath & Beyond. Although these coupons were also
viewed as a strength, the overuse of them is viewed as a weakness. Another weakness is
the lack of e-commerce sales. With complete room setups and product displays, many
consumers have used Bed Bath & Beyond as a “showroom” to view products before they
buy them elsewhere. With the rise of technology, this is seen as a huge weakness for Bed
10
Bath & Beyond. Bed Bath & Beyond only has stores in North America and Mexico,
which stands as another weakness for the company. Top competitors in the industry, such
as Wal-Mart, have stores in countries all over the world. With so many subsidiaries under
their name, they should consider expanding their production geographically.
Opportunities
Bed Bath & Beyond started opening stores in Canada in 2007and now has 28
across the country. With this expansion, they have continued to diversify their consumer
base, generate more profit, and test the expansion before taking the risk of expanding into
another continent (leading to higher operating costs). With the increase of subsidiaries,
Bed Bath & Beyond has been able to expand their product line. Buybuy BABY has
opened up many opportunities for Bed Bath & Beyond and created a new target market.
World Market also appeals to a different target market, with not only home accessories
but a larger selection of art, fancier products, fine foods and a plethora of wine. Bed Bath
& Beyond is working on improving its e-commerce business by devoting much of its
resources in promoting its technology services to create an exciting shopping experience
for its customers. Its investments in social media outlets and its e-commerce business will
also allow the company to better compete with Amazon.com for sales (O’Reilly). This is
a huge opportunity for Bed Bath & Beyond because of the continuing increase of online
shopping outlets. It is also helping customers who may not have a store nearby to still
have access to their products.
Bed Bath & Beyond is also taking on social and environmental initiatives. They
give back to various charities in the United States, Canada and Puerto Rico and have also
donated merchandise to provide relief and assistance to many people in difficult
situations such as victims of natural disasters, housing needs for families in crisis and
low-income situations and support for mentally and physically disabled individuals. In
2008, Bed Bath & Beyond established a relationship with the National Fish & Wildlife
Foundation and began to sell reusable shopping bags to preserve coastal and marine
habitats (Bed Bath & Beyond). These actions are bettering the reputation of company
which can strengthen consumer connections and appeal to Bed Bath & Beyond.
Threats
If history repeats itself, Bed Bath & Beyond is always at risk of losing sales
because of the possibility for the housing market to crash. If less people are buying
houses, sales at Bed Bath & Beyond may decrease because people do not need to
continually purchase home accessories once they already have the essentials. Bed Bath &
Beyond also has intense competition and must continually be up to date on their
marketing strategies because of it. Pier 1 and Williams-Sonoma are two strict competitors
in the industry, outside of large department stores such as Wal-Mart, Target and Macy’s.
Both of these stores offer similar products and some would argue that they carry more
original products, but are also more expensive (Carter). If Bed Bath & Beyond does not
keep up with competitor’s product lines and become too generic, they may risk losing
11
their credibility and high profits. Lastly, the rise of wages in the United States may be a
threat for Bed Bath & Beyond because consumers will no longer be concerned with a low
pricing strategy. Barrack Obama has proposed raising minimum wage and in the past 12
months, hourly wages have raised 1.9 percent (Zhang). Unemployment rates are also
rising. If consumers are not worried about pricing, Bed Bath & Beyond may lose its
competitive advantage over other home-good stores.
Porter’s Generic Competitive Strategy
Bed Bath & Beyond strives to be a first choice company and achieves this
objective by focusing on three things – product variety, pricing and customer shopping
experience. They continuously strive to improve the corporation for the future, whether
that means improving infrastructure or keeping up with current insights and local
marketing trends. Bed Bath & Beyond’s competitive strategy is to capture consumer
attention by putting a strong focus on customer service and providing customers with a
personalized shopping experience. Bed Bath & Beyond’s target market is the general
public and with strong customer service, they can gain loyalty over all stores. They have
been able to differentiate themselves from competitors by providing consumers with
reliable service and many on site sales people to enhance the shopping experience. This
consumer-focused appeal has allowed Bed Bath & Beyond to spend less on advertising
and rely on consumers to share their positive experience with others. Overall, Bed Bath &
Beyond’s strategy has been very successful in obtaining a strong consumer base and
generating solid profit. They also succeed in cost leadership because they focus on low
prices and appeal to price-sensitive customers. They are committed to reaching the 4 P
marketing strategies. They meet the product strategy with their extensive assortment of
home-goods, the pricing strategy with their everyday low prices, the place strategy by
providing free shipping and the promotion strategy by advertising through many different
mediums. Out of the four, I think they focus the most on pricing and promotion. Other
than the everyday low prices, they focus on promotion through their use of coupons and
sales promotions.
Conclusion
Bed Bath & Beyond has been prospering for almost 50 years and has successfully
been able to maintain stable revenues and a large consumer base. Although they are not
generating as much profit as large department stores, for the size of the corporation, they
are doing very well and setting the bar high for home good stores. I do not see Bed Bath
& Beyond leaving the industry anytime soon as they are not at risk of debt and continue
to have increasing annual revenues. I would invest in Bed Bath & Beyond but I would
only want to buy during certain times of the year. Bed Bath & Beyond’s stock prices
fluctuate over time and I would want to invest during a time with a lower price, such as
October, and wait for the price to rise before I sell, such as in December or January when
they are higher because of the holiday sales. I would enjoy working for Bed Bath &
Beyond. I am intrigued by the decentralized management because it gives every store a
12
unique touch. Having local managers with the power to create their own marketing plans
gives employees a voice in decision making and I think that’s important in any company.
I also really admire the environmental initiatives Bed Bath & Beyond has enforced, as
well as giving back to the community. With the longevity of the company, I do not feel
that the company is at risk of dropping off the market, so that also provides me with job
security. Bed Bath & Beyond is a successful company due to their quality goods,
competitive pricing, good customer service and I hope they continue to prosper in the
industry.
13
References
Bed Bath & Beyond. (2012) Corporate Responsibility Report. Retrieved Febuary 4, 2014
from Bed Bath and Beyond:
http://www.bedbathandbeyond.com/store/static/CorporateResponsibilityReport
Carter, Michael. (2014, January 16). The real bed bugs are Bed Bath & Beyond.
Retrieved February 9, 2014 from The Motely Fool:
http://www.fool.com/investing/general/2014/01/16/the-real-bed-bugs-at-bed-bathbeyond.aspx
CNBC News. (January 14, 2014). Bed Bath & Beyond facing ton of online competition.
Retrieved February 5, 2014 from CNBC:
http://video.cnbc.com/gallery/?video=3000236136&__source=yahoo|headline|quo
te|video|&par=yahoo
History of Bed Bath & Beyond. (2001). International Directory of Company Histories,
Vol. 41. St. James Press. Retrieved February 4, 2014 from FundingUniverse:
http://www.fundinguniverse.com/company-histories/bed-bath-beyond-inc-history/
O’Reilly, Natalie. (2014, January 22). Bed Bath & Beyond is a better business than WalMart. Retrieved February 6, 2014 from The Motely Fool:
http://www.fool.com/investing/general/2014/01/22/bed-bath-beyond-is-a-betterbusiness-than-wal-mart.aspx
O’Reilly, Natalie. (2014, January 23). 3 Reasons Why Bed Bath & Beyond Is Leading
the Way in Home Goods Retail. Retrieved February 5, 2014 from The Motely
Fool: http://www.fool.com/investing/general/2014/01/23/3-reasons-why-bedbath-beyond-is-leading-the-way-i.aspx
Shoulberg, Warren. (n.d.) Bed Bath & Beyond: The best retailer in America? Retrieved
February 8, 2014 from The Robin Report: http://therobinreport.com/bed-bathbeyond-the-best-retailer-in-america/
14
Zhang, Moran. (2014, February 7). US January job report 2014: Unemployment rate
falls, payrolls rise. Retrieved February 10, 2014 from International Business
Times: http://www.ibtimes.com/us-january-jobs-report-2014-unemployment-ratefalls-66-nonfarm-payrolls-rise-113k-1553925
15