Did you know that Bed Bath & Beyond sells 37 different types of spatulas? That it stocks trash cans in six different locations in the store? Or that you’re definitely overpaying if you buy something there without using a coupon?
A group of activist investors wants to change that. But it’s warning the company to be careful when it comes to coupons – or Bed Bath & Beyond could end up repeating the infamous costly mistake of a rival retailer.
After years of sticking by its long-standing promotional plans, Bed Bath & Beyond management finally acknowledged a few weeks ago that it intends to cut back on the store’s ubiquitous coupons and tighten up its lenient coupon policy. It’s part of an effort to boost profits at the troubled retailer. But some company investors are complaining – loudly – that management is going about it in entirely the wrong way.
The investors, who together own about 5% of the company, issued a statement saying they were “deeply concerned” about the “risky” plan to cut back on coupons.
Now they’ve followed up that statement with a comprehensive, 168-page presentation detailing what they think really ought to be done to turn things around.
One of their key recommendations is for the company not to be hasty when it comes to cutting back on coupons.
“Coupons are an essential part of the customer experience,” the investors’ plan reads. “(The) company appears to be sacrificing sales by reducing its coupon strategy. We fear they have no understanding of the potential impact this will have on their relationship with their customer. (It) equates to ‘firing your customer’.”
So they’re advocating a go-slow approach in reducing the company’s reliance on coupons, “without affecting the customer experience or repeating the J.C. Penney debacle.”
JCPenney, you may remember, imprudently decided to eliminate coupons altogether several years ago, in favor of an everyday-low-prices approach. Customers balked, sales plummeted, the CEO was fired, and the company quickly reinstated coupons. But the damage was done.
So the Bed Bath & Beyond investors are recommending “no significant changes to couponing” just yet. They say the company could start by not being too lenient with its coupons. Many stores, for example, will offer coupons at the register to any shopper who doesn’t have one, or they’ll ignore expiration dates and accept any coupon that a shopper brings in, no matter how old it might be.
The investors group also says the company needs to figure out how to personalize offers instead of blanketing the world with coupons offering 20% off everything. Bed Bath & Beyond “has been talking about personalization efforts for years and yet it still appears they lack the most basic ability to send targeted email coupons,” the investors’ plan reads.
And a pricing study finds that shoppers who never buy anything at Bed Bath & Beyond without a coupon, are onto something. The investors examined 10,000 items and found that Bed Bath & Beyond prices are an average of 7% higher than Amazon. With a coupon, however, Bed Bath & Beyond’s prices generally win. So haphazardly cutting back on coupons would essentially amount to an across-the-board price increase – turning off Bed Bath & Beyond shoppers who no longer feel they can get a deal there.
Therefore, the investors conclude, “any changes to (the) coupon policy will require extensive testing”.
Coupons, of course, are far from Bed Bath & Beyond’s only challenge. The investors’ presentation says the stores and the company’s website are in desperate need of a refresh. The investors say Bed Bath & Beyond suffers from a “cluttered shopping environment”, “difficult to navigate aisles”, “a lack of unique and innovative products”, and “a merchandise assortment that causes confusion and forces customers to struggle to make decisions”.
Store visits revealed that Bed Bath & Beyond carries frying pans made by 18 different companies, with no easy way for shoppers to determine which is best for them. There are 37 different types of spatulas with an average price of $10, compared to Walmart’s 11 spatulas with an average price of just $4. And Bed Bath & Beyond features “garbage cans galore,” the presentation reads, with different trash baskets scattered throughout the store in six different locations.
Not only is there a risk shoppers will consider Bed Bath & Beyond to be overpriced, then, but they’re likely to find it overwhelming as well. So the group is pushing the retailer to whittle down the number of items it has available for sale, to make the stores both less confusing and less cluttered.
Bed Bath & Beyond issued a response to the presentation, essentially saying “thanks but no thanks” to the suggestions. The company said it “always welcomes investor input”, but that “most of the operational areas targeted for improvement include actions the company is already taking”.
Ultimately, the biggest change that the investors group is advocating, is a change in Bed Bath & Beyond’s leadership. They want the company’s entire board, plus the CEO, to be replaced, in order to “address the long list of issues at Bed Bath which have led to prolonged poor performance and destruction of shareholder value.”
So if you’re worried you may someday find yourself having to buy something from Bed Bath & Beyond without a coupon – don’t panic just yet. This behind-the-scenes battle could help determine whether you end up paying full price for your spatula – if you somehow manage to pick one.
