In-depth: Seasoned industry vets build BB&B’s private label approach
It might be safe to say, at this point, that Target’s private label merchandising strategies — including its private label approach — are starting to pay off — at Bed, Bath & Beyond.
Just 13 months after Bed, Bath & Beyond named former Target chief merchant Mark Tritton its CEO, tasking him with rebuilding its sales and image, the results are pretty clear: BB&B is turning it around, helped, in part, by a growing emphasis on its private label merchandising plans.
Target has been a master with its exclusive and own brand lines, including in the home category dating back more than seven years ago with the launch of Threshold. For Bed Bath & Beyond, the retailer unveiled its first private brand — Bee & Willow Home — in March of 2019. With Tritton now at the helm and bringing his Target experience to bear on the home retailer, there is a lot more private brand activity to come — and executives said it would play an integral role in the resurgence of BB&B over the next three years as the company looks to reshape its in-store and online strategies, modernize its supply chain and overhaul its assortment.
Ahead of its inaugural Investor Day on Oct. 28, the company announced that it would be launching 10 owned brands in the next 18 months. The brands will span destination categories with the aim of tripling its owned brand penetration over three years.
“We have made tremendous progress this year to strengthen our financial position, focus our portfolio in core home, baby, beauty and wellness markets, rebuild our executive team and launch a series of omnichannel services to win back customers,” Tritton said as part of the owned brand announcement.
In its second-quarter report, Union, N.J.-based Bed Bath & Beyond reported its first same-store sales growth in four years, registering a 6% increase for the quarter ended Aug. 29. While a whopping 89% increase in digital sales drove the lift, saving a 12% drop inside stores, the retailer reported that it expects to grow physical store sales by building more sourcing and supply chain opportunities around its “pursuit of store brands.”
In this area, Tritton’s reputation precedes him. When he departed Target, CEO Brian Cornell said that Tritton had “re-energized its own brands portfolio,” calling it “one of his most meaningful contributions.” With Bed Bath & Beyond, Tritton isn’t alone, but has brought in retail vets with extensive experience building and growing private brands.
In July, the retailer named Neil Lick its senior vice president of owned brands, bringing aboard 22 years of experience at Williams Sonoma. Similarly, Bed Bath & Beyond named Joe Hartsig — formerly Walgreens’ chief merchant with experience leading private brand operations and digital merchandising strategy — executive vice president, chief merchandising officer and president of Harmon Stores.
Brittain Ladd, an author and consultant who has worked with several mass chain and home retailers, said the chain, with 1,500 stores throughout the U.S. and Canada (about 1,000 BB&B branded stores), will flat out not be a viable retailer without a strategic private label program.
“I believe there should be in-store and online-only private label brands,” he said. “However, what BB&B needs most are strategic partnerships to create additional value. I also believe BB&B should be willing to think big when it comes to the category of ‘Beyond.’”
Ladd said the retailer’s shortcoming before Tritton arrived was a lack of differentiated merchandising. “BB&B needs to launch brands that immediately connect with consumers across different demographics,” he added. “The best example of a retailer that has done a fabulous job in their private label program is Target.”
The Owned Brands Now
Bee & Willow Home, BB&B’s first-ever private label line aims to have the whole house covered with a warm line of accessible home décor, furniture, decorative rugs, art, pillows and accessories. The collection has a large range of items to suit the living room, dining room, bathroom and bedrooms.
The retailer described the style of the products at launch last year as providing new takes on the classic Windsor, barn-style details, emblematic wingback forms and an interpretation of modern farmhouse.
“The inspiration for Bee & Willow Home is a contemporized approach to the idyllic, rustic style of décor. We identified the unique stylistic thread that runs through all farmhouses and cottages from Maine to Key West, the Great Plains to Venice Beach that evokes an honest, restorative and timeless feel,” said Barbara Weston, director of global trend at Bed Bath & Beyond, at launch. “The materials in the collections include an eclectic blend of rustic, distressed and time-loved transitional décor pieces combined with distressed stone, wood and metal. Customers will be able to find quality investment pieces.”
In 165 of its stores, large furniture vignette displays will be set up to showcase the Bee & Willow furniture items. Currently, all stores merchandise the owned brand items in several departments with oversized wall signage and graphics that call out their exclusivity.
Joining Bee & Willow in September 2019, Bed Bath & Beyond launched a second owned brand line called One Kings Lane Open House, an exclusive brand that came with the acquisition of the home décor business of the same name. The line includes refined furniture from large-scale sofas to tables and bookcases. It also has accessories like throw pillows, mirrors, rugs, accent pieces and more. Though Bed Bath & Beyond sold off One Kings Lane in April, the company still sells One Kings Lane Open House as an exclusive brand.
With the 10 forthcoming owned brands, the retailer said it is focusing on value-tier products, as well as products that can create destinations, both in stores and online. At the same time, BB&B is hoping to deliver $200 to $250 million in sourcing benefits over the next three years by reducing suppliers and negotiating with existing vendors.
Ladd said he sees the company competing with the likes of IKEA, Walmart, Wayfair, Williams Sonoma, Target, Amazon and Kohl’s.
The company also has room to grow into other categories. Nicolas Merlen, national sales manager at the chocolate producer Chocmod, based in Fort Lee, N.J., said the retailer could use owned brand candy and gift assortments, ideal for the front of the store. He said the retailer is looking for premium products and that an exclusive gift or candy section could grow impulse buys, “only carrying clean ingredients and a premium packaging execution.”
In his new role leading owned brands, Lick is working to develop the new owned brand portfolio for 2021. During his announcement, the company said it would be looking to expand its store brand products particularly in bed, bath and kitchen products, where it holds its largest market share.
“To rebuild Bed Bath & Beyond’s authority as the leading omnichannel home retailer, we are reimagining how we develop and curate an owned brand assortment,” Hartsig said when Lick joined the company. “Neil has deep experience building brands that people love and will spearhead our new owned brand team to curate and develop a portfolio of truly differentiated brands that deepen our penetration in our core categories and our connection with our loyal customers.”
The Turnaround
When the newest private brands launch in 2021, it is possible that they will be digital-focused. Lick’s appointment comes on the heels of Bed Bath & Beyond announcing a plan to close more than one-fifth of its store footprint — roughly 200 stores — over the next two years as part of its Store Network Optimization Project and digital transformation.
In the Q2 report, BB&B said the planned closures expect to save the company $100 million in annualized savings. The company said it is also going to continue to stress its new curbside pick-up and buy online, pick-up in-store services, and work to further provide a more personalized shopping experience.
Ethan Chernofsky, vice president of marketing, Placer.ai, looked closely at traffic patterns at the retailer and said it clearly is in the midst of a strong recovery. “While visits were down 83.9% in May and 33% in June year over year, they had moved within 19% of 2019 levels by September,” he said. “This impressive performance is predicated on a number of factors including the wider surge the home goods sector is seeing, and the continued impact of a strategic reorientation that the brand has been undergoing since the announcement of new leadership.”
Chernofsky said the early stages of the pandemic were not kind to the retailer, which had to close stores and saw visits bottom out in April, but its recent performance is hinting at the potential for a very strong end to the year. “Several key competitors, like Pier 1, are in the midst of closing stores leaving vacuums that Bed Bath & Beyond is ideally positioned to fill,” he said. “Even more, the home goods sector looks to be one of the most exciting in the coming holiday period.”
Customers seem to be happy with where Bed Bath & Beyond is heading, too, including its early owned brands. According to the American Customer Satisfaction Index, which has been measuring customer satisfaction on a scale from zero to 100 for more than 25 years, the retailer sat comfortably at 80. David VanAmburg, managing director at ACSI, said the retailer gained a point despite the recent store closings.
He said that Bed Bath & Beyond consistently scores well for its layout, variety of products, inventory, website satisfaction, and mobile app quality. As for its owned brand items, he said the products scored higher than the industry average.
“The company was in such bad shape that nothing short of a transformation by CEO Mark Tritton would suffice,” Ladd said. “Some people say BB&B is in a difficult position, but I believe the company has been reborn and the executive team should feel energized.”
Chernofsky echoes the momentum. “The brand was not entering into 2020 in a strong position, several competitors are rising and even though the company is recovering well, visits are still down significantly year over year,” he said. “Yet, the company’s new leadership team generated excitement from the idea that it could apply ‘Target-style’ lessons to the home goods giant. And the fact that the latter strategy is so well aligned with the brand’s strengths is already a huge testament to their future potential.”