Bed, Bath & Beyond is going after the nonfoods category. That is not good news for any supermarket chain’s GM/HBC department.
By Seth Mendelson
For those nonfoods buyers who have always paid attention to such worthy competitors as Walmart, Target, Rite-Aid and CVS, here is some news that may make sleeping just a tad more uncomfortable. Bed, Bath & Beyond, the home superstore retailer that may arguably be the best run chain in the country, has not only entered the HBC and key general merchandise categories, it is sending out signals that it plans to be a major player in these markets for the foreseeable future.
Union, N.J.-based Bed, Bath & Beyond has developed a loyal following of shoppers over its nearly 40 years of existence by stressing a unique product assortment, excellent pricing and a discount program that has for years befuddled competitors and encouraged consumers. The chain, which generates nearly $8 billion in annual sales from more than 1,100 stores throughout the country, has helped a number of rivals find their unfortunate way to the retail cemetery, including its main competitor, Linens ‘N Things, which shut down several years ago.
With no one left to challenge it as the leader in the retail home superstore market, the chain has apparently set its eyes on health and beauty care and some key nonfoods areas, including some obvious ones, such as housewares and hardware, and some not so obvious ones like the booming pet care category.
The impetus for this move is clear. The company is going deeper into steady, recession-resistant categories so that it can expand away from traditional home products markets. Realizing that home products could only take it so far, BB&B started to branch out about eight years ago. First, the company purchased Harmon Stores, a deep-discount HBC retailer, in 2002. That was followed by the acquisition of Christmas Tree Shops in 2003 and Buybuy Baby in 2007.
These moves immediately gave BB&B expertise in several specialties areas, including the baby segment, where even a deep recession cannot stop consumer spending. Walking through one of the chain’s larger stores it becomes very clear the impact Harmon’s, in particular, has had on the chain. Health and beauty care products, quite simply, are everywhere, with a huge emphasis placed on the best selling items.
For the same reasons, pet products are also starting to pop up at the chain. In October, the company opened pet care departments in six stores, featuring a stunning, yet concise, display of food, toys, grooming, chemicals, beds and crates in a department that measures no more than 500 square feet. The guess here is that the chain will roll out pet departments to other stores in the near future.
In fact, the only thing stopping a broader expansion is the fact that some BB&B stores are simply not large enough to handle these other segments.
The chain’s strategy appears to be to offer consumers a great mix of merchandise at price points that are competitive with the local supermarket chain or drug store. It is also designed to get shoppers talking about these sections and passing the word that not only is BB&B a great place to shop for home products, but it has a great assortment and great pricing on a number of other segments as well.
Of course, there are lessons to be learned from BB&B’s venture into HBC and GM categories. The most important is that BB&B’s approach to nonfoods should serve as a guiding point for other retailers, particularly supermarket chains. If a home superstore chain can be successful selling razor blades and dog biscuits, there is no reason why a grocery store can’t do the same.
But it is going to take a sound strategy to win this game. BB&B’s top executives have developed one that concentrates on assortment and pricing. Consumers know that when they go to a BB&B store they will be greeted by a unique product mix and pricing that is as good as anywhere, particularly when you throw in one of the company’s ubiquitous 20% off coupons.
Supermarket chains can accomplish the same goals by imitating this strategy where possible and building a relationship between food and nonfoods, with a close eye kept on pricing. Now, sleep tight.
Seth Mendelson can be reached at 646-274-3507, or at firstname.lastname@example.org.