Bed Bath just escaped the second threat of bankruptcy. But it won’t survive.
“At its peak in 2017, Bed Bath & Beyond had 1,560 stores with 65,000 employees, bringing in $12.3 billion in revenue. But in the nine months through November 2022, it posted sales of just $4.2 billion, and its headcount dwindled to fewer than 30,000.” said a past CEO.
BedBath was founded in 1971. It filled an important cluster of niches that were formerly many of the niches filled by department stores. It was a smaller version of Macy’s with a greater selection in each category.
The big marketing mistake was sending millions of 20% discount cards to everyone in their marketing areas. That is a terrible marketing mistake. It has the following problems:
- It tells everyone that the prices without the discount cards are too high.
- That ALL the prices are too high.
- That it is only worth shopping at the BedBath stores when the shopper has a recent discount card.
- It made it very hard for the company to have an online store. Would an online store be 20% less all the time? Would it have a 20% discount at checkout?
All national stores need an online outlet. Bed Bath was foreclosed from this vital business option.
Management knew the problem but was trapped in this marketing nightmare.
“Like any form of promotion, it becomes a drug,” a former CEO said. Over the years, attempts to pull back on the mailings or reduce the discount backfired. “Once you’re addicted to it and your customer is addicted to it, it’s a very difficult thing to wean them off of.”
It is impossible to stop mail-out discounts.
Discount mail-outs work for grocery stores because so much inventory is seasonal and the effect is to be a seasonal reminder. Such grocery mailers are also for specific items that are sometimes temporary real loss leaders.
This is a lesson for all businesses. Sales of any type are risky unless done with a specific marketing goal in mind. Even then they are questionable.