Did you know America offers an afterlife? Where countless gods have failed, Chapter 11 bankruptcy offers US companies a chance at resurrection. Bed, Bath & Beyond would be one of its biggest miracles. The seller of bed and bath goods is about to enter the great beyond. Here’s a quick look at the stark reality it faces and three principles I’d use to raise capital and (attempt to) reanimate this fallen mammoth.
Note: this is based on my experience advising clients in similar circumstances, not inside knowledge, which could alter my conclusions.
First, a reality check
There is no market for selling commodity goods inside of buildings. This has been true for small businesses killed by giant chains. It’s now true for the giant chains, themselves. The predator is now the prey.
For most goods, the retail experience is too limited, uninformative, expensive, and cumbersome, compared to ordering online. Even retail’s instant gratification advantage is fading, as Amazon inches closer to same-day delivery for most items.
There’s also no middle. The population is splitting into an upper middle class and lower class. The death of Macy’s, malls, and The Gap is as much about a dwindling middle as it is about an outdated way to sell undifferentiated goods to the masses.
The numbers back that up. The performance of Fidelity’s high-flying retail fund can best be described as Rich Man, Poor Man.
The Three New Rules of Retail
To succeed, retailers must embrace three fundamental truths: passion plays, experiences, and impermanence.
As I argued in The Future Is Belief, we have abandoned traditional faith and channeled our dogmatism into secular pseudo-faiths, many of which are inseparable from commerce. These passions range from yoga to Bitcoin to foodie-ism.
Everyone talks about “experience”. Few do it well. Even fewer truly delight. I describe the Disney version in this excerpt from Econovation. Below, I’ll try to be as prescriptive as I can for BB&B.
Finally, today’s companies are like Instagram Stories: fleeting and impermanent. Unless they have deep, sustainable advantages. Until further notice, every business is now a pop-up. Ones that don’t get this will soon join Bed, Bath in the Great Beyond. This reality mandates constant change, novelty, and experimentation to stave off irrelevance and tedium.
How to Resurrect Bed, Bath & Beyond
From the outside, BB&B has several defining assets: brand recognition, national retail footprint, supply chain, some complex product categories, and likely a decent mailing list. Here’s how I might use these assets to embrace the new rules of retail.
A. Passion Plays
Using sales data, I’d identify the best selling, most complex, and passion-inducing categories — and build multiple smaller specialty locations based on them. There might be a kitchen-only location, focused on foodie passions. Maybe another for decorating, design, furnishings, or automation.
In general, I’d favor selling more complex products that have a learning curve, nuances people want to learn about, or lend themselves to experiences.
My goal would be to have 1/3 to 1/2 of revenue to come from classes, events, memberships, tastings, services, and spectacle. Imagine your favorite YouTube how-to channels live and hands-on. I want everything in the store to be Instagrammable, including the staff.
Scaling and achieving consistency in this kind of experiential business is no easy feat. It requires strong partnerships with manufacturers, new service providers, regional/category adaptations, and a major shift in talent and training. This is not traditional retail. The degree of difficulty is higher. But the days of easy are OVER. Commodities on their own, are DEAD.
I’d create a data-driven R&D group to create complementary products and experiences. For products, I’d borrow from Trader Joe’s and partner with manufacturers to create proprietary original goods, especially consumables. They’d be augmented with some must-have branded goods that can be made experiential.
There’d be a few staples, but most would not be permanent. Keeping things fresh and surprising will keep customers coming back and talking about you online. That’s way cheaper and more convincing than paying for one-way marketing.
There’s no shortage of things to be done, post-restructuring. If you want to read more on this subject, I laid out my philosophy on monetizing assets at any growth stage — even decline, in How To Grow Using Existing Assets here. (You can also sign up there for The McFuture newsletter & podcast.)
Finally, I broke down the strategy for creating proprietary goods in The Trojan Mule Strategy.