How Focusing On Instore Experience And Omni Channel Retailing Could Be Key For Bed Bath & Beyond?

A weakening retail market, the slow growth rate of comparable store sales, and the after-effects of the West Coast port crisis have all been a concern for Bed Bath & Beyond (NASDAQ:BBBY)  investors. The company is now focusing on the enhancement of its e-commerce capabilities, the integration of its online and in-store channels, and improvement of  customer services, all to a better customers’ in-store experience.  We believe these will be the key drivers of growth for the company in future. Bed Bath & Beyond also remains focused on renovating, relocating and expanding stores based on customer preferences, which should attract new customers and retain existing ones in future.

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Omni Channel Offers “Best Of Both Worlds”

Several retail players are focusing on integrating the online channel with physical store experience and this appears to be driving more revenues.  According to Walmart, an average store-only customer spends approximately $1,400 a year at its stores, compared to $200 among online customers.  However, customers who shop through multiple channels spend $ 2,500 a year. This indicates how omni channel retailing can drive revenues for a retailer. For Bed Bath & Beyond, we believe the consumer preference is shifting from in store purchases to store browsing and online purchases. The company is leveraging this trend by strengthening its e-commerce channel with continued investments in technology. It invested heavily in e-commerce by upgrading its site, creating new mobile apps and installing a new data center. To integrate the in-store and online experience the company is offering options that include the ability to buy online and pick up and return in store. They also encourage customers to schedule appointments online, which should attract more customers to the physical stores. While the investments in technology have impacted the margins, these should drive higher sales growth in future. As the company achieves economies of scale in ecommerce, margins should eventually see an improvement.

Enhancement of In Store Experience

While Bed Bath & BeyondBBBY saw negative growth in comparable store sales (sales in stores open for at least an year), we believe this is an indication of shift in consumer preference towards online channels and not a sales slowdown. In its most recent quarter Bed Bath & BeyondBBBY’s comparable sales growth dropped to 0.7% versus 3.4% a year ago, comparable sales growth in the online channel ranged between 25-50% in the previous few quarters.  The company is now focusing on initiatives to attract more customers to its stores to improve product visibility, which can drive additional sales, by enhancing the in store experience. While customers could continue using online channels for the actual transaction, visiting stores to browse products and seek advice from qualified sales associates can provide better product visibility. While the pick from store initiative is aimed towards this, the company is also hiring local store managers to improve provide more region based customer service to enhance customer experience. The company’s coupon strategy and liberal return policy is aimed towards creating loyal customers and new initiatives to create a better in store experience which would integrate the online and in store experience would be key to drive its growth in future.

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