Bed Bath And Beyond Announces Several Technology Initiatives: Too Late To Be Back In The Game?

In its recent earnings call announcing Q4 2015 results, Bed Bath & Beyond (NASDAQ:BBBY) listed several technological initiatives aimed at serving its customers better in an ever evolving digital world.  The company is augmenting is IT team with additional resources, focusing on better integration of its systems, enhancing its digital web and mobile capabilities and planning multiple software releases in the fiscal year 2016 to provide additional enhancements  to its digital experiences. Bed Bath & Beyond is also leveraging its analytics group to use business intelligence and reporting for gaining insights on customer behavior. We believe that, while these initiatives should lead to improvements in customer experience, the company may not be able to regain its lost market share to e commerce players such as Amazon in the near term. Its investment in digital initiatives comes much later than competitors and it has a huge ground to cover before real results will be tangible.

See our complete analysis for Bed Bath & Beyond

Digital Initiatives Essential To Connect With Young Consumers               

According to Blueport Commerce, furniture and home décor will be one of the top 5 ‘hot’ e-commerce product categories in 2016. With increased focus on graphics, free delivery and friendly return policies, shoppers are increasingly looking to buy home décor products online. Bed Bath & Beyond has seen a positive impact of this uptick and its online sales increased by 25% in Q3 2015.  For Q4 2015, comparable sales from customer facing digital channels grew by more than 25% while comparable sales from stores were relatively flat. The company is now focusing on several digital initiatives such as online appointment schedule for registry, virtual coupon wallet and online vehicles for marketing such as emails and social media display. The company is also making a digital version of its catalog available online.

As Bed Bath & Beyond targets millennials and baby boomers as the likeliest buyers of its products, it will be essential for the company to focus on digital initiatives not only for sales but also for marketing and consumer interactions. The company is looking to map its customer interactions both in-store and via digital channels so as to anticipate customer needs smartly and provide personalized solutions. It also plans to use predictive modelling tools to achieve improved optimization to markdowns, pricing and direct mail campaigns. To improve customer experience the company is planning to launch a new series of curated merchandise collections and allow consumers to conveniently shop the “look”.

While these digital initiatives are aimed at attracting younger consumers, Bed Bath & Beyond will need to move rapidly on these projects to catch up with other players. The company’s strategy of spending excess cash on share buybacks, rather than technology investment, appears to have impacted it negatively. WThe previous quarter saw increases of  just 2.4% in net sales and 1.7% in comparable sales, primarily due to an increase in online sales.  We believe technology investments are essential for the company to increase its market share. The digital initiatives do appear to have come later than warranted.  Whether these will drive revenues for the company in future remains to be seen.

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