Bed Bath & Beyond’s future likely won’t be in stores

When a company files for Chapter 11 bankruptcy, the hope is it remerges like a phoenix from the ashes and lives a new life.

For Bed Bath & Beyond, Chapter 11 restructuring will involve, among other things, shedding its stores and new retailers taking over the leases. Once it exits bankruptcy, the company will have to come up with a new strategy, which may be an online-only or e-commerce-led approach. But the experts Retail Brew spoke with said that the company will have to learn from its previous mistakes for a revival like this to work.

“Bed Bath & Beyond’s product set is in direct competition with very established online retail/delivery groups,” Justin Grochoski, solution engineering manager for retail and CPG at Celonis, told Retail Brew.

“This sort of round trip channel where you're selling online, but people are returning and refunding ‘in store,’  it's a pretty common theme. I think Bed Bath & Beyond can get that right by having some sort of physical presence and maintaining some sort of high-touch element with our customers, they can maybe survive.”

First, everything must go: Part of the bankruptcy process will involve Bed Bath & Beyond potentially shedding its nearly 500 stores, which include Buy Baby locations. Toronto-based retailer Canadian Tire already plans to acquire 10 of the leases for $1.6 million.

There’s also an opportunity for off-price, discount retailers and pharmacies to snatch them up, Deborah Weinswig, CEO of Coresight Research, told CNBC.

• And the appetite may be there, considering last year saw store openings outpace closures for the first time since 2016, according to Coresight Research cited by CNBC.
• Weinswig added that Bed Bath & Beyond’s locations are more move-in ready since they were fairly well maintained.

Let’s get digital: A pivot to online-only in the aftermath of a bankruptcy is common for retailers. In 2021, Lord & Taylor came back as a digital-only platform and now has leaned into advertising content like shoppable videos.

• Another home goods retailer, Pier 1, reopened stores last year for a liquidation sale after filing for bankruptcy in 2020 and is now an online-only operation.
• Grochoski believes the company will need an e-commerce operation that integrates physical spaces such as pick-up locations and fulfillment centers.

Retail Brew reached out to Bed Bath & Beyond for comment and has not heard back.

“Online, I think, is a lot easier to operate,” Neil Saunders, managing director at GlobalData, told Retail Brew. “It’s not necessarily the most profitable of channels, but you can sort of scale up and scale down a lot more easily. You don’t have that fixed base of costs that you have with stores, which is why I think we’ve seen a lot of these retailers.”

The big picture: Bed Bath & Beyond’s story should serve as a cautionary tale for retailers to ensure that they’re transforming their businesses at a pace that best serves customers. Their lackluster e-commerce operation couldn’t pick up the slack when in-store inventory started falling, Krish Thyagarajan, president and COO at DataWeave, told Retail Brew in an email.

The company will need to keep that in mind when it comes out on the other side.

“This highlights the point that retailers who don’t invest in ramping up their e-commerce capabilities will always be vulnerable to supply-chain shocks,” Thyagarajan said. “If they can emerge quickly from bankruptcy, brand damage will be minimal. But to succeed they need to be ‘e-commerce first’ with stores as the other side of the coin.”