Even the best of strategies can take a hit when something unpredictable happens. This is why business leaders must be able to create and implement prearranged, deliberate strategies while being open to and able to evolve when disruptions happen or when crises alter the brand’s landscape. Having strategic dexterity is an imperative.
In April of 2019, Bed, Bath & Beyond hired a new CEO, Mark Tritton. Mr. Tritton inherited a troubled brand. Not only was store traffic down but there were serious concerns about the current CEO who Mr. Tritton was replacing. Mr. Tritton focused on generating and implementing a brand turnaround plan. His turnaround strategy followed the basics of what to do when faced with a troubled-brand challenge: 1) Stop the bleeding, 2) Focus on the Core and 3) Generate SMART objectives.
A turnaround strategy – as opposed to a growth strategy – is a business approach for a brand that is going in the wrong direction at an accelerating pace. It is a plan of thinking and action that immediately moves to stop a deteriorating situation. It is short-term. It focuses on reinforcing brand strengths. What is working? Why? How can it be improved? What is not working? Why? What do we need to do differently?
The goal of a turnaround plan is to focus on the immediate requirements of the business. For a troubled brand business, an aggressive turnaround plan is not an option. It is an imperative. It is not a long-term plan. It is a short-term plan for business revival. It has specific short-term objectives. It has specific actions designed to achieve those specific objectives. It has a specific timeline.
Stop the Bleeding
All turnaround experts agree that the most immediate “must-do” action in a turnaround is to “Stop the bleeding.” Stop the financial bleeding and stop the bleeding of the customer base. The immediate goals are business survival and brand revival. Stopping the bleeding requires a set of quick, decisive decisions. One of those decisions is to determine the brand’s purpose and promise.
Stopping the bleeding requires the reallocation of precious resources and the reduction of allocations on expenditures that are not consistent with the redefined brand purpose and promise. Refocus resources behind those programs that pay. Restore positive cash flow.
With the development of an aligning relevant differentiating brand purpose and promise, all employees and stakeholders are aimed in the same direction. Alignment is a critical factor. Developing a purpose and promise requires a deep, clear understanding of who is the customer and what are the customer’s needs and problems.
Focus on the Core
The main core business must be protected and cultivated. Keep the brand heart alive and restore it to health. When the brand heart stops, the business dies. The main core business is attracting and maintaining loyal customers. Not every customer is a valuable customer. Not every store is a viable store.
A brand turnaround plan must have a clear, measurable time-dependent objective. Vague visions, vague goals, vague hopes and vague promises will not accomplish what is needed to do to turn around the brand. Vague promises of vague objectives lead to vague strategies with vague commitment to vague outcomes.
Be SMART. Identify:
- Specific purpose and promise
- Measurable objectives
- Ambitious and achievable
- Relevant, clearly defined action plan
The Bed, Bath & Beyond turnaround plan had SMART objectives focused on stopping the bleeding and saving the core. Mr. Tritton unveiled a three-year $250 million turnaround plan with four critical steps: 1) focus on fewer deals, 2) focus on Bed, Bath & Beyond “own” brands, 3) upgrade technology to provide real-time financial, supply chain, merchandising solutions, and 4) focus on remodeling those stores generating 60% of revenues, selling the non-revenue-generating stores. Additionally, Mr. Tritton instituted a share-buyback program. The brand bought back $225 million shares through February 2021. The plan was to repurchase $675 million shares over the course of the three-year turnaround.
Based on a review of reporting, the one missing link in Mr. Tritton’s turnaround plan was articulating the relevant, differentiating brand purpose and promise of the brand. This is part of stopping the bleeding. A purpose and a promise generate alignment so everyone is rowing in the same direction. Galvanizing employees and all stakeholders is critical for success especially in a crisis. A purpose and promise also differentiates in the brand a relevant manner from its competitors.
The Bed, Bath & Beyond turnaround plan was in motion and on track until Covid-19 changed everything. Bed, Bath & Beyond fell behind.
One way to stop the bleeding is to rein in costs. In 2021, Bed, Bath & Beyond decided to stop a lot of the print circulars that generated store traffic. Similar to the switch to everyday low prices instituted at J. C Penney during the tumultuous tenure of ex-Apple store maven, Ron Johnson, Bed, Bath & Beyond stopped coupon-generated and flyer-generated deals. The idea was to become less dependent on dollars-off shopping. Mr. Tritton also wanted price parity with its competitors.
Retracting circulars was a minor disaster. Knowing the customer base could have avoided this kind of crisis. Print circulars and mailers have been mainstays of the brand for decades. Customers missed the circulars; store traffic dropped. When Mr. Tritton’s team recognized that circulars needed to be reinstated, Covid-19 paper supply issues along with labor constraints meant the brand could not print the circulars fast enough.
Although an initial expense, private label brands are money-makers if handled properly. The Wall Street Journal recently pointed out that private label brands, “… are no longer the cheap knock-offs you keep hidden in the back of the cupboard, but quite possibly the tastiest deals on the shelf.” Referring to Whole Foods’ reincarnation of the 365 brand and Target’s innovative private label creations, The Wall Street Journal stated private label brands are “… casting off their bland reputation and transforming themselves from dull to desirable.”
Mr. Tritton comes from Target where own brands are an essential, profitable revenue source. Adding more private label brands became a priority for the Bath & Beyond brand. In addition, Bed, Bath & Beyond created a partnership with Kroger Co. whereby Kroger will sell some of the Bed, Bath & Beyond private label offerings.
Mr. Tritton indicated that the own brand portfolios would consist of products in home décor, laundry, bathroom and kitchen, according to Bloomberg BusinessWeek.
Own brands require manufacturing and supply. Manufacturing and supply have been hard hit by coronavirus.
From the standpoint of both staunching the hemorrhaging of cash and making life easier for customers, new technologies is a winning issue.
According to retailtouchpoints.com, Bed, Bath & Beyond’s technology upgrade program is designed to “… support improvements in merchandising and inventory management, product lifecycle management, retail space planning and optimization, the launch of additional private-label brands and real-time tracking of merchandise fulfillment with the supply chain.” The technology changes are also designed to make shopping easier for customers.
One of the lessons of Covid-19’s supply chain problems is that real-time inventory practices create empty shelves and deficits in other critical items necessary for manufacturing. In its most recent earnings call, Bed, Bath & Beyond admitted that its poor quarterly performance was due to a “… compromised customer experience” when customers could not find what they wanted on its shelves. As Mr. Tritton said, there was demand but limited availability.
Bed, Bath & Beyond stated that the supply chain issues cost the brand $100 million at the November 2021 end of quarter. The December results were equally bad.
Focus on the Core
Keeping core customers happy and loyal is essential in a turnaround. But, not all stores are magnets for customers. Bed, Bath & Beyond had a lot of stores. It turns out, however, that not all of these stores were profitable. The brand has shut, and continues to shut, stores. Bed, Bath & Beyond stated that it would focus on remodeling the stores that generate about 60% of revenue.
In May 2020, according to USA Today, Bed, Bath and Beyond had 955 namesake stores in the US. Closing 200 stores is expected to save the brand anywhere from $250 and $350 million annually.
Upgraded technology has focused on pandemic-fueled customer needs such as e-commerce, curbside services, in-store pick-up and same-day shipping. Of course, if there is limited product availability, these services become moot.
As for the share buyback program, Mr. Tritton said it would end by March 2022, two years ahead of schedule. The brand’s share price has been turbulent. Bed, Bath & Beyond was one of the brands caught up in the Reddit-meme frenzy in 2021. This coincided with a significant round of share buybacks: Bed, Bath & Beyond said that it paid double for its shares during this period. With the buyback program ending, The Wall Street Journal opined that with shares “back to Earth,” the brand can now focus on store shuttering, store remodeling and marketing.
Bed, Bath & Beyond is not the only brand to be hit by supply chain issues. It is just that Bed, Bath & Beyond was fairly frail for several years. And, the executive team may not have been as flexible as necessary for the ravages of the pandemic. Mr. Tritton has said that the turnaround plan changes have been “difficult” to implement with coronavirus still rampant. Some analysts point out that the turnaround troubles at Bed, Bath & Beyond are of its own making.
Bed, Bath & Beyond has a challenging set of competitors. Target, Walmart, Amazon, HomeGoods and its parent T.J. Maxx. This is why Bed Bath & Beyond needs to figure out what will be the relevant differentiating brand promise. Having a relevant differentiating purpose and promise are drivers of any coherent turnaround strategy.
The Bed, Bath & Beyond turnaround plan had most of the elements necessary for success. Being able to alter pieces of the plan to demonstrate dexterity in times of crisis might help. Let’s hope we do not lose another retail icon.