As Bed Bath & Beyond goes through unprecedented gyrations to stay in business a key part of its planned new strategy is to have a drastically reduced footprint in its physical store presence.
Only a few years ago, the home furnishings conglomerate could count upwards of 1,500 stores, counting its sub-brands such as BuyBuy Baby, Cost Plus/World Market and Christmas Tree Shops. Even after selling off the latter two and announcing an earlier round of closings, it still had more than 900 physical locations as recently as a few months ago.
Now, after shutting down its Harmon Beauty unit, closing all of its Canadian operations and at least three more rounds of announced U.S. store closings, BBB says it will circle its wagons around a core count of about 360 locations.
Which begs the question: Can you be a national Big Box retailer serving the entire country with only that many stores?
Consider some of the big specialty chains on the retail landscape. Best Buy, the consumer electronics chain that went through its own epiphany a few years ago and is often considered the retailer most similar to BBB in sector positioning, has about 1,000 U.S. stores. That’s down from as many as 1800 locations a decade ago but still a sizeable number.
Home Goods, the TJX nameplate that many consider Bed Bath’s most direct competitor, had 895 stores at the start of the year on its way to 1,000 according to its parent company. Dick’s Sporting Goods, considered the leading category killer in its space, has just under 800 stores and is in the process of opening more rather than cutting back. Children’s Place has about 1,000 North American locations.
AutoZone has more than 6,000 locations and we won’t even bring in dollar stores which have counts of over 15,000 locations. Even Cost Plus had about 240 locations as of last count.
So, Bed Bath’s projected 360 fleet sure seems sparse compared to other specialty chains in the retail business. Look at it some other ways: it’s about one store for every million Americans. The last time BBB had so few stores was in 2001, more than two decades ago when the country’s overall population was more than 15% smaller.
When these concurrent rounds of store closings are completed, BBB will have just one store in Manhattan, its unofficial flagship on Sixth Avenue in Chelsea. There were five when the year started just six weeks ago. Manhattan’s population is about 1.6 million. Other major urban areas aren’t much different.
And OK, you can make the case that e-commerce is going to cover the shopping space for many of these closed locations and, besides, lots of other big retailers like Williams Sonoma, Macy’s and Gap are closing stores. These are valid points.
But no other national retailer is talking about closing two thirds of their stores and even Tuesday Morning’s seemingly ill-fated attempt to stay in business only involved closing about half its locations. This downsizing as a strategy to return to success and profitability is virtually unprecedented in the history of American retailing. And let’s not forget that of this store total, perhaps as many as a third will be BuyBuy Baby locations, even further reducing Bed Bath’s market penetration.
Today, stores are much more than just a place to physically shop. They are distribution points for e-commerce orders. They are locations where customers can pick-up orders they placed online. They serve as giant billboards, reminding shoppers driving or walking by that they should be stopping in to get a new spatula or set of towels. They are physical points where consumers can see products in person, testing a new vacuum cleaner, feeling high-thread count sheets or seeing if the color of that bowl is really the same as it looked online.
There’s no doubt that America is over-stored and that too many big national chains went on a feeding frenzy over the past few decades that left them with an excess in real estate. But such a drastic diet as BBB is working on – especially as there is little talk about a corresponding investment in its e-commerce operation to make it more attractive and efficient for shoppers – is risky business.
And risk is something Bed Bath & Beyond is in no position to take right now.
WarrensReport 