Q&A: Bed Bath & Beyond is Rebuilding Through Owned Brands
Beginning in March, Bed Bath & Beyond announced it would be debuting six new owned brands over the next six months. Nestwell was the first, followed by Haven this month. Simply Essential launches next month. Going into next year, 10 new store brands will be unveiled. Joe Hartsig, chief marketing officer, talked to Store Brands about the company’s ongoing transformation.
Store Brands: Why did you launch Nestwell first?
Joe Hartsig: I think there are a couple parts to that answer. Mark [Tritton, CEO,] came in a year and a half ago. I came in about a year ago. The company is now undergoing a big turnaround transformation — and one of the things that attracted us to the company is that there’s a high association with consumers to our core categories: bed, bath, kitchen, storage, organization. And bed and bath is in our name. That’s how the company started. When we looked at the categories from more of an analytical and data-driven aspect, we created four big category groupings, and the most important one for us is what we call destination categories. That’s where we have the bed, bath, kitchen, storage and organization.
I think over the years, the company lost relevance and they lost some market share, and to rebuild this authority back with these customers who still, despite all that, have a very big love for our brand, we sought out to kind of focus our efforts around the areas that mattered most and Nestwell represents the first step into that.
SB: The brand launched with innovative digital and in-store marketing, a reflection of your omnichannel strategy. Is this what we can expect from the other brands?
JH: Oh, absolutely. As we were just reflecting on a year ago, we became a digital-only business for three months until we reopened our stores in June or so. We brought on some new team members who had a lot of expertise in digital to overhaul our website, overhaul our mobile platform, and to make them functionally faster, more responsive and more stable, making sure the user experience is much smoother in terms of product, page flows and navigation. We did a lot of work around product, discovery and content to make sure that we’re providing the right level of information.
Part of this is using digital to connect to customers that may not have shopped with us before, too. Let’s be honest, we have a core customer that might have been slightly older, but we want to reach more customer types that we’ve defined in our customer segmentation, who are really connected to digital.
SB: How does the new digital focus compare to what was done previously?
JH: The company had digital, but it wasn’t connected very well to the physical. We’re not all the way done, but clearly this is a great manifestation when we bring our first of many owned brands to market, how we use our new platforms much more seamlessly due to the interconnectivity of this. So we’ve done a lot on mobile in terms of creating that platform to make it easier, more accessible and shoppable, because part of our mission is to make it easy for our customers to feel at home. We know that through some research that it has been hard to shop Bed Bath because it’s too cluttered in the stores, it’s hard to find things. So, a lot of our work and our efforts around remodeling our stores or improving our digital platform is in service of making it easier to shop and make it easier to feel at home.
SB: Talk about the challenge of launching new owned brands at the same time you’re launching a new omnichannel experience.
JH: I would say a lot of time has been spent with the digital teams, engineering teams, technology teams, and our marketing and merchandising teams, overhauling our omni-channel capabilities. Concurrently, because we're a large organization, we have a lot of team members working through category line reviews. But to be honest, they really didn't exist at the company. There was a lot more gut than art and science, so while we didn’t want to lose the art, we definitely injected a lot more science with data on where the market is, who our competitive set is, shifting from just being focused on specialty and department stores to those channels, but also online players, as well as big mass merchants who have a very large share of the home goods market.
That really taught us a lot about different price brackets and the owned brand infusion was developed concurrently so that when we went through the line review processes, we knew that there was real opportunity in some of these places where the brands that we were carrying just didn't matter as much anymore to consumers. They were tired. They were their department store brands that just kind of outlived their excitement lifecycle. We’re resetting the rooms, cleaning up assortments, keeping national brands that are important to us and to our customers, but then infusing these owned brands selectively.
SB: Is the phased launch for the store brands tied to store resets?
JH: That’s exactly right. We’re going to have six consecutive launches that we think all in their own right are complementary. They’re very exciting in terms of the brand that we’ve researched, curated and sweated. We made sure we were carefully considering products to be part of that brand — taking more of a brand-management approach. That’s why we’re spending a lot on marketing to create awareness.
The Haven brand is actually a brand that is very small right now, but we love the name. We did some research and there’s a lot of relevancy for that product line for our bath product. So we rejuvenated it and cleaned it up. It’s spa-inspired towels, furniture, robes, slippers and other things that would accessorize your bathroom. Simply Essential, which is more value based, but good quality, is a broad product line that includes bath and bed products.
SB: Is Simply Essential considered the flagship?
JH: I wouldn’t call it flagship. It’ll probably be our broadest line because it’s going to touch many different categories of essentials across different rooms. The theory was: Okay, we’re moving to a reset calendar as opposed to drip-feeding products and whatever the merchant thought they wanted in the store. We’re going to be more purposeful on how we use store operations and create a room-reset process. So those new brands will flow into those new rooms when they’re ready, when the room set is going to be done.
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SB: How much do the owned brands mean to the transformation?
JH: Means a lot. There’s value to customers in terms of price point, value and quality. But clearly if you look at our assortment in the past, we haven’t really had more of an opening-price-point assortment. Owned brands, taking cost out, being much more direct, can help us get to a price point with a margin structure that’s much more competitive.
Then there’s the shareholder value creation, because certainly the margin profile on these is in some cases dramatically better than buying a product that has a license on it, for example, really taking the costs out so we can pass it along to our customers, but also provide shareholder value. So as we’re overhauling stores or we’re revolutionizing our supply chain or our technology platform, how do we pay and fund our future? This is a critical strategic component to that roadmap.
SB: The owned brands feel like a connective tissue to reach new shoppers and usher in a new store.
JH: You’re spot on. One of the things that we needed to do when we joined back in the spring of last year was to really step back and create a segmentation. We identified five key segments of the home goods market. We’re really good with what we call the “nester,” kind of an older female shopper who’s known us for years. But on the other end of the spectrum, there’s these millennials, these creators and innovators, minimizers that probably haven’t shopped with us, and we haven’t had the ways to connect with them with product and omnichannel capabilities.
It’s also about finding an emotional connection. Nestwell is very much an emotional brand and sustainable. The goods and the quality of the products are sustainable. We think it’s going to resonate very well with a younger shopper and the price points are affordable enough so you can actually go out and afford these with straightforward pricing.
