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Jan 09, 2024

Why Bed Bath & Beyond’s private labels were a bust

The now-bankrupt home goods retailer hired the merchant who led the development

The now-bankrupt home goods retailer hired the merchant who led the development of billion-dollar store brands at Target. What went wrong?

When Bed Bath & Beyond hired Mark Tritton in 2019 to spearhead its turnaround after years of struggles, analysts expected private labels to be key to his approach.

After all, as Target's chief merchant, he had spent the previous three years or so unleashing a blitz of more than 30 new private labels, many of which went on to become billion-dollar brands in their own right. Before that, he led Nordstrom's Product Group, overseeing the merchandising, design, manufacturing, marketing and distribution of more than 50 private label brands.

With Tritton as CEO, Bed Bath & Beyond got to work, announcing plans in October 2020 to launch more than 10 new store brands within 18 months as part of its comeback.

Instead, that backfired, and many analysts now see its private label effort as a contributor to its downfall. Tritton left last year as sales plummeted further, and the retailer, now in Chapter 11, is winding down its half-century-old business and liquidating stores. What went wrong?

Around the time of Tritton's arrival, Bed Bath & Beyond was garnering just 10% of its sales from private labels, compared to Target's one third. The struggling retailer wanted a new private label strategy, or, at least some of its investors did. The idea "seemed sensible on paper," though it was poorly executed, according to GlobalData Managing Director Neil Saunders. And there was one cohort at the big box goods specialist that didn't want more private labels there — its customers, he said.

"[Tritton's] plans, which were essentially a carbon copy of what he had done at his former employer, Target, quickly alienated existing customers and failed to attract new ones," he said in emailed comments. "Tumbling sales resulted, exacerbated by a tightening economy."

This exposed a longstanding problem at Bed Bath & Beyond, according to Liza Amlani, principal and co-founder of Retail Strategy Group.

"What I've always said is that Bed Bath & Beyond does not know their customer and what their customer wants," she said by phone. "What does your customer want to see from you? They don't want to buy private label mixers, they want to buy a KitchenAid mixer. So don't make a private label."

Getting to know your customer is an ongoing process because habits and preferences constantly evolve, and that takes good data as well as human interaction, she also said. Target integrates focus groups in the development of its private labels, for example.

"We have an abundance of data. If you're not humanizing that, you're missing the ‘art’ in the art and science of merchandising," she said. "It has to be both."

"Bed Bath & Beyond does not know their customer and what their customer wants."

Liza Amlani

Principal and co-founder, Retail Strategy Group

Bed Bath & Beyond's private label effort was both rushed and poorly timed, experts said.

"I think Mark probably tried too much too fast," Sanford Stein, founder of Retail Speak, said by email. "His experience at Target taught him the benefits of building those now legendary ‘must have’ private label brands that deliver great margins, but that took time to design and refine. It's also important to remember Mark and his plans nearly dovetailed with the onset of Covid and the supply chain debacle."

There are clues to Target's process in the development of its owned activewear line, All in Motion. In 2018 the retailer ended its relationship with Hanesbrands’ C9 by Champion and launched All in Motion in 2020. A little over a year later, All in Motion became the retailer's 10th billion-dollar brand. Jeffrey Sward, founding partner and CEO at Merchandising Metrics, said that shows how Target gives itself the luxury of time to conceptualize and implement its owned brand initiatives, and also noted that for most of them, the restrictions imposed by the pandemic haven't interfered.

"That's a full year and a half from announcement to product on the floor," he said by email. "My guess is that Target handled the exit from Hanesbrands gracefully and professionally. Prior to making the decision to take the business in-house, Target had plenty of time and data to analyze, design and organize the supply chain for a new private label venture. It could easily have been two years from ‘let's do this’ to seeing the product hit the floor."

"Fresh from those many successes at Target, the Bed Bath & Beyond team thought they could severely compress the whole time/action calendar as they sought to replicate a private label strategy."

Jeffrey Sward

Founding partner and CEO, Merchandising Metrics

The pandemic not only roiled supply chains, but also hampered shoppers’ ability to take in and embrace new labels popping up at Bed Bath & Beyond. The cheaper prices weren't enough of an enticement, according to Ellis Verdi, president of advertising agency DeVito/Verdi.

"What value can you create if you create something so quickly?" he said by phone. "It takes some time to create the consumer desire and demand. It was based purely on price. Essentially they were giving away the store."

If Bed Bath & Beyond recognized that Target was a major rival in the home goods space, it soon found, as many retailers do, that playing catch up is difficult and expensive — even if you poach the rival's key player, Sward said.

"Fresh from those many successes at Target, the Bed Bath & Beyond team thought they could severely compress the whole time/action calendar as they sought to replicate a private label strategy," he said. "The big takeaway from Target is the benefit of a disciplined, ongoing investment in creating and managing evolution and staying ahead of the curve."

Unlike Target, Bed Bath & Beyond did little to support its new labels, experts said. The home goods specialist found success for years without employing much marketing, but that couldn't work once they began introducing unknown goods, according to Verdi, who has experience working with the likes of Macy's, Kohl's, Meijer and Men's Wearhouse, as well as Bed Bath & Beyond rival Linens 'n Things in its heyday.

"So you found a way to put some nice details on this thing, and you gave it a little bit more interest, and then you gave it a funky name," Verdi said. "But, so what? You're not promoting it, you're not pushing it, you’re not giving me the quality cues. You're not telling me why this is better than something else on the market."

Without the proper marketing, customers, especially those unable to find their preferred brands on the shelf, are easily thrown when they encounter unfamiliar ones, Sward said.

"Turns out private label is a lot harder than knocking off best sellers and banking the margin," he said. "It's brand development and brand management. It's marketing and selling as if it were a national brand. Because in the eyes of the customer that's the expectation. Customers were buying the old brand for a reason. What's the reason to buy the new brand?"

"So you found a way to put some nice details on this thing, and you gave it a little bit more interest, and then you gave it a funky name. But, so what? You're not telling me why this is better than something else on the market."

Ellis Verdi

President, DeVito/Verdi advertising agency

The reason for the new brands may have been unclear not just to customers, but also to Bed Bath & Beyond itself. Private label goods are attractive to retailers and their investors because they can bank much of the payments that would otherwise go to brand name wholesalers. But their purpose is to fill the gaps within a branded assortment, according to Amlani.

"That is the purpose of private label whether you are pushing better quality, better pricing or more options," she said. "Bed Bath & Beyond came out guns blazing with so much product. And when you have so big an assortment, whether it is branded, private label or both, the customer is going to get confused."

Bed Bath & Beyond's missteps in developing a new owned-brand portfolio might be more understandable if the retailer hadn't tapped Tritton, viewed by many in the industry as a private-label master. But a savvy merchandising hire can only go so far at a retailer with multiple challenges.

"One person cannot make the change," Amlani said. "Relying on just one piece of the puzzle to fix the entire puzzle is not ever going to be successful."

The pandemic made running even a thriving retailer more arduous. But Bed Bath & Beyond was not thriving, and after Tritton's departure things only got worse. Marketing experts and business school professors will be analyzing what went wrong there for decades, according to Stein.

"Unfortunately the seeds of its demise were deeply planted long before Mark Tritton got there," Stein said. "Mark's initial efforts in paring back inventory redundancy made sense, as did cleaning up and reimagining the stores. I think private label made sense. We can't separate the fact that Tritton was suddenly in the position of having to please multiple masters. That included the board, Wall Street, shareholders and customers. All those shiny new brands made for great press back then. It was too much, too quick, too many masters, too little time."

"We can't separate the fact that Tritton was suddenly in the position of having to please multiple masters. That included the board, Wall Street, shareholders and customers."

Sanford Stein

Founder, Retail Speak

Tritton brought skills honed at an upscale department store and general merchandise retailer to an aging specialty retailer with a mountain of debt and shrinking sales, said Verdi, who agreed he never had the required space and time.

"Wall Street's telling him he's got to turn this thing around, with the debt they had, and no time," he said. "You can't build a brand in no time. Not even a single one — forget about 10."