A couple of weeks ago, I wrote a column laying the blame for the bankruptcy and demise of Bed Bath & Beyond on the corporate decision to buy back nearly $12 billion of stock.
Hank Reinhart respectfully disagrees. And he should know — he was in the room where it happened.
Reinhart worked at Bed Bath & Beyond from 2004 until 2020, running the corporate wedding registry business and eventually becoming vice president of customer service.
He recently founded Sabavi Home, an online home goods store that offers the same type of products as Bed Bath & Beyond, though perhaps a notch higher in both quality and price.
This week, Reinhart told me that from his perspective, the collapse of Bed Bath & Beyond was more multifaceted and nuanced than I had represented. He saw the company's problems as stemming from its failure to change with the times.
The company set itself apart from other home-goods stores in two key ways, he said. First, there were those ubiquitous blue 20%-off coupons that they sent out to vast portions of the population. And the other was its focus on customer service.
"If you bought a vacuum cleaner or coffee maker and you needed help with anything, you were much more likely to get it at Bed Bath & Beyond than any competitor," he said.
"(But) when the business started to shift from brick-and-mortar to online, Bed Bath & Beyond was not able to adapt and move along with their customers."
By running the corporation's wedding registry department, he had a bird's-eye view on what happened.
The wedding-registry program at Bed Bath & Beyond represented an oversized portion of the company's total sales. With kitchenware, bedding and such necessary items as towels and wash cloths, it offered precisely the items that young married couples needed for their new homes.
The advantage to wedding registries is that the people who receive the gifts pick out what will be purchased, making the choice easy for the buyer. When the registry is online, that makes the buying even easier.
As other stores put their registries online, that lessened Bed Bath & Beyond's inherent in-store advantage, he said. It was just as easy to select items from other retailers as it was from them.
"The difference between Bed Bath & Beyond and their competitors started to narrow," Reinhart said.
The problem the company began to experience with its coupon program was more subtle.
The great advantage of those coupons is that they gave the customer 20% off any purchase. The purchaser did not have to wait until a specific item went on sale; essentially, any one item was 20% off at any time. Even if the coupon had expired, it was company policy to honor it.
Many major brands set a bottom price that a store can charge for their goods. The genius of the Bed Bath & Beyond coupon system, Reinhart said, was it actually allowed customers to buy these name-brand items for less than the lowest allowed price.
"That was a tremendous competitive advantage," he said. Many other retailers complained about it, but the brand-name manufacturers generally ignored their protests because the coupons were leading to higher sales.
But that only worked when the majority of the sales using coupons were made inside stores and thus were more or less hidden from view.
"When it was visible online, (the manufacturers) couldn't look the other way because of the pressure from the competitors," Reinhart said.
Because the coupons allowed Bed Bath & Beyond to sell the same items at lower prices than its competitors, giving it an unfair advantage, some major brands stopped selling to Bed Bath & Beyond.
Many analysts have pointed to Bed Bath & Beyond's rush toward creating and selling its own private label brands as being another reason for the company's collapse. Reinhart said a private label makes sense for a retailer, but that they went about it in the wrong way.
Customers are more likely to look for brand names on some types of products than others.
"If you show me a bowl or a vase without a brand name on it, I'm fine with that. But show me a coffee maker or a toaster without a brand name on it, and I'm not fine with that," he said.
The problem was not that Bed Bath & Beyond aggressively launched private brands. The problem was that it spent time, energy and money on that project while not spending time, energy and money on efforts to attract younger customers and more customers online, he said.
"Things change, times change and we always have to have our eyes open and be intellectually honest about what our strengths are, what our weaknesses are, what our opportunities are and what our challenges are," Reinhart said.
"The consumer is the ultimate arbiter of success."
