Bed Bath & Beyond to Scale Back Coupons in Bid to Grow Profits
Bed Bath & Beyond (BB&B) is known for its frequent coupons, sent in the mail and via email to lure customers into stores by promising 15 percent or 20 percent discounts off bedding and other home accessories. However, in a bid to boost profits and be more competitive on pricing with its competitors, the company is planning to scale that back. BB&B cited data from an internal study of 405 million shoppers’ baskets and 285,000 items, and found that 40 percent of its promotions were deemed “ineffective” and unnecessary. The move to limit the use of coupons is part of broader turnaround strategy at BB&B, which also calls for $1 billion to $1.5 billion in capital investments over the next three years, remodeling of stores, upgrades to its e-commerce operations, among other initiatives.
Total Retail's Take: Coupons have become synonymous with BB&B's brand, and it will be interesting to see customer reaction to this plan. While a necessary step to preserve margins, BB&B's customers have been trained over the years to wait for a coupon before making a purchase. Expecting them to forego coupons and pay full price is likely to cause dissatisfaction and grumbling, and may result in the loss of some of BB&B's most loyal customers.
However, BB&B is seeking to attract new customers to the brand — i.e., younger buyers — that are less reliant on coupons. To that end, BB&B reported that it has acquired 1.4 million new customers this year — in large part due to the coronavirus pandemic and people looking to stock up on cleaning supplies or to spruce up their homes. On average, those new customers are six years younger and 20 percent less likely to use a coupon. So while there might be some short-term pain with cutting back on its use of coupons (i.e., sales losses from loyal customers), BB&B believes the strategy will help it become a more financially healthy company moving forward. My concern is that BB&B won't be able to survive that short-term pain and it never gets to enjoy the long-term benefits of its actions.
