Bed Bath Looks Beyond the Coupon
06 October 2016 - 11:10PM
Dow Jones News
Bed Bath & Beyond Inc. is attempting to scale back those big
paper coupons that are stuffed in mailboxes across the country.
Instead, the home goods retailer is testing a membership model
that for $29 a year offers a 20% discount on all purchases and free
shipping. The paid subscription aims to generate other streams of
revenue, increase customer loyalty, improve margins and better
compete with Amazon.com Inc.'s Prime membership program.
"The coupon is clearly and has been strongly associated with
us," Chief Executive Steven Temares said on the retailer's recent
earnings call. "But really, we need to be working and we are
working on becoming a lot more intelligent about our marketing and
making it much more personalized."
The invitation-only program was launched less than two weeks
after Bed Bath & Beyond reported a 17% drop in profit and
slowing sales growth in its most recent quarter. In the quarter
ended in August, the company reported yet another increase in
coupon usage with a slight decrease in average coupon amount.
Coupon redemptions have squeezed the retailer's margins for the
past 15 quarters, according to UBS analysts. The company's shares
have fallen about 25% over the past year.
It is the latest attempt by a retailer to move away from the
promotions and discounts that proliferated after the recession and
onto a paid-membership program. Restoration Hardware Holdings Inc.,
Lands' End Inc. and Barnes and Noble Inc. have also introduced
similar offers. Wal-Mart Stores Inc. earlier this year began
offering free two-day shipping to members of its $49-a-year
ShippingPass program.
Tom Caporaso, who runs marketing technology company Clarus
Commerce LLC, said Bed Bath & Beyond's new program is seeking
to change shopper's reliance on its coupons. "This is a way to wean
themselves away from offering that to all customers, and see if
certain customers will raise their hand to pay a fee to get access
to these benefits," Mr. Caporaso said.
Bed Bath & Beyond's program, called Beyond+, is still in the
testing phase. It started last week and has closed for new members.
The company hasn't said how many customers it admitted and didn't
respond to requests for comment.
Analysts from Wedbush Securities Inc. said the program "appears
attractive for frequent shoppers" and is the best attempt to date
to stem lost market share. After the 20% discount, Wedbush said,
items from Bed Bath & Beyond would be on average 13% cheaper
than Amazon.
But the program falls short of what members get from Amazon's
Prime. Its shipping-free window is between three to seven days
while Prime's is a two-day offer. And Prime also offers a range of
other services, such as video streaming and photo storage, and a
wider array of inventory. Beyond+ perks don't extend to purchases
made at the retailer's other nameplates, such as Buy Buy Baby Inc.
and Harmon Stores Inc.
The program benefits customers who spend $145 or more annually
at the retailer, according to UBS analysts. On average Bed Bath
& Beyond shoppers visit and buy from its stores 2.84 times a
year and spend an average of $120 per trip, UBS said.
Moving customers away from coupons won't be easy. The retailer
has developed a reputation for accepting multiple coupons per
order, and honoring them beyond their expiration dates.
One shopper, Danelle Staebler, learned about the membership
program from a friend who posted about it on Facebook. She then
commented, "What am I going to do with the 30,000 coupons I've been
hoarding?"
Ms. Staebler, 38, said she visits the store about four times a
year, but always armed with the coupons that she has been
collecting for over a decade. Last weekend, she found a stack of
coupons from 2004 that she promptly used to buy hooks and a liner
for her shower curtain, and laundry detergent for her new home in
Fargo, N.D.
Ms. Staebler said she likely wouldn't join the membership
program if the retailer expands it nationally because "I don't buy
a ton of stuff there and when I do I have my coupons."
(END) Dow Jones Newswires
October 06, 2016 07:55 ET (11:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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