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Discussion: Bed, Bath & Beyond Trumps Amazon! The Revenge of Old School Retail

ph.logo.sublogos.news.white-DISCUSSIONYahoo! Finance Article

What’s exciting about Bed, Bath & Beyond is less about the company itself and more about what it says about the retail industry as a whole. They have taken the price wars a step further by compressing margins enough to beat Amazon without gimmicks. The company is seeing margins shrink as it drives prices lower but it’s still quite profitable. Bed, Bath & Beyond is a glimpse into the post-eCommerce revolution where the best retailers thrive by becoming more efficient.

Over the last twelve months Walmart (WMT), Target (TGT) and Best Buy (BBY) have all been able to end show-rooming by matching any competitive price without losing money. They did it because they were able to adapt to a more competitive marketplace.

Best Buy is the most radical example of a retailer getting smarter about the way it does business. In one year on the job CEO Hubert Joly has managed to reduce costs while improving customer service by partnering with Apple, Samsung and Microsoft to create in “stores-within-a-store.” As the smartphone wars heat up, Best Buy has vendors fighting to fill floor space that’s been empty since the death of DVDs. It’s better retail you can see at first glance.

Top Comments

 

Scott Francis

 

President, Strategic Pricing Solutions

 

It will be interesting to see their financial results next quarter. I have not studied them in detail, but my oberservation is that BBBY has some items lower than Amazon and some higher. They also provide excellent service from their sales associates. With their labor cost and their physical stores, they must have a higher cost structure than Amazon. So if their average basket of goods is lower priced than Amazon, they will need to have a lot of volume growth to make that a profitable strategy.

Matt Burnett

Pricing Analyst at B&Q

I agree, Scott. It would be interesting to know the detail behind the strategy. Presumably, they are price-competing on some key, high volume lines in order draw in customers in the hope of making up the margin loss on secondary purchases.

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