Battle Of Business Models: Buybuy Baby Versus Bed Bath And Beyond

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Buybuy Baby was acquired by parent Bed Bath & Beyond Inc. at the end of July this year. He came back from the dead after he died for his forgiveness. About 11 of the stores have reopened, their leases under new owners, the NJ-based Dream on me Acquired Buybuy Baby IP assets for $15.5 million prior to BBBY’s bankruptcy. Privately owned Dream On Me is a nursery furniture manufacturer and BBBY supplier.

Among its big-box baby stores are four in NJ (Bridgewater, Iselin, North Cherry Hill, Paramus), two in NY (Amherst, Scarsdale) and one each in West Hartford, CT; Newark, DE; Rockville, MD; Braintree, MA; and Springfield, VA.

CEO Pete Daleiden is tasked with breathing new life into the Buybuy Baby brand. It’s a step up for Daleiden, who spent 16 years as the brand’s vice president of merchandising after five years at Target.
TGT
Mervyn shares the same role.

In addition to its online site, Buybuy Baby plans to open more than 100 new stores in the U.S. over the next three years, reaching the same number of stores BBBY operates. The company is looking at the possibility of adding about 200 small footprint stores Wall Street Journal.

“The future of Buybuy Baby is bright and our team is committed to ensuring that Buybuy Baby continues to be the go-to destination for parents, caregivers and families seeking thoughtful design and quality baby and child-focused products and exceptional customer service. Daleiden said. In the statement.

Buybuy Baby’s brick-and-mortar-centric strategy contrasts sharply with that of another survivor of the BBBY debacle, the flagship Base & Beyond brand, which now lives exclusively on the Internet.

Overstock.com has acquired The brand and its IP assets were sold after BBB’s bankruptcy for $21.5 million and in a virtual New York minute he changed the company to Bed Bath and Beyond Online and changed its corporate name to Beyond Inc. It switched from the Nasdaq to the NYSE.

Although these newly revamped brands compete in two different retail categories, both are born from the same company’s business model, so it will be interesting to see which one will do better in the long run.

But one – the new Bed Bath & Beyond – has abandoned its father’s model and now lives exclusively online. Buybuy Baby, however, is following in the footsteps of its parent company, which makes it particularly vulnerable because its core business model has not worked well.

climbing

Both companies face an uphill battle to get back to where they started. BBB ended up generating $5.3 billion Last fiscal year, operating 696 Bed Bath & Beyond and 131 Buybuy Baby stores with 45 Harmon beauty products stores are well disposed. Less than 40% of company revenues are generated online.

While the company doesn’t disclose revenue from its divisions, back-of-the-envelope calculations put Bed Bath & Beyond’s revenues at about $4 billion and Buybuy Baby’s at just under $800 million, based on the number of stores each brand has. .

However, Bed Bath & Beyond was a much bigger brand and Overstock.com found it a steal, compared to the price Dream On Me paid for Buybuy Baby.

Leadership challenges

In the first nine months of the year. Beyond Inc It brought in $1.2 billion, down nearly 25% from last year, but had a full quarter less time to operate under the new name and business model.

The CEO and the board and investors did not expect a quick change Jonathan Johnson Not to mention he’s been with the company for the past 21 years, and after the founder crashed and burned, stabilizing the company, leading the buyout and getting the Bed Bath and Beyond website up and running, he had to go.

Interim, President Dave Nielsen He is the Acting Chief Executive. In the year He started at Overstock.com in 2009, then moved to e-commerce and logistics provider Global Access from 2015 to 2018, before returning to the company. He at least studied under Johnson and was key to the brand’s digital vision.

While Bed Bath and Beyond was born with a new asset-light, direct-to-consumer online business model, Buybuy Baby is following the same brick-and-mortar, online-enhanced business model that ultimately led to the parent company’s bankruptcy. .

Instead of rethinking what new parents need to provide a nursery and provide all the things a new baby needs in a new way, he chose something that at first seemed cheesy – the most familiar. But that may not be the best for the company long-term.

New customers are needed.

Buybuy Baby’s Daleiden from the store. Merchandise The new baby market is recruiting new customers to replace the old ones.

A bed bath and above, on the other hand, can rely on ongoing repeat business if it does its job well. People always need furniture; Baby furniture and other items are not like that.

Buybuy Baby’s demographic is not ideal. US births hit their highest level since the turn of the century in 2007, when 4.32 million babies were born. Level It has since dropped to 3.66 million in 2021.

of Average age of first born It rises to 30 years, which gives first-time parents more financial stability, and fertility peaks between the ages of 30 and 34, but after that the birth rate drops sharply. And the total birth rate is now 58.2 births per thousand women, compared to 70.8 births in 1990, which is a decrease of 20%.

Buybuy Baby has a narrow age window to attract new customers, although the gift and gift registry adds to the market. But if the U.S. birth rate continues to decline, its primary target market will shrink rather than grow.

Business model testing

Writing in Harvard Business ReviewMark Johnson, co-founder and author of strategic consultancy InnoSight Lead from the futureAnd the co-authors explained, “Every successful company, knowingly or unknowingly, owes its success to its business model.”

Beyond Inc. is leading from the future by reinventing the Bed Bath and Beyond business model to align with the next generation of customer shopping behavior. On the other hand, Buybuy Baby seems to be leading from the past by following its old business model, which ultimately led to the collapse of its original parent company.

Regarding the challenges of business model innovation, Johnson, et al. Al, wrote:

“Few companies understand their existing business model well enough—the prerequisites behind its growth, its inherent entanglements, and its strengths and limitations. So when they can leverage their core business and success requires a new business model, they don’t.”

Buybuy Baby has the advantage of understanding the existing business model, but instead of choosing innovation, it follows the same course. At least, Beyond Inc. Trying new.



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