At least one major chain is taking advantage of the demise of its main competitor. Bed Bath and Beyond, helped by the demise last year of Linens ‘n Things, turned in a pretty good second quarter, posting a 14% profit increase, a 3% revenue jump and a same-store sales slide of less than 1%.
That’s a lot better than Best Buy has done since its main rival, Circuit City, went under. Same-store sales during the electronics chain’s second quarter fell 3.9% and earnings came in at $159 million, down from $202 million during the same year-ago period.
So why is one doing so much better than the other? We’re guessing that it has to do with what they sell. Could it simply be that less people are purchasing electronics than home furnishings? Or is it that Bed Bath has more of a price advantage over discount chains than Best Buy?
Counter Culture 
Ian, frustrated English major here: In your second paragraph, it should be “its”, not “it’s”. Have a delightful day! (Oh, and if you really want to be annoyed, you ended your last sentence with a preposition. I’ll shut up now.)
Ouch. Thanks Patrick.
Customers had abandoned Circuit City well before they went under.
Circuit had fired their best salespeople and were selling products where you needed to rely on the store to back up warranties, provide tech support etc. Rumors of Circuit City’s demise sent customers to Best Buy in droves. So when Circuit City ultimately closed, there was little additional impact..
I don’t think the customer saw that much difference between Linens and Bed, Bath – who you went to was more a matter of convenience. So when Linens actually left – Bed Bath got more of a boost and was also able to be a little less promotional, improving margins.
Phil –
Great assessment and spot on. I would add that Best Buy’s business plan and the electronics industry for that matter has major issues to address. The severe competition from the large discounters like CostCo and Wal-Mart will continue to impact their sales. The DVDs and CD market will continue to decline as we go through the digital age, making those obsolete. This also bodes for electronic games as well which can now be purchased via on-line through the game consoles.
Regarding BBB, there is and will continue to be a growing market for home furnishing goods that are a bit better quality and better selection than the discounters. Plus, and I don’t know how much the new concept Buy Buy Baby adds to the sales number, but their stores are killing the baby market and Babies R Us with extremely good and knowledgeable customer service and quality product and selection. Watch for them to take the market by storm and in fact to take over former Circuit city stores.
Yeah, BBB isnt cheap, but they have more selection than wal-mart, so you go to BBB if you need a specific household good. More people are saving money by not buying retail high end stuff, but instead dressing up their homes with simple but nice goods from BBB.
People certainly are not upgrading their toys right now. At my house we have this a discussion like this…..Honey, I need a new video card for my computer and she responds….does that match our towels in the bathroom, because I think we need new matching towels. Guess which one we buy?
Actually, I’ve been impressed that Bed Bath & Beyond has continued with their 20% off coupon blitz even though their main competitor has closed. I thought for sure those would stop when Linens & Things closed. BBB can be expensive, but you can almost always find a coupon to take 20% off; and it usually feels like a better retail experience than Wal-Mart.
Bed Bath & Beyond does a much better market job overall. Unlike Linen ‘n’ Things the honor their expired coupons.Unlike Best Buy, you go into BBB knowing you will get a discount on whatever you buy.Their mail campaign is very effective in support of the regular news fliers. Their selection is excellent, pricing is reasonable BUT the best part is their customer service- employees are respectful and helpful- Best Buy has some employees with attitudes & very little service provision- a demeaning sales process for customers. Moral to story- customer service is the bottom line.
I am comfortable ordering electronics online, or going to Costco for a TV. BestB screwed me years ago, just went in for the first time since and their product selection was horrible. I won’t be back.
As for BBB, my wife might get the wrong shade of towel online, so she wants to shop for those itmes in person.
The retailers who honor their contract with their customers, who provide superior customer service, and who treat their customers like intelligent human beings will prevail. Its not all about price, its about the whole experience, the whole relationship. Makes me feel better to be able to see that happening!
Bed Bath and Beyond stays in our faces with the consistent mailing of coupons; whether or not we use those coupons is another matter. Also, it seems that BB&B had more locations, easier to find, etc. while L&T didn’t have many locations.
Let’s face it, electronics are a luxury item which towels, sheets, etc. are necessities.
If I need household items and electronics, I will most likely go to a WalMart which will save me driving all over town.
I can’t help but wonder if the above numbers aren’t a reflection of the capital expenditure required by Best Buy for the agressive moves they’ve made globally via acquisitions (Carphone Warehouse in the UK), new store formats and market expansions (China, Mexico, Europe). To my knowledge, Bed Bath and Beyond has not been “spending money to make money” in a similar way. I would caution viewing the demise of a key competitor against quarterly numbers in isolation…
What you need to understand about Bed Bath and Beyond is that they are very picky about how and when they spend their money. They do have stores in Mexico and Canada, have a couple of other chains that sell different types of items, and have still been opening up new stored nation wide. But they only do so after careful planning. This company is not full of risk takers, no, but they are stable and continuing to grow. I know this because I work for them. For example, the store I work for has cut hours and when certain employees have left voluntarily they have not been replaced. This is because my store is smaller and last year the sales weren’t quite what the company had hoped they would be. (The geographic location of my store has a lot to do with it) However, just in my area alone, we have opened up a new location up north from here and we’ve recently opened up two BuyBuyBabys. The two companies take different approaches to business, it’s as simple as that.