Bed Bath & Beyond doubles its private label

Late last year, before the coronavirus contagion became the one thing that mattered most, the struggling retailer Bed bath and beyond (NASDAQ:BBBY) began to implement much-needed changes. Namely, he hired former Target (NYSE: TGT) Mark Tritton, head of merchandising, as the new CEO in October, who in December fired the vast majority of his executive management team.

The drastic move reinforced the idea that he would try to recreate his success at Target, which was largely rooted in private label products. Any executive who doesn’t completely agree with (or isn’t able to deliver) their vision for retailer overhaul is gone.

However, the company has been surprisingly slow to replace these former members of Tritton’s management team. Joe Hartsig was only named director of merchandising in March of this year. The new chief operating officer, John Hartmann, was not recruited until April, and Gustavo Arnal was not appointed chief financial officer until late April. Brand manager Cindy Davis was only put in place in May.

Also, conspicuously absent from these new executives’ job descriptions — and any other recent public discussion of company strategy — was a word about its private label initiative. Maybe that wasn’t a key part of Tritton’s plan after all.

Image source: Getty Images.

Bed Bath & Beyond finally addressed the issue earlier this week, naming the former Williams Sonoma (NYSE: WSM) executive Neil Lick as senior vice president, Owned Brands. In other words, one person is now solely dedicated to the private label effort.

It couldn’t have been a better choice, as he held essentially the same position at Williams Sonoma for years.

An evolution, from simple generic to high-end private label

Product lines that were once referred to as “generic” and reluctantly carried by retailers (just to be able to offer something at a discount) have evolved tremendously over the years. Now, many of these so-called private labels are the premium products in a retailer’s aisle. The product category Our brands Kroger sales, for example, are often rated higher than competing national brands in terms of quality. This group includes Kroger’s own organic brand called Simple Truth, which often costs more than similar products from competing national brands. Consumers don’t mind paying for this quality, and they don’t care who made it, which drove Kroger’s private label revenue to a record $23.1 billion. dollars in 2019.

Private label isn’t just a grocery phenomenon. e-commerce giant Amazon is also in the business, along with many other retailers. The target is waist deep, thanks in large part to Tritton. It now operates dozens of private label brands which, according to an estimate by e-commerce news site The Drum, now generate more than $70 billion in sales a year for the discount chain.

The value of offering more house brands isn’t hard to see – there’s a lot of money to be made by offering products purchased and packaged by one retailer versus strictly transporting products from another manufacturer.

This was not always the case. For years, retailers have been content to let national brands do the heavy lifting in terms of advertising and product creation. Over time, however, retailers have learned a trick or two. It is now difficult to distinguish between third-party groups and a store’s own brands. For example, many consumers may not realize that Target’s famous Cat & Jack children’s clothing line is entirely Target’s invention.

Cat & Jack didn’t launch until 2016, by the way, just months after Mark Tritton was named the company’s merchandising director. It has since become a $2 billion mark for the company.

Read between the lines

It’s not hard to connect the dots. Tritton has proven the potential of private label products at Target, and with Bed Bath & Beyond only launching its first-ever private label merchandise in March last year, the potential for growth in its branded business clean is huge. The hiring of Neil Lick underscores the idea that Bed Bath & Beyond takes its private label business seriously.

You see, Williams Sonoma isn’t just a retailer selling inventory from other vendors. Thanks to Lick, he also has a wide range of his own high-end household products with a Williams Sonoma label, such as kitchen utensils, kitchen appliances and bed linens, to name a few- one. The retailer also owns the West Elm furniture brand, which is sold in West Elm stores. In short, as senior vice president of merchandising for Williams Sonoma — which included tasks like product innovation — Neil Lick has already been where Mark Tritton was with Target, and where Tritton now seems set to go with Bed. Bath&Beyond. There may be no one in the country better suited for this particular job, especially given Tritton’s affinity and support for local brands.

At the end of the line ? It is increasingly clear that private label will be a key part of Bed Bath & Beyond’s turnaround.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

Comments are closed.