The recent news of Bed Bath & Beyond’s filing for Chapter 11 protection was met with little surprise – but the implications of the news on the wider home furnishing space are not as obvious.
Bed Bath & Beyond’s bankruptcy is likely to benefit two categories of retailers. First, chains looking to expand their brick-and-mortar footprint will be able to snap up retail vacancies created by the store closures. Second, retailers with a large home furnishings selection – including dedicated home furnishing brands along with home improvement, superstores, and discounters – will likely see an uptick in visits from former Bed Bath & Beyond customers.
We dove into the location intelligence data to understand what happened to the brand and who stands to benefit from Bed Bath & Beyond’s store closures.
Bed Bath & Beyond Traffic Has Fallen in Recent Years
Bed Bath & Beyond and its massive selection of bedding, towels, and home furnishings has served American consumers for over five decades – but in recent years, traffic to the brand has slowed. And even as home furnishing visits surged over the pandemic, Bed Bath & Beyond visits continued to fall.
By Q1 2023, visits to the brand were down 63.4% relative to Q1 2018, due in part to large-scale store fleet consolidation efforts. But between Q1 2018 and Q1 2023, Bed Bath & Beyond’s average visits per venue also fell significantly – 47.3% – indicating that the stores that remained open were attracting significantly less traffic than they had been several years before.
High Demand for Retail Vacancies
Still, even as overall traffic and visits per venue decreased, average visits per venue to the Bed Bath & Beyond locations continued to exceed average visits per venue for the wider home furnishings segment – perhaps due to the relatively large size of many of the brand’s stores. Bed Bath & Beyond operated venues in all fifty states as of November 2022, and at 32,000 sq. ft. the average location tends to be closer to the size of a typical grocery store and larger than most retail stores.
Traditional and non-traditional tenants, including retailers, fitness chains, and groceries, are already looking to take over some of Bed Bath & Beyond’s leases. So which types of brands are best positioned to take advantage of these rare retail vacancies, and which retailers are most likely to see a boost in visits following Bed Bath & Beyond’s store closures?
Who Will Serve Bed Bath & Beyond’s Former Customers?
Bed Bath & Beyond visitors already shop at a variety of other retailers that carry bedding, furniture, and other home goods, with Walmart and Target serving the largest share of Bed Bath & Beyond visitors in 2022. Other retailers that carry home furnishings and already serve Bed Bath & Beyond customers – including dedicated home goods retailers and superstores with a large home furnishings selection – are also likely to benefit from the legacy brand’s troubles.
The chart below shows retailers that already enjoy significant traffic from current Bed Bath & Beyond visitors and whose share of cross-shopping from Bed Bath & Beyond visitors has increased between 2019 and 2022. Some of the rise in cross-shopping may be due to the other retailers’ expansions – for example, more Target stores means more opportunities for Bed Bath & Beyond customers to visit Target, which can drive a rise in cross-shopping.
But much of the increase in cross-shopping to the companies appearing in the graph below is likely due to Bed Bath & Beyond’s store closures in 2022, which led customers of the shuttered venues to look for alternate retailers for their home furnishings needs. These brands are likely to see an additional boost in visits as Bed Bath & Beyond continues closing stores.
Significant Diversity Among Bed Bath & Beyond’s Trade Areas
Some of the home goods retailers currently competing with Bed Bath & Beyond may try to take over shuttered Bed Bath & Beyond stores. But the company operates 360 venues in a wide variety of markets, so there is no one-size-fits-all tenant well-positioned to take over the brand’s entire real estate portfolio. Characterizing the consumer base in the trade areas of each of the company’s stores can help potential tenants identify attractive locations.
To illustrate the diversity of Bed Bath & Beyond’s store fleet, we analyzed demographic and psychographic data of trade area residents for eight stores throughout the country. The venues selected represent a geographic range and were all among the company’s 20 most popular stores in April 2023.
As the chart below shows, 2022 STI Popstats data reveals that the median household income in the trade areas of the analyzed stores ranged from $53.1K to $103.8K, the median age ranged from 35.3 to 38.1, and the share of households with childrens ranged from 16.8% to 31.6%. Potential tenants such as off-price retailers can use this data to identify locations most likely to attract frugal families looking for bargain-priced apparel. The AGS: Behavior & Attitudes dataset, which focuses on geospatial psychographics, shows that residents in the trade areas of the analyzed stores also vary in terms of their propensity for exercise, natural products, and online shoe shopping. Fitness brands, grocery stores, apparel chains, or other retailers looking for their next store can use this data to select sites that attract visitors who best match their customer profile.
The trade areas of the stores ranged from 37.0 square miles to 183.0 square miles, although the store with the smallest trade area actually encompassed a larger population than the store with the largest trade area. Potential tenants can use this data to identify venues best suited for their offerings. For example, fitness centers might favor sites with a smaller, more densely populated trade area, as fitness consumers tend to favor close-to-home locations that can be conveniently accessed multiple times a week. Home improvement retailers, on the other hand, may prefer venues with a larger, less densely populated trade area, as these retailers do not rely on frequent repeat visitors and less densely populated regions may have a stronger demand for DIY materials.
What Does The Bankruptcy Mean for the Future of Brick & Mortar Retail?
Some commentators have framed Bed Bath & Beyond’s bankruptcy as the latest manifestation of the ongoing retail apocalypse. But the company’s Chapter 11 filing is also creating opportunities. Superstores and home furnishings retailers can step in to fill the gap in supply, and store closures will open up vacancies for traditional and non-traditional retail tenants to expand their fleets and revitalize existing shopping centers and strip malls.
As consumer preferences continue to shift, other legacy brands may go the way of Bed Bath & Beyond. But one retailer’s challenge could be another’s opportunity – and the range of retailers standing to benefit from Bed Bath & Beyond’s bankruptcy highlights the resilience of the current retail landscape.
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