Bed Bath & Beyond Tests Membership Model to Boost Revenue and Loyalty

Will this improve customer retention and profit margins?

Subscription News: Bed Bath & Beyond Tests Membership Model to Boost Revenue and Loyalty

Source: Bed Bath & Beyond

Bed Bath & Beyond (NASDAQ: BBBY) is testing a membership model to boost revenue, increase customer loyalty, improve profits and help it compete against ‘free shipping’ subscription programs like those offered by Amazon and Walmart, reports the Wall Street Journal.

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For $29 a year, plus applicable taxes and fees, Bed Bath & Beyond subscribers receive a 20 percent discount off all in-store and online purchases along with free shipping. Specific items may be excluded from the program. The discount only applies to Bed Bath & Beyond purchases, and does not include purchases made at subsidiaries including One Kings Lane and World Market.

The paid membership program is called Beyond+ and is in beta testing with a limited audience. Memberships are currently available by invitation only, and the company is not accepting additional sign-ups at this time.

Subscription News: Bed Bath & Beyond Tests Membership Model to Boost Revenue and Loyalty

Source: Bed Bath & Beyond

Memberships are non-refundable and automatically renewable unless canceled by calling customer service. To access Beyond+ discounts in-store, customers can go to My Offers within the Bed Bath & Beyond app and show it to the cashier, or they can print out the coupon and bring it to the store. To access Beyond+ discounts online, customers can enter the email address associated with the Beyond+ account and select both Beyond+ free shipping and discount offers at checkout.

One of the goals of the paid membership program is to help the company separate itself from the popular coupons that it has become known for – like the 20 percent off coupon postcards that come in the mail every month, or this one which pops up when visiting the Bed Bath & Beyond website.

Subscription News: Bed Bath & Beyond Tests Membership Model to Boost Revenue and Loyalty

Source: Bed Bath & Beyond

Will this paid membership program save the big box retailer from declining profits and, in fact, improve margins? Since the program is still in the testing phase, it is hard to say. For the fiscal second quarter 2016, ended August 27, Bed Bath & Beyond reported the following quarterly results:

  • Net sales of $2.988 billion, a 0.2 percent decline compared to $2.995 billion year-over-year
  • Operating profit of $281.0 million, a 19.8 percent decline compared to $350.2 million year-over-year
  • Comparable sales from customer-facing digital channels grew more than 20 percent.
  • Comparable sales from stores declined in the low single-digit percentage range.

Bed Bath & Beyond Inc. and its subsidiaries include Bed Bath & Beyond, Christmas Tree Shops, Harmon Face Values, buybuy BABY, One Kings Lane and World Market. It operates a number of websites including OneKingsLane.com, HarborLinen.com and T-YGroup.com. As of August 27, 2016, the company owned 1,539 stores, including:

  • 1,024 Bed Bath & Beyond stores in all 50 states, D.C., Puerto Rico and Canada
  • 278 World Market, Cost Plus World Market and Cost Plus stores
  • 107 buybuy BABY
  • 79 Christmas Tree Shops
  • 51 Harmon and Harmon Face Values stores

Insider Take:

In the world of e-commerce, it is hard to beat Amazon at its own game. For $99 a year, Amazon Prime members get free shipping plus a host of other benefits. Walmart is chiming in with its own subscription-based free two-day shipping program and has recently expanded its capabilities with its $3 billion acquisition of Jet.com. And smaller players like Lands’ End are also trying the paid membership-free shipping combo with their new Circle Membership.

The bottom line is that the retail world – both in-store and online – becomes more competitive every day. It is no longer enough to offer customers products they want and need at good prices. Retailers must go above and beyond to retain customer loyalty and to attract new customers. Paid memberships are a way to do that. When done right – as Amazon has shown us time and again – it can pay off. The key is in the execution and marketing of membership programs.

Customers must not only get a great deal, but they must feel like they are getting exclusive access and opportunities not available to the average customer, and product quality and customer service must be top notch. With so many shopping options these days, customers can easily go elsewhere online and off to get the products they want and the service they deserve. Will Bed Bath & Beyond get it right?