What Mistakes Did Bed Bath and Beyond Make?

Bed Bath & Beyond (BBBY), once a giant in the retail home goods industry, suffered greatly from missteps in the last decade. Profits soared in the 1990s, making it one of the more coveted stocks to own on Wall Street.

Despite that previous stature, the company as it existed is no more. Bed Bath & Beyond filed for bankruptcy in April 2023 and had all of its assets liquidated. While the company no longer operates in its old form, the brand was acquired by Overstock.com and repositioned as an online retailer, a shell of its former success.

If you’re a small business owner keen on side-stepping the mistakes of fallen industry titans, consider discussing your finances with a business bankruptcy attorney. These financial experts have seen it all. They can help analyze your company’s position and determine what measures you can take to prevent ending up like BBBY.

Four Mistakes BBBY Made That You Can Avoid

Industry analysts and experts agree that many of the company’s setbacks were self-inflicted, brought on through poor decision-making and financial mismanagement. It remains to be seen whether the former merchandising giant’s new ownership can recover the brand and return it to profitability. Still, there are many lessons that small business owners can take and employ in their own ventures.

Filing bankruptcy can be helpful when trying to save a business, but it should only be considered a last resort after exhausting all other options. It would be best to avoid these critical mistakes so you don’t end up like Bed Bath & Beyond:

Mistake #1: Refusing To Adapt to Changing Times

The early 2000s saw a trend in consumers shifting to e-commerce to purchase housewares. This trend further solidified in 2020 when the coronavirus pandemic forced many shoppers to buy their goods online. Retailers like Walmart and Amazon had spent years preparing for a future where many products are sold online and delivered directly to customers’ homes.

Where other retailers adapted, BBBY was hesitant, opting to invest heavily in their in-store approach. This worked for a while. But as customers became more comfortable with online buying, the company was ill-prepared. BBBY tried to switch course and catch up to other companies online, but it was too late.

This hesitancy led to a huge drain on the company’s profits. Their sales stagnated, and their in-store inventory gathered dust. They missed what so many other retailers saw: That e-commerce would eventually supplant in-store buying as an income stream.

Disregarding trends can cost you in the long run. Look at trending customer analytics and challenge yourself to adapt. It is better to steer the ship in the right direction now so you won’t have to course-correct later.

Mistake #2: Mismanaging Your Assets

Investing heavily in brick-and-mortar inventory seriously cost the company during the pandemic. As their cash flow troubles increased, their vendors began to lose faith in the company, leading to severe supply chain issues.

But Bed Bath & Beyond’s asset woes did not end there. When a company suffers terminal cash flow problems, it is usually because they are overextended on their assets. The company mismanaged its inventory, but it also made bad acquisitions.

One example is Buy Buy Baby, a baby clothing store founded by the sons of one of BBBY’s co-founders in the 90s. Bed Bath & Beyond acquired Buy Buy Baby and its eight stores in 2007 for $67 million. This extravagant purchase is now considered one of many bad investments made by executives, as Buy Buy Baby was liquidated along with the rest of the company in 2023

Mistake #3: Betting on Expensive, High-Risk Strategies

Former CEO Mark Tritton invested heavily in private-label products, a strategy he’d seen successfully used while working at Target. These are product lines that the seller owns. While this strategy can help a company retain a bigger profit share, the hasty move harmed vendor relationships.

BBBY’s vendors grew worried these private-label brands would slash their income and take up valuable shelf space. The move created an unnecessary divide between the company and its vital chain of suppliers.

Mistake #4: Upsetting Your Investors

It’s unwise to upset the people investing in your company, but that’s what BBBY did when it announced its stock repurchase program in 2021. While the company sold it as an opportunity to save the sinking ship, the costliness of the move ($625 million) erased the last bit of trust from their suppliers and investors, ultimately sealing its fate.

By 2022, activist investors took hold of the company and orchestrated its sale to Overstock.com. At the time of the deal, Bed Bath & Beyond was little more than a name and some real estate, empty buildings from a bygone era of retail.

What Went Wrong?

Slow and steady wins the race, but minimizing risk takes balance. Too slow, and you’ll get lapped. Being too steady or too focused on your own strategy can block you from avoiding hazards. Bed Bath & Beyond adopted a hasty and haphazard approach.

When e-commerce boomed, they were ill-equipped to change with the times. When their private-label products tanked, vendors were unwilling to help. Where other companies stayed lean, BBBY spread itself thin with bad acquisitions and risky strategies that eroded customer and investor confidence.

A Financial and Legal Adviser Is the Best Solution

If you’re a small business owner facing financial hardship, the best course of action is to consult a local attorney in your area. Attorneys with bankruptcy experience have seen all kinds of business plans. They know what has worked, what has not, and how to best position your business for continued financial wellness.

Contact a local business bankruptcy attorney today and take the first step in securing your business’s financial growth and future.