Why Bed Bath & Beyond's Private Brand Strategy Failed

In 2019, after years of operational difficulties, Bed Bath & Beyond hired Mark Tritton as CEO to drive the company's transformation. At the time, industry analysts generally expected that private labels would become the core focus of its turnaround strategy.

After all, as Target's former Chief Merchandising Officer, Tritton had led the launch of over 30 private labels in the roughly three years prior, many of which had grown into brands with annual sales reaching the billion-dollar level. Earlier, he led Nordstrom's product group, overseeing merchandising, design, production, marketing, and distribution for over 50 private labels.

Under Tritton's leadership, Bed Bath & Beyond announced plans in October 2020 to launch more than 10 new private labels within 18 months as a key part of its revitalization plan.

However, this strategy ultimately backfired. Many analysts now believe the private label program was one of the factors leading to the company's decline. Tritton left last year after sales fell further and sharply, and the company is now in Chapter 11 bankruptcy proceedings, gradually winding down its half-century-old business and liquidating stores. What exactly went wrong?

Customers: The Overlooked Core

Around the time Tritton took office, private label sales accounted for only about 10% of Bed Bath & Beyond's total sales, compared to roughly one-third at Target. The struggling retailer hoped to pursue a new private label strategy, and at least some of its investors expected this. Neil Saunders, Managing Director at GlobalData, noted that the idea "looked reasonable on paper," but execution was poor. He also said there was a group within the big-box home goods retailer that did not want to see more private labels—its customers.

"Tritton's plan was essentially a replica of the strategy he had pursued at his former employer Target, which quickly alienated existing customers and failed to attract new ones," Saunders said in emailed comments. "Sales consequently fell sharply, and the tightening economic environment further exacerbated the situation."

Liza Amlani, Principal and Co-Founder of Retail Strategy Group, believes this exposed a long-standing problem at Bed Bath & Beyond.

"I've always said that Bed Bath & Beyond doesn't understand its customers or what they want," she said in a phone interview. "What do customers want to see from you? They don't want to buy a private label blender; they want to buy a KitchenAid blender. So don't do private labels."

She also pointed out that understanding customers is an ongoing process because consumption habits and preferences constantly change, requiring good data as well as human interaction. For example, Target incorporates focus group research when developing private labels.

"We have massive amounts of data. If you don't humanize it, you're missing the 'art' in the 'art and science' of merchandising," she said. "You need both."

"Bed Bath & Beyond doesn't understand its customers or what they want."

——Liza Amlani, Principal and Co-Founder of Retail Strategy Group

Timing: Hasty and Misaligned

Experts point out that Bed Bath & Beyond's private label program was both hasty and poorly timed.

"I think Mark may have tried to do too much too quickly," Sanford Stein, Founder of Retail Speak, said in an email. "His experience at Target showed him the benefits of creating those now-legendary 'must-have' private labels, which bring healthy margins but take time to design and refine. Equally important, Mark's plan coincided almost exactly with the onset of the COVID-19 pandemic and the supply chain crisis."

The development of Target's private label activewear brand All in Motion may offer some clues. In 2018, Target ended its partnership with Hanesbrands' C9 by Champion and launched All in Motion in 2020. Just over a year later, All in Motion became Target's tenth billion-dollar brand. Jeffrey Sward, Founding Partner and CEO of Merchandising Metrics, said this shows Target gave ample time to the conception and implementation of its private label program, noting that most of its private label initiatives were not significantly disrupted during the pandemic.

"From announcement to product on shelves took a full year and a half," he said in an email. "I suspect Target handled the exit from Hanesbrands gracefully and professionally. Before deciding to bring the business in-house, Target had ample time to analyze data, design, and organize the supply chain for the new private label program. From 'let's do this' to product on shelves could easily take two years."

"Coming off Target's many successes, the Bed Bath & Beyond team thought they could compress the entire timeline/action plan significantly and try to replicate the private label strategy."

——Jeffrey Sward, Founding Partner and CEO of Merchandising Metrics

The pandemic not only disrupted supply chains but also hindered customers from accepting and embracing the new brands Bed Bath & Beyond launched. Ellis Verdi, President of advertising agency DeVito/Verdi, believes that lower prices alone were not enough to create appeal.

"If you create something that quickly, what value can you create?" he said in a phone interview. "Creating consumer desire and demand takes time. This was purely price-based. Essentially, they were selling products at a discount."

Sward noted that if Bed Bath & Beyond realized Target was its main competitor in the home goods space, it would soon discover, as many retailers have, that catching up is difficult and expensive—even if you poach key people from the competitor.

"Coming off Target's many successes, the Bed Bath & Beyond team thought they could compress the entire timeline/action plan significantly and try to replicate the private label strategy," he said. "The key takeaway from Target is to make disciplined, sustained investments to create and manage brand evolution and stay ahead."

Marketing: The Missing Support

Experts say that, unlike Target, Bed Bath & Beyond provided almost no marketing support for its new brands. The home goods specialty retailer had succeeded for years without heavy marketing, but once it started launching unknown products, that approach no longer worked. Verdi has worked with companies like Macy's, Kohl's, Meijer, and Men's Wearhouse, and also with Bed Bath & Beyond's competitor Linens 'n Things during its heyday.

"So you figured out a way to add some nice details to this thing, make it more interesting, and give it a quirky name," Verdi said. "But so what? You didn't promote it, you didn't push it, you didn't give me a quality signal. You didn't tell me why this is better than other products on the market."

Sward said that without proper marketing, customers—especially those who can't find their preferred brands on the shelves—can easily become confused when faced with unfamiliar brands.

"It turns out that private labels are much harder than copying bestsellers and making a profit," he said. "This is brand development and management. You have to market and sell them like national brands. Because in the customer's eyes, that's their expectation. Customers buy old brands for a reason. What's the reason to buy a new brand?"

"So you figured out a way to add some nice details to this thing, make it more interesting, and give it a quirky name. But so what? You didn't tell me why this is better than other products on the market."

——Ellis Verdi, President of DeVito/Verdi

The reason for the new brands' existence may have been unclear not only to customers but also to Bed Bath & Beyond itself. The appeal of private label goods to retailers and their investors is that they can capture most of the profits that would otherwise go to brand wholesalers. But Amlani pointed out that the role of private labels is to fill gaps in the branded product assortment.

"That's the purpose of private labels, whether you're offering better quality, better prices, or more selection," she said. "Bed Bath & Beyond went full throttle and launched a massive number of products. When your assortment is that large, whether it's branded goods, private labels, or both, customers get confused."

Talent: The Limits of a Single Point of Breakthrough

If Bed Bath & Beyond hadn't hired Tritton—a figure many in the industry regarded as a private label guru—its missteps in developing a new private label portfolio might be easier to understand. But at a retailer facing multiple challenges, a savvy merchandising executive can only do so much.

"One person can't make a difference," Amlani said. "Relying on just one piece of the puzzle to fix the whole puzzle will never work."

The pandemic made things harder even for well-run retailers. But Bed Bath & Beyond was not in good shape at the time, and after Tritton left, things only got worse. Stein said marketing experts and business school professors will be analyzing what exactly went wrong there for decades to come.

"Unfortunately, the seeds of its decline were deeply sown long before Mark Tritton arrived," Stein said. "Mark's initial efforts to cut inventory bloat were sensible, as were cleaning up and reimagining the stores. I think private labels made sense. We can't ignore the fact that Tritton suddenly found himself in a position where he had to please multiple 'masters,' including the board, Wall Street, shareholders, and customers. All those shiny new brands did generate great media coverage at the time. But it was too much, too fast, too many 'masters,' and too little time."

"We can't ignore the fact that Tritton suddenly found himself in a position where he had to please multiple 'masters,' including the board, Wall Street, shareholders, and customers."

——Sanford Stein, Founder of Retail Speak

Verdi said Tritton brought skills honed at an upscale department store and a general merchandise retailer to an aging specialty retailer burdened with heavy debt and declining sales. He agreed that Tritton never got the space and time he needed.

"Wall Street told him he had to turn things around, and they were saddled with debt and had no time," he said. "You can't build a brand without time. Not even one brand—let alone 10."