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What did Bed Bath & Beyond (NASDAQ: BBBY) think would happen when it converted its bricks-and-mortar stores into online window shopping opportunities?
By stressing the sale of "deep value" products and "treasure hunt" items over products consumers actually come to its stores to buy -- while also using its stores as display areas for stuff customers can buy online -- the home goods retailer has seen same-store sales tumble. While e-commerce revenue is increasing, it hasn't been enough to offset the declines in physical stores yet.
Going forward, those online operations will face new competition from The Home Depot (NYSE: HD), which has completed its acquisition of direct-to-consumer home goods retailer The Company Store. Home Depot is now making a pitch for its customers to shop the site.
Image source: Getty Images.
A credible threat
Forbes notes that earlier this month, Home Depot sent out emails to customers highlighting new products available for purchase online, in categories including furniture, bedding and bath, and small appliances.
How many of these products will eventually be displayed in Home Depot stores isn't known yet. But regardless of whether the DIY center erects in-store displays and signage that encourage customers buying a refrigerator to also consider curtains for the kitchen windows, it represents a direct challenge to Bed Bath & Beyond.
Last year, when Home Depot announced the acquisition, analysts at Credit Suisse pointed to The Company Store's customer demographics, which have a "heavier skew to females, higher income and older, overall most comparable to Bed Bath & Beyond."
Because Bed Bath & Beyond is focusing so much on its digital efforts, it needs to contend with Home Depot also being a formidable e-commerce competitor. (eMarketer pegs it as the fourth largest e-commerce site.) Home Depot reported that online sales accounted for 6.7% of its $100.9 billion in annual revenue last year, up 21.5% from 2016. Perhaps just as importantly, 60% of all Home Depot sales are influenced by customers visiting its website first.
No guarantees, though
Buying The Company Store isn't a slam-dunk move, as Home Depot hasn't exactly made a name for itself with fashion accessories. It's more of a place contractors go to get their jobs done. Pushing soft goods in a warehouse setting amid an industrial environment is a bit incongruous.
Home Depot has experimented with fashionable home decor before through its Expo stores, which it subsequently closed. The Company Store appeals to the same customer demographic. So, while cross-pollinating its stores with home furnishings is an interesting idea, there's no assurance it will resonate with customers.