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Linens ‘N Things needs to take on and best all comers
Even with a new lease on life, Linens ‘N Things online faces a tough fight.
Though it was a relatively early e-commerce player, Linens ‘N Things never differentiated itself online to become a dominant brand in the online housewares and home furnishings space, say retail analysts.
But even with a renewed lease on life from new owners that bill themselves as brand-building specialists, LNT.com, the e-commerce destination for Linens ‘N Things, still faces a tough fight to acquire customers, let alone become a dominant housewares and home furnishings web merchant, analysts also say. “It is a crummy time to try and dominate this particular category, and I’m not sure there’s room for more than one top player anymore. Online, it’s still tough because there are so many retailers selling similar stuff,” says Paula Rosenblum, managing partner at research and advisory firm RSR Research LLC. “So what are their future prospects? Meh.”
Today no single web merchant owns outright the Top 500 housewares and home furnishings products category, which generated combined web sales of $5.60 billion in 2012, an increase of 19% over the prior year. In the run-up to the Great Recession Linens ‘N Things and Bed Bath & Beyond had a better than average chance to dominate the category given that those two retail chains had the most recognizable brand names, analysts say.
Linens ‘N Things and Bed Bath & Beyond, respectively, operated hundreds of stores, had big supply chains and generated total annual sales of more than $1 billion. But in 2008, Bed Bath & Beyond only accounted for about 2.2% of all Top 500 housewares and home furnishings sales and Linens ‘N Things for only 2%. In 2012, Williams-Sonoma, with web sales of $1.66 billion, accounted for about 29% of all category sales compared to 1.7% for Bed Bath & Beyond, which posted 2012 web sales of $95.6 million. LNT.com is currently not ranked in The Top 500 or in the Second 500, Internet Retailer’s annual research guide that ranks up-and-coming and leading niche web merchants. Bed Bath & Beyond ranks No. 210, well below its position five years earlier.
“These two chains had the opportunity to really own this space, but they were lackadaisical about e-commerce and ceded market share to Amazon.com, Target, J.C. Penney and a few other competitors,” says Jim Okamura, managing director of Chicago-based retail consulting firm Okamura Consulting.
Yesterday Linens ‘N Things, once a major home furnishings brand online and offline that now survives only as an e-commerce site, got a new owner. Hilco Global, Gordon Brothers Group and Infinity Group sold the brand assets of Linens ‘N Things to Galaxy Brand Holdings after about five years of ownership. The sale includes LNT.com, the e-commerce site of the former chain retailer of home goods and home décor. The parties did not disclose the terms of the sale.
Hilco and the others purchased Linens ‘N Things in February 2009 after the retail chain declared bankruptcy in 2008. They re-launched LNT.com in spring 2009 and the brand has existed as a web-only retailer since. Now that it’s under new ownership, it’s not clear how Galaxy Brand Holdings, a brand development company majority-owned since May by private equity and asset management firm The Carlyle Group, intends to build up LNT.com into a more viable web site. “We’re currently exploring all opportunities with the brand,” says Galaxy vice president of corporate development Abraham Hidary.
If LNT.com is to survive and grow, the site can’t repeat historical mistakes and must look to differentiate itself, analysts say. Back in 1975 when the chain launched its first store, Linens ‘N Things was onto a new niche in the housewares and home furnishings products category—selling high-quality home textiles, housewares and decorative accessories at competitive prices. The concept worked in the bricks-and-mortar world and at its height as a store-based retailer around 2000 to 2004 the company generated annual revenue of about $1.5 billion and operated a national network of about 571 stores.
But Linens ‘N Things failed to make e-commerce a true priority and strayed from its original niche while trying to operate too much like its close rival Bed Bath & Beyond Inc., say retail and industry e-commerce analysts. Linens ‘N Things filed for bankruptcy in 2007, closed all of its stores and sold its e-commerce assets in 2008 for about $1 million to a group of retail liquidation firms headed up by Gordon Brothers Brands LLC.
“Back in the day, Linens ‘N Things was a big-box retailer that treated e-commerce as a rounding error and didn’t treat the Internet seriously as a traffic and sales driver,” says Jim Okamura, managing director of Chicago-based retail consulting firm Okamura Consulting. “They didn’t have a strategy that says ‘we want to own this category.’”
In its Top 500 Guide and in earlier editions of the Top 400 and Top 300 Guide, Internet Retailer ranked Linens ‘N Things and its chief rival, Bed Bath & Beyond. But an analysis of Top 500 data from 2004 to 2007, the last year Linens ‘N Things appeared in the rankings, shows that while Linens ‘N Things was a slightly bigger web merchant than Bed Bath & Beyond, neither chain retailer had established a dominant position online. In the 2008 edition of the Top 500 Guide, Linens ‘N Things ranked No. 154, while Bed Bath & Beyond ranked 20 spots higher at No. 134. From 2004 to 2007, when web sales reached $75 million, Linens ‘N Things grew e-commerce revenue at a compound annual growth rate of 13.6%. In comparison Bed Bath & Beyond had web sales of $86 million in 2007, but grew e-commerce at a slower compound annual growth rate of 8.5%.