The web could account for 10% of total sales by 2015, an analyst says.
Bill Briggs , Senior Editor
Bed Bath & Beyond Inc.’s growing emphasis on e-commerce, including a new online fulfillment center and a new e-commerce platform, led an investment banker to project web sales for the home furnishings retailer to reach 4% of total sales, or about $373 million in 2013.
Bed Bath & Beyond, or BBBY, “has launched the first of two new e-commerce sites, and we are raising our estimates as we incorporate growth of the online channel into our model,” writes Laura Champine, an analyst with Canaccord Genuity, the market analysis unit of investment banker Canaccord Financial Inc., in a June 19 report. “Behind sizable investments in a new e-commerce platform, including data analytics and web marketing teams, we believe BBBY can increase e-commerce penetration from its current level of 2% to 10%” by the end of fiscal 2015.”
Adding a new e-commerce platform is notable, Champine says, “as we think this is the first significant upgrade for the company online since the launch of its namesake brand's initial web site in 1999.” The retailer did not respond to requests for the identity of the e-commerce platform provider or comments on its e-commerce plans.
The merchant has stepped up its online sales support in the past year. In 2012 Bed Bath & Beyond opened a new Internet fulfillment center in Georgia to support its growing online business, CEO Steven Temares told analysts on the company’s year-end earnings call in April, according to a transcript by Seeking Alpha. “We opened a new Internet fulfillment center in Georgia to support our growing online business. We have increased our investment in people and systems to upgrade our data and analytics capabilities. Lastly, we commenced the initial phase of a new I.T. data center to enhance our disaster recovery capabilities and support our overall I.T. systems. Due to the nature and timing of these initiatives, we will continue to incur additional expenses related to these areas in 2013.”
Capital expenditures for fiscal 2013 are expected to be in the range of $350 million, Eugene Castagna, chief financial officer and president of Buy Buy Baby Inc., the merchant’s retail chain that offers baby and young children’s clothing and gear, told analysts. Projected capital expenditures, which include the recently acquired Cost Plus World Market and Linen Holdings, a wholesale distributor of bed, bath and table linens, “are primarily for new stores, existing store refurbishments and information technology enhancements such as launching our new web sites,” Castagna said. Other expenditures include upgrading mobile sites and apps, enhancing network communications in stores, implementing point-of-sale improvements, and building, equipping and staffing its I.T. data center to support the company’s technology initiatives, he said.
Bed Bath & Beyond, No. 210 in Internet Retailer’s 2013 Top 500 Guide had 2012 web sales of $95.6 million, by Internet Retailer estimates, an increase of 5.0% from $91.0 million in 2011.
Bed Bath & Beyond’s web sales lag far behind those of the leading online home furnishings retailers in the Top 500, which is “pathetic given the company’s leadership position with 24% market share of the $46 billion home furnishings market (based on sales as reported by the U. S. Census Bureau),” Champine says. “We believe this is a clear example of the sizable opportunity that exists within the home-furnishings category online.”
The leading home furnishings retailers in the 2013 Top 500 are: Williams-Sonoma (No. 22) at $1.66 billion in 2012 web sales, Wayfair (No. 52) at $602 million, Crate and Barrel (No. 68) with $430 million and Restoration Hardware (No. 107) with $241 million.
The buybuyBaby.com baby supplies site relaunch earlier this month included new drop-down menus at the top of the page that give the site “a less cluttered look, in our view, compared with the list of products scrolling down the side of the page on the old site. We also think the new site does a better job of highlighting new products, popular categories and the baby registry option, which management believes represents a sizable opportunity,” Champine says.
The merchant also is testing buy online, pick up in store on buybuyBaby.com, and is offering free shipping on a wide range of products and 20% discounts for both online and mobile customers.
There’s more growth ahead for Bed Bath & Beyond, according to the Canaccord Genuity report. “Our projections call for BBBY's online sales to more than double again in FY14 to $792 million, representing about 6% of total sales. We believe the company is capable of ramping penetration up to 10% ($1.5 billion) by the end of FY15.”