thought of dot.com as both a big risk and a big opportunity for the likes of
Bed, Bath and Beyond. On one hand, virtually every item at a home goods store
can be purchased online with little to no risk of getting the wrong size. In
contrast, an apparel company can do dot.com to a lesser degree as there is
some, but not massive, variability in sizing. At the extreme is footwear, where
one SKU x 3 colors x 28 different sizes = massive complexity. This gives BBBY
an edge vs. these other categories.
But within the
home goods category the edge is less clear. Specifically, the barriers to entry
are extremely low, as just about everything at a Bed Bath can otherwise be
ordered at any of hundreds of sites, and shoppers can price shop using shopping
bots. The key here for BBBY is to exploit its leverage and be sharp on price
points while upselling the consumer on impulse-purchase items.
This is working to a degree, as Home Décor Products Inc, an on-line retailer and operator of nine sites that sell home furnishings, ceased operations. The company is one of the largest online home products retailers ranking number 143 in the Internet Retailer Top 500 Guide and generated sales just shy of $100mm. This is only a drop in the bucket to BBBY (BBBY’s revs are $7.2bn in a $110bn category), but it is still capacity removed from the industry. On the margin, a good thing for BBBY.