How Does Bed Bath and Beyond Stay in Business?
Mar 30th, 2009 by Nut
(I’ve stopped asking myself this question and am now a BBB convert. For more on what happened, check out this story)
M and I registered at a couple of places before we got married, and Bed Bath and Beyond was one of them. Even though most guys say it’s painful, I thought it was pretty fun to take the scanning gun and go hog wild picking out stuff that I wanted.
Not as fun as doing it in Best Buy, but hey—that’s life.
Turns out one of the reasons people register there is because their return policy is so liberal. You can take back anything you want, at anytime, for any reason, and get store credit.
Or cash. That’s right—cash. After an experience I had yesterday, which was great from the customer point of view, I’m left wondering how the heck this company manages to stay in business.
The Vacuum
When we were picking out what we wanted to register for, I was in charge of researching a vacuum. So I did my due diligence—after all, that’s what an obsessive person does. I compared and contrasted all the models they had and settled on the best one: a $169 model.
Someone bought it for us and when it came in the mail I was kind of surprised—it was a behemoth. Huge and heavy. So much so that only I could take it out of the closet to use it. Hence, I am was in charge of vacuuming.
Not a problem, I’m progressive like that.
Then yesterday it starts making this awful grinding noise—after only 8 or 10 uses. So I give it a look under the hood and a piece of plastic is broken.
M and I are shocked: it’s practically new and my research said it was a good vacuum. My research and my vacuuming skills go under intense scrutiny.
So I call up Bed Bath and Beyond and ask what my options are, since we have no receipt and no box. I think we even threw the manual out.
Here’s basically what they said:
Just bring it to the store and we’ll give you store credit. Then you can pick out a new one.
Awesome! So we hop in the car and, just in case, bring along about 30 of those $20 coupons you see everywhere.
At the Store
So we get to the store and right away I find a smaller, lighter (this was on my priority list) model that has all the powerful amp and cleaning power our old vacuum has. And it costs about $60 because it’s on sale. I’m sold.
But we lounge around and start to buy other stuff, as often happens at Bed Bath and Beyond. There’s always something else you can buy there—picture frames, a replacement filter for the vacuum, a gardening can, and some other random stuff.
We go to check out and I sheepishly hand over my stack of expired 20% coupons, which the cashier rings up without even checking. Then she asks me how I would like the remaining $36 of my balance: on my credit card or in store credit. I stammer that my credit card would be great and I hand it over—amazed by the whole thing.
What Gives?
So I walked in with a broken vacuum, no receipt, and a stack of expired coupons and walked out with a new vacuum, a whole bunch of new stuff, and $36 on my credit card.
Again I ask: how does this business model work?
What happens with that broken down vacuum?
I understand that having a return policy that’s this liberal draws in a ton of customers. So that’s great, you get tons of convenience points there, BBB.
But isn’t it a little too liberal? Who are they competing with that they feel they have to offer such cushy terms?
The Motley Fool has an interesting article on the stock. It also agrees that the store no longer has traditional competition, but is now tussling with Wal-Mart and Target. And maybe it’s right—perhaps this kind of coupon craze and liberal return policy is just a way to get people into the store during tough times. And who knows, maybe people are more apt to redecorate since moving is impossible for so many right now (the same way car-part stores are doing brisk business because no one is buying new cars).
No Answer
I’m no expert, but I just can’t understand why the store keeps these policies. Is being so customer friendly going to make me buy there more often? Not really—their competition is gone.
Am I going to take advantage of the policy to suit my needs? Hell yes. That’s what prompted Costco to change their policy, and I’m guessing Bed Bath and Beyond will do the same once the economy steadies itself.
Otherwise, I don’t think they can keep this up. Abusers will continue to walk in and switch out their stuff for newer items just because they can.
Next time I go I’m exchanging my burnt wok for a zebra snuggie.
Photo by NNECAPA
I heard BBB had stopped taking expired coupons — they didn’t tell you that?
I don’t think “abusers” would make that much difference. Like you said, there’s so much useful stuff there that you almost always leave with more than you came in for. For every abuser who runs off with $50, there’s 50 more suckers like me who come in for a coffee grinder and come out with a coffee grinder, a coffee pot, filters, and two baking sheets.
I think the BBB coupons are great! So far, we haven’t been turned away with the expired coupons we bring in. We usually don’t bring in a stack, so since it’s only one, they probably aren’t going to fuss over it.
Similar experience with us purchasing a lamp set in a box at BBB. We got home and found one of the lamps was damaged. I called and asked about our options. They said, just bring the bad lamp back and we’ll get you a new one. I show up with the single lamp and they open a new box, inspect it to make sure it’s OK and I just walked out the door with the new one. They didn’t ask for a receipt (even though this was a legit transaction). Talk about no hassles!
Sure you may walk out with more things, but their customer service has been stellar.
Stupidly Yours,
Matt
I totally agree that the BBB coupons are excellent. More power to them and as a consumer I’m all about it.
I just wonder how the business side of it adds up. I’m curious if this is good or bad for the bottom line.
I bet not everyone who buys stuff there uses the coupons. I do, but a lot of people don’t, because I’ve seen them checking out. That and the fact that you do find a lot of stuff you didn’t know you needed every time you go there will probably keep them in business. Especially now that their biggest competitor (at least in this area) Linens ‘N Things is out of business.
I went there last month because they are in a mall with a Macy’s and my friend was registered for her wedding at the Macy’s. I found the EXACT same item I was going to buy at Macy’s (same bar code, everything) for HALF!!! the price. This was before using the coupon. So instead of paying $99 for a panini pan at Macy’s, I paid $40 ($50 – 20% off) for the SAME EXACT ITEM!!! I was infuriated that Macy’s could sell something for double and wondered how the heck there was such a huge disparity. I always think of shopping at BBB first when I need something that I know they have and will be a loyal customer. The other thing I like is the web site has things like strollers and such that the stores don’t but have the same guarantee. Simply wonderful!
I have had some retail work experience and from what I find most of the bigger companies have excellent deals with the manufactures so they can return broken goods and get back partial or full credit for the item. I think this is why they are so willing to take back your product and sell you a new one.
As for the coupons I would imagine the markup on most of the items in the store is more than enough to cover even expired coupons, also I’m sure BBB doesn’t want merchandise to rot on the shelves. They probably would rather break even or take a small hit than let it sit there.
Our BB&B closed.
Maybe poor business model & high prices is why?
For a couple hundred dollars, BBB got a smoking hot deal: a guy who would go on to tell thousands of people not to worry about spending money at BBB, because if they get buyers’ remorse, they can just take it back, even without a receipt.
Some retailers see return policies as a marketing expense, not a loss-minimization practice.
If 100 people buy something, 10 are going to return it. And if 3 of them are abusing the return policy, you have a 30% abuse rate. Wow, so high! But if that liberal return policy was what converted 10% of the buyers (the policy raised the number of buyers from 90 to 100), then the losses on the 3 abusers buy you the additional 10 customers. And if the ROI on that cost to buy 10 customers is better than the ROI on, say, print ads, to buy those same 10 customers, you go with the liberal return policy. If one of those 3 turns out to be a guy with a blog who sneezes the BBB name to his readers, that’s just icing on the cake.
Best regards,
Matt Krause
@Matt Krause: Well said. That pretty much answers my question. If I gave out prizes, you would get one
I’ll second Matt’s comments; presumably the BBB policy leads to greater overall profits than a stricter return policy. Either that, or Adam Sandler was onto something, and all their real profits are made in the ‘Beyond’ area of the store.
I am a sales associate at BBB. Basically, for every “abuser” that takes advantage of BBB’s policies, there are dozens more who are too “honest” to take advantage.
Many of BBB’s competitors did not take care of their customers, and they’re gone now. BBB remains primarily because of their policies. Let’s face facts. Just about everything at BBB can be purchased at stores like Wal-Mart, Target, Fred Meyer, etc. There’s nothing unique about BBB in that respect. What sets BBB apart from them, is the way they take care of their customers.
Johnny, you have probably waited on me at BBB-I shop there for all kinds of things all the time. You can always find a willing and helpful associate whatever your needs. Right now I have a bunch of coupons both new and expired so I will be heading to BBB tomorrow.
I went to shop at Linen’s and Things once – I had one of their cpns. and 1 from BBB. Their cpn expired the day before and the BBB cpn was new, but they would not take either one. As you know, L & T is out of business. I left the gift items on the counter took my cpns. and went to BBB. No problem there.
It’s all about Customer Service!
I have a question: So you’re wondering how BBB stays in business… because they were so good to you? Isn’t that kind of counterintuitive (one of my favorite words)? What if they were indifferent? What if it was like Home Depot, where you have to wander around for 25 minutes to find someone who can’t help you find the adapter you need? I’m guessing that you might actually go back to BBB when you need something because of that liberal return policy.
Joel: I guess my question is this: at what point does awesome customer service bad for the bottom line? As a customer, I love BBB. But as an investor, I’d be pissed. I’ll never buy a Wok again, I’ll just keep getting a new one for free from them. Sam’s Club had this problem (or maybe it was Costco) with their liberal TV return policies.
They had to stop being so nice because people were abusing the policy and it was affecting their bottom line.
They also need to realize that when they change their policy, they will lose customers…any system will be taken advantage of when humans are involved…Costco sells junk, just as Walmart does, and when it breaks 2 days beyond the 90 day return policy, they make out like a bandit…it is highway robbery by the big boys with the money bags…
I work for Bed Bath and Beyond and have for 2 years old. I work Customer Service and I know much of how that company runs at a store level. We do take outrageous returns, but as a result our customers keep coming back. On average, when a customer comes in with a return they usually spend another 50$ in the store when they come in if not more. We have tons of items and you can always find something that you didn’t even know you needed (something I hear at least 30 times a day when working). We do not have a 30, 60, or even 90 day return policy because we believe in the products we sell and when it comes down to it, we want our customers to feel confident in their purchases with us. Not only do some of our stores take our expired coupons, but we still take our competitor’s coupons. Now, I live in Arizona and I do know that some of our districts have stopped taking our coupons expired and we are testing out some new types of coupons that change in value as they age, but we price match competitors so we’ll always be the lowest price around anyways. As for the returns, much of our items that don’t work correctly or that customers aren’t satisfied with go bad to the manufacturer. When it comes down to it, our customers keep coming back because we take good care of them. They know that if they buy those 20 dollar towels and they fall apart that we’ll stand behind our word and let them try a different brand. Then we’ll go to the manufacturer to help them make the products better for the customer. Our customers love that I greet them at the door and check them out. They remember my name and call me when they need something special. If I can’t find it for them then I tell them where they can find them. It’s all about making customers for life. Customers that can depend on us and trust us not to take them for all they’re worth. We’ll stick around for awhile because our business is smart and trustworthy. We make up for loses in other ways and yet can afford to start out new employees at wages way above minimum wage. Love my job and love my customers.
I love BBB customer service. That’s why I buy every thing I can from there, even if it is more expensive. In other words, I am a loyal customer to BBB. I returned couple of items that I was not satisfied with, and I bought many more things. Thats how they stay in business.
[...] if the kid pushes Mom’s buttons again can she use Bed Bath & Beyond’s notoriously liberal return policy to bring him [...]
If BBB has such a wonderful customer experience and their extinct competition didn’t, why are you questioning their reasons? It is obvious except to the terminally ignorant. Please use your next 20% coupon to purchase a clue.
I’ve been meaning to post a follow up to this post since I am now a convert. Instead of asking myself how they make money with this policy, I now see the light: it’s customer service. It’s caring for your customer and giving them what they want and then some. You win Mike, you win.
I work at a BBB in the RTV department (where all the items that you return go after you leave) and we are able to give you full credit because we get full credit in turn. We send (im going to assume it was a hoover because we get them back all the time) a return refund auth to Hoover and they send us back a return to vendor number and we send it back. They repair it and send it to their warehouse where they sell it refurbished for like 10% off the list price.
As for the coupon thing….we would rather let you guys save 20 % (really what is 20% in the long run?) so that we know you will come back to us because you saved the money.
In Florida, and its per district based, we still take the expired coupons. They were talking about retracting that, only giving you 10% for expired ones because there are so many out there right now we are trying to do what we can to get you guys to redeem them.
Oh and what you dont know? Investors of this company are sitting on a 1.2 billion dollar savings account….that they dont even touch, in the event something drastic happens…..
O and if you forget your coupon when you want to buy that 320.00 dyson vacuum, bring it back in for an adjustment with the reciept.
squeeeee!
[...] first time I wrote about Bed Bad & Beyond and their return policy, I was really curious about how a company could be so liberal in taking things back from customers [...]
Bed Bath Beyonds markups are well over 20%. I would put them at closer to 40% in fact. The 20% off coupons usually are only good for a single item and as most use it on big $ items however you must keep in mind its teh accessories that have the biggest markup on item with markups over 200% on some. so figure they can get you in for one large item $200 ($160 BBB cost liberal but realistic would be around $120) and you save $40. you also buy 3 accessories all ranging between $15 and $30 (2 $15 and 1 $30). Keep in mind most people like to save the 20% coupons for their big purchaes so they wont throw away the 20% on a $15 item. BBB is still looking at a profit of best case scenario $80 (worse case $40). This is all jsut estimates but I can guarnatee you you would be surprised at their mark ups
I also work in the RVT dept. and we DO NOT get full credit for returned items. We do get full credit for some appliences. We get 1-5% credit on about 75% of returned items. We then put the returned items in 1 of 3 places. Sold As Is, donated (all bedding items and such) or thrown in the trash if broken, unsafe, or some vendors will not let us discount their product. All those returned Keurig coffee makers….trashed!