Bed Bath & Beyond Rethinks Loyalty

Bed Bath & Beyond is thinking past its nearly ubiquotous paper mailers promising 20 percent discounts and is instead considering a move to a $29 annual membership model. That model will give customers an automatic 20 percent off on all purchases and would replace those direct mail 20 percent-off coupons and Sunday circular $5-off coupons.

Those coupons have long been customer favorites, but they have seen their use increase by “an order of magnitude,” according to internal sources.

So far, analysts like the idea behind the pilot program and believe it will be particularly attractive for shoppers who tend to spend more than $145 annually.

That is good news for BB&B, whose customers tend to come in three times a year and spend $120 a shot.

But Bed Bath & Beyond’s plan to drop those coupons is not without risk. Customers like them, and some experts contend the membership model is getting to be too popular. Profitero VP of Strategy and Insights Keith Anderson believes memberships are “successful, but saturated,” and that they will work less well for each store that tries to add one on. Bed Bath & Beyond could succeed here, many note, or it could alienate loyal customers who like those big blue-and-white mailers and offer them something in return that they already have a little too much of to start with.

Bed Bath & Beyond’s same-store sales overall fell 1.2 percent in the second quarter compared to last year’s 0.7 percent rise. But online sales grew more than 20 percent, indicating promise.