3 Lessons Small Businesses Can Learn From The Collapse of Bed Bath & Beyond

The ability to adapt to changing consumer trends and maintain a competitive edge is the key for any business' survival. Too many business owners tie themselves to outdated practices, or put their business on autopilot only to find themselves off course from their consumers. Recently, Bed Bath and Beyond, once the go-to for every college freshman and bridal registry, filed for chapter 11 bankruptcy in late April. According to CNN, the retail giant had almost a billion dollars in debt at the time of their filing.

It's hard to pinpoint any one particular reason for a company to collapse, usually it's the combination of multiple things at play. But the fall of Bed Bath and Beyond in particular offers valuable (and free!) lessons for small business owners so they can avoid a similar fate.

Lesson 1: The importance of having a coupon strategy

The most obvious issue at play is the proliferation of their infamous 20% off coupons. Those blue postcards came every week in the mail and, even though they had a printed expiration date, experience shoppers knew Bed Bath and Beyond would honor any coupon, no matter now expired and even allowed customers to use multiple coupons as long as the items were broken up into separate purchases.

It's easy to see why the Bed Bath and Beyond coupons were so popular with their customers. Prices were often significantly higher than other box stores if purchased at full retail price. And while coupons can be effective marketing tools and drive an influx of orders when used correctly, Bed Bath and Beyond's over-reliance on them led to a devaluation of their brand and eroded profit margins. Basically, they attracted coupon clippers looking for the best price possible and trained their customers never to shop unless they had a coupon.

While there are some good reasons to implement a coupon strategy within a business, this cautionary tale serves as a good reminder that if it can happen to a billion dollar business, it certain can happen to a small business, too. Rather than distributing coupons willy-nilly to every Sue, Shirley, and Shannon, think strategically about how you will implement the coupon. What are the terms? How long is it valid? Can it be combined with other discounts or offers? When was the last time you offered a coupon? How much will you be losing in profit and do you think that loss will be outweighed by the increase in sales?

You want to be very careful not to offer sales or discounts too regularly or your customers will hold off on purchasing until they know they can get a better price. If you over-discount, you'll end up having to over-price in order to make up the lost profit. This leads to a vicious cycle where your products become overpriced compared to competitors and you'll either lose the customer to your competition or only capture the customer with a deep discount. In the end, your brand cheapens and your products appear lower quality because they're always on sale.

Instead of offering coupon codes or deep discounts, you could consider adding value to your customer with value based offers and incentives. For example, free shipping over a certain order amount, or a free product with the purchase of of a certain number of products or order amount. These strategies not only drive up your average sale, but the customer feels like they're getting more for their money.

Lesson 2: Reward customer loyalty

Bed Bath and Beyond coupons were plentiful to say the least. Most suburban, middle class families had a bottomless junk drawer that somehow seemed to overflow with Bed Bath and Beyond coupons. There was always one when you needed it.

But that's the thing. Everyone had them and they were all the same. New customers were rewarded with the same 20% off as loyal shoppers. What would have happened if Bed Bath and Beyond had personalized their customers shopping experience by offering something special for repeat customers? What if they had a loyalty program that rewarded customers for shopping? Bed Bath and Beyond did not take the opportunity to build a loyal customer base and instead appealed to bargain hunters and coupon clippers.

Small businesses are in a unique position to create close relationships with their customers. It's a well-known fact that customers buy from brands they know, like, and trust. Do your customers really know and understand your brand? Do you know and understand your customers? People want to feel special and when a company takes the time to notice their individual customers, it goes a long way in creating customer loyalty. You can do this by implementing a loyalty program, offering personalized promotions and targeted marketing campaigns to individual segments of customers, and always engage on social media by replying to comments and messages.

Lesson 3: Stay flexible and adaptable

The first step towards death for any business is their inability or unwillingness to change. We saw this when Covid shut down brick and mortar stores. Many businesses had to pivot quickly to focus on online shopping, and many small businesses suffered because they didn't have an online shop. Many outlets talk about the rise of online shopping in a post-covid era, and while it's true there was a significant spike in online sales that has permanently shifted the market towards online shopping, the reality is that online shopping is not new. People have been ordering things online for years. Amazon and eBay both launched in 1995, followed quickly by PayPal in 1998. Online shopping has been around nearly twice as long as anyone old enough to have a credit card. Why any shop open for business would not also have a stoppable website in 2020 or beyond is bewildering — if your business does not offer a seamless online shopping experience, you're losing money.

Diversifying your streams of revenue is a great way to increase your sales and make more money. So while having website should be the baseline of doing the bare minimum, you now have the option to offer your products for customers to easily shop on social media, you can also have your products available on different platforms such as Etsy, Amazon (Yes, small businesses can sell on Amazon!) or available for wholesale through Faire.

Statistics show that 20% of small businesses will close within the first two years, while 45% won't make it past five years. By staying strategic and keeping one eye on the future and the other on your bottom line, you'll have a better chance at not becoming a statistic and building the brand you've always dreamed of.