While some fallen retailers return as “ghost IPs” that exist only to wring the final few dollars out of their names, Overstock CEO Jonathan Johnson has far more concrete plans for the company’s acquisition of Bed Bath & Beyond’s intellectual assets. The most eye-catching part of the plan — rebranding Overstock’s own website as Bed Bath & Beyond — is at the center of the strategy: a way to marry the best aspects of each company.
“We’re not a liquidator,” said Johnson in an interview with Retail TouchPoints. “We’re an online home furnishing and furniture company. We have a little bit of headwind with customers and we have a little bit of headwind with suppliers, given our name. Bed Bath & Beyond, on the other hand, is a great name which proved to be not as good a business model. When we saw ‘good name, bad business model,’ and ‘good business model, bad name,’ dropping the two bad things and putting the two good things together made a lot of sense.”
However, Overstock didn’t acquire Bed Bath & Beyond’s IP for name recognition alone. Jonathan and his team had been considering the business as an ongoing concern, and their research found that while the brick-and-mortar operations and inventory weren’t a good fit, the customer base was appealing.
“We loved its name, loved its customer base, loved the customer demographic and its loyalty,” said Johnson. “So when the opportunity came to buy those things in the IP without buying the business model and the leases and all the inventory and contracts — that kind of baggage — it just seemed like a natural fit.”
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One key benefit of grabbing Bed Bath & Beyond’s customer base: the retailer appealed to a younger demographic. Overstock is already making plans to attract and keep these valuable customers as it prepares for its rebranding effort.
“You’ll see a real push on our mobile app,” said Johnson. “The Overstock mobile app is better than, and has a higher percentage of sales than, the Bed Bath app. We’ll probably reskin that and ask Bed Bath customers to download it. I think the mobile app will be appealing, and so will our social media marketing. There’s a lot going on that the customer will be very excited about.”
The name change also is expected to help Overstock enhance its appeal to suppliers. The company hasn’t been a liquidator in two decades, but its name has made it difficult to shed that perception with customers and suppliers alike. The acquisition news alone helped with that challenge.
“As soon as the news broke [that] we were the stalking horse bid in bankruptcy, not even that we won, in the following seven days, we uploaded more than 100 new Bed Bath SKUs from suppliers that came to us wanting to do business with us,” said Johnson.
Using Canada as a Testing Ground
The plan to rebrand Overstock as Bed Bath & Beyond is starting in Canada, which is a smaller market for both brands. Overstock.ca already has made the name change, and it will serve as the testing grounds that will help the retailer perfect the U.S. relaunch.
“We’re able to beta test it up there, and we’re able to do it quickly,” said Johnson. “We closed the deal on Wednesday [June 28] and launched the Canadian website Thursday morning. The team was very nimble and got that done. There was less data to port over. The data for the U.S. is significant, and we want to take time and we want to learn from what we’re doing in Canada.”
That beta test has been going well so far. Johnson noted that traffic at overstock.ca on June 29 was double compared to a normal day.
Another reason to start in Canada was that Bed Bath & Beyond’s debtor-in-possession asked to keep its U.S. stores open through the end of July. Johnson wanted to avoid launching the revamped U.S. site while the stores underwent liquidation sales, which often have a “garage sale feel” that can include selling items other than the expected Bed Bath & Beyond merchandise. As a result, Overstock is planning to begin its website transition on Aug. 1.
The transition itself will be a carefully curated process that will aim to keep the site familiar for Overstock customers while easing in Bed Bath & Beyond’s loyal fans. “It will be bed, bath and a lot bigger beyond — a lot more product offerings,” said Johnson.
Expanding that “beyond” includes adding new product offerings to Overstock’s current home furnishing focus — Johnson noted that Overstock carries about 10 million SKUs, compared to the 40 million at rival Wayfair. This expansion will cover some of the categories Bed Bath & Beyond carried that also make sense for Overstock’s DTC model. Johnson noted that the retailer plans to carry items like shower curtains and throw pillows, but impulse items like spatulas are unlikely to appear on the new site.
Selection alone won’t necessarily win over all Bed Bath & Beyond loyalists, so Overstock is planning to issue more coupons and potentially reinstate some of the reward points Bed Bath & Beyond shoppers earned in order to make the switch feel more natural. However, this won’t be a permanent change to Overstock’s business model.
“We’re a couponer too, but we don’t offer the same ubiquitous 20% coupon Bed Bath had,” said Johnson. “We don’t need to because we have prices that are a little sharper and lower. Customers can expect promotions, like site sales and coupons, but I don’t think they’ll see the consistent 20% coupon. Our pricing will already be more than competitive.”
Overstock’s Eye is on the Future, but its Head is in the Now
Overstock still has a lot of work ahead, including a corporate rebrand that will likely reflect the retailer’s new identity as a holding company. However, as Johnson noted, “The easy work is done — we’ve acquired the assets.” Now comes the challenging work of successfully rebranding a website, turning Bed Bath & Beyond customers into Overstock fans and discovering the new opportunities enabled by the acquisition— all during a touch economic climate.
Johnson is confident in Overstock’s ability to succeed. He noted that, despite the aforementioned headwinds, the company has been profitable for the past 12 quarters thanks to a laser focus on supporting the bottom line. The retailer enters its next phase of operations with $375 million in the bank and almost no debt, which already has enabled it to turn the challenging environment into a strength.
“The home retail sector, frankly, is in a recession,” said Johnson. “Even if the entire economy might not be in a recession, this sector is. Having a strong balance sheet and protecting that strong balance sheet has allowed us to play offense when many others have had to play defense, or like Bed Bath & Beyond, step out of the game. We’re poised to continue doing that, including spending a little more on marketing over the next few quarters even if that means losing a little money, to take advantage of this unique customer seizing opportunity.”
While Overstock’s eyes are on the long term, it isn’t neglecting the coming months. The plan to start the rebrand in early August means it will be online for Labor Day sales, which will offer a major opportunity, and Johnson expects the new site to be fully up and running for Christmas, which has traditionally been a bigger deal for Bed Bath & Beyond than it was for Overstock.
“The exclamation point on this is we’re combining two winning things: Overstock’s asset-light business model and the Bed Bath & Beyond iconic brand,” said Johnson. “We think that one plus one equals many. It’s going to be very appealing to the customer — it feels like a marriage made in heaven.”
