A number of big retail stores, including Bed Bath and Beyond, Tuesday Morning, Christmas Tree Shops, and others have recently gone out of business forever. These stores were heavy promoters and had loyal followings, but still couldn’t keep the doors open. What will happen to the vendors and the sales generated by their advertising now that they’re gone? Warren Shoulberg discusses the future of retail in The Robin Report, writing:
As recently as just a few years ago, Bed Bath & Beyond did over $5 billion in annual retail sales. Tuesday Morning was doing close to $700 million a year before it closed. Christmas Tree Shops, privately owned before it also announced its closing, had a yearly estimated revenue of about the same level, $700 million. Throw in the home furnishings sales of a few other chains that have gone belly-up like David’s Bridal, Party City and Sears Hometown and you can add in another $100 or $200 million in sales, easy.
It’s the suppliers who are in the biggest mess. Big vendors to BBB might have done $100 million – some even more – a year with that single account.
Put it all together and that’s close to $7 billion in annual home furnishings revenue generated by stores that have been liquidated – or are in the process of being liquidated. And most of it has disappeared forever.
Because of more careful monitoring of accounts receivable throughout the ordering process, the money due to creditors from these bankruptcies rarely stretched into seven figures, much less eight. So, vendors did not get stung as badly as they had historically been tagged by previous retail bankruptcies.
But the bigger problem is the loss of annual top-line business with the closing of all these retail chains. Using the good old keystone equation of wholesale being about half of retail – an imprecise measurement to be sure but the best we’ve got – home furnishings vendors are looking at a shortfall of at least $3.5 billion in yearly sales.
And history would suggest that most of it will evaporate, never to be seen again.
The Law of Migrating Retail Sales
Consumer purchasing patterns are a funny thing. As often as people say they plan their buying and keep tight budgets on what they will spend, it rarely works out that way. The fact of the matter is that retailers are really good at driving business through advertising, sales, promotions, coupons and just being in plain sight as people drive to work or do errands. That big bad Bed Bath & Beyond coupon that arrived like clockwork every few weeks in American mailboxes was an amazing vehicle to get people to go to their local store and spend, often far more than they ever planned. BBB didn’t get to be so successful — $11 billion in annual sales at its peak in the 2010s – by sitting around and waiting for customers to show up.
Without all this promotional and marketing activity so much of this business simply disappears. Without that coupon, that one-day sale, that act-before-midnight-tonight blaring TV commercial, shopping loses its place as top of mind, replaced by Netflix, Uber Eats and a day at the beach.
This is especially true when it comes to home furnishings. Unlike absolutely necessary purchases like food and drugs or more aspirational buying for things such as new clothing and shoes, very few people really need a new set of towels, more cookware or dishes…or even bigger ticket items like rugs, furniture and mattresses. We may have a need to replace some of these – and most sales for home furnishings these days are replacement sales – but we can certainly wait a week, a month or even longer to do that. The fact that so few home furnishings brands drive sales themselves through advertising or marketing only adds to the perception that since those former behemoth retail brands are no longer promoting, it feels like nobody is promoting.
Read more here.