Who Killed the Category Killer?
The bankruptcy of Bed Bath & Beyond is part of a larger retail story.
On April 23, housewares and home goods retailer Bed Bath & Beyond announced it was filing for Chapter 11 bankruptcy and planning to liquidate and close all of its stores (and those of its subsidiary chain, buybuy BABY).
As in the demise of Toys ‘R’ Us, cultural or demographic elements might be playing a role here: smaller families, in the case of toys; younger consumers with smaller homes and lower rates of homeownership, in this case—people with less space to fill. Culture-war narratives also form in the wake of these stories: In some corners of the right-wing internet, the “smaller families” element of Toys ‘R’ Us’s failure became something like “childless feminists killed Toys ‘R’ Us.” (The company itself fed such narratives by citing declining birth rates as a potential culprit for poor sales performance in its annual filing the year it declared bankruptcy.) With Bed Bath & Beyond, some have blamed the company’s alleged “wokeness” (diversity and inclusion initiatives, environmental and social governance, and dropping MyPillow) for its bankruptcy. “Performance was a lower priority than equity,” one typical dispatch claims.
And then, of course, there are the immediate economic causes: falling sales, changing consumer tastes, private equity or real estate interests (so-called “vulture capitalism”), and corporate greed. Serious analysts cite pressure from Amazon as a major reason for the company’s years-long decline. But there is also a definite turning point in the company’s recent history: Though Bed Bath & Beyond remained the same continuous company from its origins in New Jersey in the early 1970s down to its bankruptcy and expected closure, in 2019, activist investors forced the company’s board to hire as CEO former Target chief merchandising officer Mark Tritton, who implemented a strategy of taking merchandising authority away from store owners, clearing out the regular brand-name products to which shoppers were accustomed, and pushing private-label goods in their place. This had worked at Target, where Tritton had implemented the strategy to great effect. But it left Bed Bath & Beyond shoppers confused and disappointed, and brought about a steep decline in sales from which the company did not recover.
Anecdotally, while I’ve always liked Bed Bath & Beyond, I haven’t found it to be an expertly run store. My wife and I bought a ceramic utensil holder from its website; it arrived in pieces, with no packing material to protect it inside its oversized box. (That, of course, is no way to beat Amazon.) Another time, we learned that while Bed Bath & Beyond coupons could be used at other subsidiaries (buybuy BABY, and, at that time, World Market), Bed Bath & Beyond gift cards could only be used at Bed Bath & Beyond and buybuy BABY, not World Market. (If I’m remembering this wrong, well, that’s the point.)
But the bigger picture is more interesting than the economic analysis or the culture-war haymaking. Bed Bath & Beyond was a quintessential “category killer”: a marriage of the big-box superstore (discount) and the specialty store (wide selection and knowledge), which emerged in its present form in the 1980s and 1990s. This particular retail segment has been perhaps hardest hit by the “retail apocalypse”: Borders, Toys ‘R’ Us, Sports Authority, and Circuit City come to mind, among others. Best Buy has weathered rough patches; Office Depot has been slowly shrinking but is holding on. You can probably think of others.
The category killer, in theory, is genius, giving the customer something like a mashup of Walmart and a boutique. That can mean anonymity, a huge sales floor, and low prices combined with a broad, deep, curated product selection and employees who are knowledgeable in a specific area. Those characteristics, however, would represent the best of Walmart and the boutique, a truly ideal arrangement. In execution, this hybrid often ended up being the worst of its two lineages: the same generic warehouse environment, poorly trained and overworked employees, and low-quality merchandise you might find at Walmart, but combined with the high prices of a boutique. Very few category killers (Best Buy and the Container Store are successful exceptions) felt like truly successful discount-oriented specialty stores. They more often felt like departments that had been broken off from a discount department store and reopened on their own with everything unaccountably marked up. The marginally lower prices, more or less similar merchandise, and one-stop-shop convenience of Walmart—and, later, Amazon—never lost their allure.
Nonetheless, I hope the slow diminution of the category-killer retail segment stops or even turns around. I suspect we’ll miss them when they’re gone. Where else could you choose from among thirty minutely different bath towels? Or play around with ten different digital cameras and then consult the home theater specialist? Or sit in all of the office chairs in a sprawling furniture department? There were products, services, and experiences that only these stores could ever provide. When the only remaining options for purchasing a specific product are the small and expensive specialty stores, Walmart’s one or two rock-bottom offerings, or the crapshoot of Amazon search results, consumers will truly have lost something valuable.
But it is formidably expensive to selectively curate products, source them through different channels than those of the discount department stores, and train employees to become experts in their product categories. And truth be told, doing all these things might have made no difference.
There’s a concept in environmental economics known as “existence value,” which is how much a person would be willing to pay—in actual money—for the knowledge that an endangered species is being protected and still exists. Studies show that people are willing to pay something, but, of course, there are limits. In a way, the existence value of these stodgy big-box specialty stores is greater than their value as actual everyday shopping outlets: I like knowing that I can go spin around in the office chair department, but I can’t imagine actually buying an office chair more often than once or twice a decade. I like the idea that there’s a store within driving distance that stocks more bath towels than my supermarket has peanut butter varieties. But at the end of the day, except in special cases, I’m not going to actually pay more just to be able to turn down a larger number of purchasing possibilities.
Consumer behavior is only one element here. The task of actually stocking a category killer with a meaningfully different product selection than a discount department store has probably gotten more difficult over the years, too: The ongoing consolidation of retail has also meant the consolidation of manufacturers and suppliers. (Such issues were probably at play in former CEO Tritton’s decision to overhaul and centralize Bed Bath & Beyond’s product strategy.) National chains need larger and more consistent suppliers (a point I elaborated here), and this squeezes out room for the sort of quirky, independent manufacturers who might actually make a unique or standout product.
I’m thinking, for example, of a company based in New Jersey that manufactured plastic strainers with a hook that could attach to the kitchen faucet, meaning the strainer could hang on its own above the sink. My mother bought them at Jamesway, a regional discount chain, in the 1990s. They were sturdy, useful, and well designed. Like Bed Bath & Beyond, Jamesway was also based in New Jersey; like Bed Bath & Beyond, it also declared bankruptcy. The subtle processes that changed the commercial landscape to make it inhospitable to both companies have also quietly changed—and narrowed—the variety of products consumers have to choose from.
Furthermore, any given product is likely to face cost pressure these days. This pressure is often discernible not in higher prices for a consistent level of quality, but in consistent prices for ever-decreasing quality. In Vox, Izzie Ramirez writes about an experience buying a new bra to replace one that had worn out. By all appearances, the replacement she purchased was a new version of the exact same bra she had recently worn out, but she soon found out that it was not the same product at all.
It can be difficult for consumers to recognize that the landscape has changed because they’re not primed to see the full picture, [lingerie expert Cora] Harrington explains. She mentions how when she writes about the state of fast fashion, she often gets pushback from new readers who say their older fast fashion pieces have lasted a long time. “Yes! Many of us bought cheap clothing 10 years ago that’s still fine,” she says. “But 10 years ago, our clothing was higher quality than it is now. That is actually part of the point.”
It’s actually impossible to buy the same bra I had in high school for the same price. It’s simply more expensive to produce now than it was then. All of this is to say that category killers are hardest hit by these pressures because of the expectation consumers bring to them that their products are a cut above those being sold in the discount department stores or the “Amazon’s Choice” top search results. If all the products and suppliers end up being basically the same across retail segments—if the space heater or the towel or the bathroom mirror available through each outlet are all a bunch of imported brands you’ve never heard of, and all kind of flimsy anyway—that supply-side pressure advantages retailers who compete mostly or solely on cost. And that was never the way category killers were designed to compete.
And so we might sincerely miss this retail segment when it’s gone, as we might miss a vanished species of lake fish. We can mourn the existence value of Bed Bath & Beyond and similar stores. But in many ways, even that is already gone. And besides, as Katy Perry sings, “I miss you more than I loved you.”