Bed Bath & Beyond publishes its 20% and $5 off coupons in nearly every Sunday newspaper and fills shoppers’ mailboxes with them.
That ubiquity has apparently set customer expectations. More of them than ever show up in store with coupons in hand, and that’s hitting the retailers’ margins. Q3 sales rose 1.7%, to $3 billion, but profit fell 10%, to $202 million, due mostly to “an order of magnitude increase” use of coupons, according to the company.
The retailer faces other hurdles, including its slow work in e-commerce, its thin margins, and its difficulty differentiating its merchandise.
Although Bed Bath & Beyond’s coupons all have expiration dates, company policy is to accept them nonetheless. This allows shoppers to collect thick stacks of them and use them at their leisure.
That has now grown to the point of hitting margins hard, according to the retailer.
“These are expected now by most shoppers,” Seth Basham, a retail analyst at Wedbush Securities, told the Washington Post. “You can walk in with a handful of them.” By staggering purchases at the checkout, which the retailer also allows, it's possible to 20% off the entire purchase.
Investors have become impatient, sending the stock down 25% this year.
But it could be difficult to wean shoppers off those big blue and white cards, especially in an era when Jet, which has promised the lowest prices on the web, is selling some of the same items and has its own methods for “couponing” its shoppers to even lower prices -- through cheaper fulfillment options, for example.
Still, the coupons have their upside. They get people through the door and help fill up carts.
"These coupons add an element of intrigue and excitement to the shopping experience," Antonia Mantonakis, a consumer psychologist and professor at Brock University’s Goodman School of Business, told Racked. "Customers are habitual, so if they are in the habit of looking for Bed Bath coupons, saving them and shopping there, the coupons will keep them coming back. Coupons are also a motivator. Sometimes shopping is a utilitarian function, but other times consumers want a hedonic experience where they can spend an afternoon browsing. For those shoppers, coupons are key."