Bed Bath & Beyond It may never return to its brick-and-mortar heyday, but former corporate brothers Buy Buy Baby and Harmon’s doors are set to open again, as CNBC learned.
The group that bought Buy Buy Baby’s intellectual property in a bankruptcy auction in June, the owners of baby goods retailer Dream on Me, plans to open 11 stores in the Northeast this fall, Dream on Me chief marketing officer Avish Dahiya told CNBC said.
But the group does not stop there.
The head of marketing, who is also the officer of the Buy Buy Baby transition team, said that he has an ambitious plan to bring the brand back to its glory years with 100-120 stores in the next 1-3 years.
“We definitely see merit in expanding to that number in the U.S.,” Dahiya told CNBC in his first interview since the company’s acquisition. “It’s going to be more cluster-based, not one-off like we’ve seen in the Northeast.”
A Bed Bath & Beyond and Buy Buy Baby sign is displayed outside a store in Los Angeles.
Patrick T. Fallon | Bloomberg | Getty Images
Dahiya added: “We believe omnichannel is critical to business success and stores have a role to play, so it’s important that stores don’t come late.”
Meanwhile, private investor Jonah Raskas brought the dog-walking program wow! Public through a special-purpose acquisition company in 2022, it plans to reopen five Harmon stores in the tri-state areas of New York, New Jersey and Pennsylvania, and potentially more.
“This case never failed. This case was closed because the bed bath failed,” Raskas told CNBC. “We have the luxury of deciding which stores to reopen … we have the ability to focus on the right locations when customers really want to bring us back again.”
When Bed Bath & Beyond filed for bankruptcy on April 23, it paid back its creditors by auctioning off pieces of its shattered empire to investors. No one was willing to buy the entire company, but some saw the value of its individual assets and managed to buy them for a song.
Overstock bought the intellectual property of Bed Bath’s namesake banner for $21.5 million, a price Bank of America Internet analyst Curtis Nagle described to CNBC as “pretty cheap.” Dream on Me’s owners have a chance to rebuild Buy Buy Baby after buying the trademark, data and 11 store leases for about $16.7 million, far less than what the chain could fetch as a going concern. (The new Buy Buy Baby will operate independently of Dream on Me.)
Raskas, on the other hand, bought the Harmon’s trademark for just $300,000, when the chain once fetched between $5 million and $10 million.
According to Neil Saunders, retail analyst and managing director at GlobalData, the new operators of Buy Buy Baby and Harmon have better balance sheets and less exposure to underperforming locations, with a better chance of extracting something from the bankrupt businesses.
“People picked up the body of Bed Bath & Beyond and were able to get pretty good deals in terms of the intellectual property and the value they paid for the business,” he said.
What will the new Buy Buy Baby offer?
When Buy Buy Baby’s doors reopen, shoppers can expect smaller stores, national brands and a focus on experience, community building and learning, said Dahiya, Dream on Me’s head of marketing.
About 80% of the staff, including the merchandising, technology and marketing teams, previously worked at Buy Buy Baby, and the company has named Bed Bath veteran Glen Cary as store manager, Dahiya said. Cary spent nearly two decades with BB&B, overseeing stores under the namesake banner of Buy Buy Baby and Bed Bath, according to his LinkedIn profile.
The revamped Buy Buy Baby features registry events and product demonstrations that will allow new parents to meet, learn from each other and try out big-ticket items like travel strollers before making a purchase.
A brick-and-mortar footprint is important to a company’s overall strategy because it will give it a competitive advantage that better differentiates it from mass retailers. Target and Walmart, it would be more difficult to do this if the business was only online. Big box stores are heavily into the baby category, but they lack the expertise and attention that comes with a specialty store.
“(Mass retailers) have babies in one or two aisles. We have a baby store. That’s the difference, right?” Dahiya said. “We’re very focused on the category we’re in.”
Melissa Gonzalez, director of architecture and design firm MG2, says that when it comes to children’s goods, especially higher-priced items that are more technical, consumers need more “hands-on” that’s better suited to an in-store experience than online. Founder of the Lionesque group.
“There’s so much of a mix of education that can’t really be done online without feeling overwhelming and intimidating,” Gonzalez told CNBC. “On average, when someone spends over, say, $200, it’s a different price point where they’re going to need multiple touch points before they make a decision, and on average, there’s not that much flexibility to do. it’s online only.”
A display of diaper bags at Buy Buy Baby in Brooklyn, New York in January 2023.
Dream on Me has been in the baby business since the 1990s. While its manufacturing capabilities and experience make it competitive, busy families need convenience, and it’s now convenient to shop for their baby at Walmart and Target. GlobalData’s Saunders said that to survive this time around, Buy Buy Baby will have to focus on offering a unique value proposition.
“It’s not just Buy Buy Baby that’s failed. It’s been there before, Babies R Us failed, and Toys R Us, which used to be baby stuff, failed. So it’s a difficult model to get right,” Saunders said.
“It has to really focus on specialisation, and that means having products that other retailers don’t have, having services that other retailers don’t have and being well-known for really strong advice and expertise in the baby segment and having really good locations.”
What’s next for Harmon?
Raskas, who acquired the intellectual property for Harmon, was a longtime customer of the chain when he heard it was closing 50 of its stores.
Immediately, his interest was piqued, and he began contacting the board member to see if there was anything wrong with the case.
“There was nothing. There were no red flags,” said Raskas, 37, in an interview with CNBC. “The exact line was, ‘There are so many fires that have to be put out here every day, it was just something that had to be put out in the past.’
Investor Jonah Raskas bought the intellectual property rights to discount chain Harmon.
Courtesy: masonre studio
When Bed Bath filed for bankruptcy a few months later and investors began tearing up over its namesake banner and Buy Buy Baby, Raskas began asking about Harmon, who got lost in the noise.
He learned that the company expects sales of about $150 million in 2022, has been profitable every year for the past two decades, and that seven out of 10 customers who come into the store buy something.
“I went and discussed it with my lawyers and we said, ‘Okay, what’s the bare minimum offer to throw?'” Raskas recalled. “And we did it.”
With a bid of $300,000, he secured the rights to Harmon’s trademark and plans to reopen five top-performing locations in New York and New Jersey by the end of the year. More could be coming down the line, Raskas said.
David Abrams, founder and CEO of brokerage and consulting firm Masonre, is advising Raskas and scouting locations for stores, one of which could be in Manhattan.
“There’s probably no better time to be a tenant,” Abrams said, adding that he’s looking for storefronts with better rents and visibility.
A view from the aisle of a Harmon store in Brooklyn, New York in January 2023.
At its core, Harmon is a drugstore chain that sells many of the same products CVS and Walgreens does, but has gained a cult-like following with its wide range, travel-sized products, low prices and beloved private label Face Values.
Standing outside the shuttered Harmon’s location in New Rochelle, N.Y., where Raskas and his family shop about an hour north of Manhattan, he pressed his face to the glass and remembered what the store was like in better times.
“Wide changing aisles, great lighting, the staff was very friendly,” Raskas said. “In this day and age, when your in-person shopping experience is often beautiful, painful, or hellish, it was refreshing. I knew I was going to get what I needed … and get out of there quickly.”
Located at the end of the North Ridge Shopping Center, next to an Italian restaurant and smoothie shop, it was one of Harmon’s best stores, and one Raskas is considering reopening.
Jennifer Kiggins, a trainer at the Rumble Boxing studio a few doors down, can’t wait.
“I think they had really great prices and everything you need from toilet paper and paper towels to sunscreen to makeup,” said Kiggins, 28, who was shopping in Harmon with her mother. “I feel like it’s always been there.”
Fortunately, aside from a few optimizations and tweaks, Raskas plans to keep things the same.
“I’m not just getting a retailer, I’m getting something that’s a store that’s loved by the community, that they’ve been going to all their lives and all these different life cycle journeys. … So I think that’s very exciting,” Raskas said.
“Everybody loves a comeback story, and everybody loves coming back to something they thought was gone and now it’s back again.”