Lnt and bbby Retail Houseare industry Case assignment sandeep sharma

1. LET’S TAKE THIS PRIVATE: LINENS ‘N THINGS
VERSUS BED BATH & BEYOND

2. I. Porter five forces model [ Not very difficult market as New Entrant and Rival needs
to be controlled].
Threat of substitutes
(Low or Weak)
Bargaining Power of
Supplier
(Moderate to Low or
less or weak)
Rivalry among
existing competitors
(more or High or
strong)
Threat of new entry
(Strong or High)
Bargaining Power of
Buyer
( Moderate to Low or
Weak)
Porter's Five Forces Factors
(Houseware Retail Chain)
Threat of new entry (High)
 - more as Amount of capital required (PE funding , IPO 4 yrs late,
not easy for competitor to get same kind of funding as market
leaders).
 - more as Retaliation by existing companies
 - less as Legal barriers (patents, copyrights, etc.)
 - more as Brand reputation (blurred lines between Low end good
deal with high end quality) No Frill environment
 - more as Product differentiation (ELDP) No Frill Cost savings
 - less as Access to suppliers and distributors (unrestricted)
 - more as Economies of scale (specialty Stores are Category killers
as speciality Houseware Scale)
 - less as Sunk costs

3.  - less Government regulation
Supplier power (mix of Low Moderate)
 Number of suppliers
 Suppliers’ size
 Ability to find substitute materials
 Materials scarcity
 Cost of switching to alternative materials
 Threat of integrating forward
Buyer power (mix of Low Moderate )
 Number of buyers
 Size of buyers
 Size of each order
 Buyers’ cost of switching suppliers
 There are many substitutes
 Price sensitivity
 Threat of integrating backward
Threat of substitutes (Low)
 Number of substitutes less as high capital intensive only market
leaders survives
 Performance of substitutes
 Cost of changing
Rivalry among existing competitors (more or High)
 Number of competitors
 Cost of leaving an industry
 Industry growth rate and size
 Product differentiation
 Competitors’ size
 Customer loyalty
 Threat of horizontal integration
 Level of advertising expense

4. II. Situation Analysis
ELDP strategy requiring less advertising cutting cost was good but left market open for
BBBY in many States Where it LNT did not had presence in terms of matching no. of
stores with competitor BBBY hence Game played out as advantage to competitors in those
almost 20/50 states hence Market Share Strategy and Expansion coverage strategy was
weak. Proof of that came as BBBY Herfindahl index was double hence more market share.
Overall market is very fragmented leading to more bargaining power for buyer than usual
and evensupplier can choose multiple stores.
Chief executive officer of Linens ‘N Things, Robert DiNicola, decided in 2006 that his
company was in need of a turnaround plan. Their major competitors were Bed Bath & Beyond,
Target, and Walmart. Linens ‘N Things realized that they had to improve their systems in order
to beat their competitors and stay in business.
Houseware is a sector of the retail industry that in 2002, the five-year sales growth was
4.8 percent. Companies within the houseware sector all have their own niche to appeal to certain
demographics. For example, Walmart dominates the low end of the market because they offer
everything from groceries to furniture at a low price. Target has a similar niche but is known to
be slightly better quality but still at a lower cost. Macy’s and Bloomingdale’s have a higher
quality of product and service. Williams Sonoma companies sell high end house and homeware
goods. Pier 1 describes themselves as sellers of native crafts and imported goods. Then we have
stores such as IKEA, Bed Bath & Beyond, and Linens ‘N Things who have found niches that
target customers who are willing to pay for quality but also recognize the value of a good deal.
Linens ‘N Things was founded by Eugene Kalkin in the year 1975. Ironically, Bed Bath
& Beyond was founded just four years before and only 16 miles away. LNT had loyal customers
because of their good value on an assortment of merchandise as well as exemplary customer
service.
Bed Bath & Beyond is the #1 superstore in the United States. They have over 740

5. stores throughout the country as well as Puerto Rico. They sell private-labels as well as brand
name merchandise that attracts customers looking for good quality merchandise at an affordable
price. BBBY strives to use their customer service skills and be a “customer’s first choice”.
LNT and BBBY clearly offer similar merchandise at a similar price. BBBY was able to
expand and have no debt and this company tends to promote within. Analyst Hunt stated, “They
stress service, every retailer tries to do that, but they are better at it than most.”
DiNicola thought it would be a good idea for LNT to operate at a higher level and offer
high-quality products. He found it difficult to work within the company's current structure. It
was very hard to reach out to new customers because they did not have the advertising funds to
do so. They had a reduction in employees which made it challenging to execute proficient
customer services skills that would encourage customers to return to the store.
Cleary, LNT is not as established as its competitors. They do not have their own unique
niche. They’re very similar to BBBY but BBBY has more funds for expansion, advertising, and
they created the store before LNT did. DiNicola had trouble restructuring the company because
they did not have the means to so but could have tried just redoing the current structure and
improving on it.

6. II. SWOT Analysis
Strengths
● #2 home goods chain
● Commitment to everyday low prices
● Own private label
● Created loyal customers by offering an
appealing array of merchandise and
through bridal registry and online
shopping services
● Centralized operations Not
decentralized decision making leading
to losses.
● Invested heavily in infrastructure to
support inventory management
● Web based sales and marketing
Weaknesses
● Late mover Given many state
exclusivity to competitor as if did not
expand to gain market share.
Expansion and market share increase
strategy Not
● Limited advertising budget and
product offerings
● Weakened customer service due to
reductions in full time employees
● No international presence like BBBY
● Founded right after & nearby to the
founding of BBBY
● Oppositions Decentralized more
Decision making at Store level.
● The profitability decreased.
● Lower stock price.

7. Opportunities
● New concept of cheap, stylish home
decor that would be replaced before it
wore out
● The increasing number of new stores
● Growth of international market
● Changes in real estate purchases,
remodeling trends &
marriage/wedding trends
Threats
● New concept of cheap, stylish home
decor that would be replaced before it
wore out
● Changes in real estate purchases,
remodeling trends &
marriage/wedding trends
● Fragmented and intensely competitive
housewares segment
● Maturity of U.S. market
● Price sensitive consumers
● Varying demand for housewares
merchandise
● Reversal of financing trend
● Consumer demand for housewares was
generally declining.
● Purchasing habits of consumers (small
but frequent purchases)
III. Problem Statement
Linens ‘N Things was purchased by a private equity firm and needs to be restructured to work
towards becoming an industry leader.
IV. Development of Alternatives
One alternative solution would be for Linens ‘N Things to introduce new merchandise
that they are currently lacking but their competitor Bed Bath & Beyond offers. If Linens ‘N
Things adds hampers, artificial plants and flowers, gift wrap, serveware and wall art to their
inventory, they will have a better chance at not only increasing sales but becoming an industry
leader over Bed Bath & Beyond. Adding these items to their inventory also has the possibility of
bringing in new customers who may have shopped at Bed Bath & Beyond or other competitors

8. like Target or Walmart. A weakness of this solution would be the risk that they stock their
inventory with these items for them to not sell and only sit on the shelves. Another weakness
would be the possibility of having to reformat the stores in order to store and merchandise the
additional new products.
A second alternative would be for Linens ‘N Things to expand into a new international
market, such as Korea or China. Similar brands in the U.S. have been popular in many Asian
countries and the demand for houseware in the U.S has been declining in recent years. Entering
the Asian market now would benefit Linens ‘N Things since their biggest competitor, Bed Bath
& Beyond, has not yet entered this market. BBBY has not recently entered into any new
international markets in the last few years. Another strength of this solution is that LNT would
be able to attract more new customers in the Asian market, later leading their profitability to
increase over the next few years. A weakness of this solution would be the unknown risk of the
foreign market. The different culture will have different consumer behaviors and LNT does not
have any past experience in foreign markets. Their managers will also face many unknown
problems that they have never seen before, and they may make some wrong decisions during this
process.
A third and final solution would be for Linens ‘N Things to invest more into their
advertising and marketing budget. In the past, Linens ‘N Things used low cost promotions like
newspaper circulars and mailings to reach consumers. They can start by updating their website
and creating an email list to increase online sales. They can also either start a catalog along with
their newspaper circulars or invest in commercials to increase their outreach. The strengths of
this solution is that their advertising will stand out above Bed Bath & Beyond’s low cost ads and
their visibility among consumers across the country will increase. If they choose to implement a

9. mailing or email list, they will not only gain new customers but also increase their loyalty among
regular customers. The weaknesses of this solution would be the cost of the budget increase as
well as the time and focus put into finding a skilled advertising team.
V. Evaluation of Alternatives and Recommendations
DiNicola wants Linens ‘N Things to become the leading company in the houseware
industry. As a final recommendation, the best way for Linens ‘N Things to reconstruct
themselves is to invest more into advertising and update there website. They can continue to use
newspapers while creating catalogs to give prices and further present their merchandise. For their
online customers, Linens ‘N Things should revamp their website and use emails to connect with
their shoppers. Making online shopping easier and more interactive will create and increase loyal
customers. Other ways to improve the companies outreach is to put focus on making
commercials that are enticing and relatable to their target market. By doing so, Linens ‘N Things
will give customers a better visual understanding of what they have to offer. Advertising is an
important part of the business and a great marketing tactic. With stronger advertising, Linens ‘N
Things will be able to target their ideal customers while at the same time informing them about
new products and promotions. Overall, by putting time and money towards ecommerce and
advertisement, DiNicola well be able to give consumers a better experience and improve brand
awareness.