Fast Five Shorts | Is The Third Time The Charm For Buybuy Baby?

Summary

Omni Talk Retail Podcast Summary

Episode: Fast Five Shorts | Is The Third Time The Charm For Buybuy Baby?
Release Date: February 6, 2025
Hosts: Chris Walton, Ben [Last Name], and Dave [Last Name]
Guests: N/A

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Introduction

In this episode of Omni Talk Retail, hosts Chris Walton, Ben, and Dave delve into the recent acquisition of the Buy Buy Baby brand by Beyond Inc. for $5 million. The discussion centers around the strategic implications of this move, the potential benefits and challenges, and the broader context of the current retail landscape.

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Acquisition Overview

Chris Walton opens the conversation by providing an overview of Beyond Inc.'s acquisition of Buy Buy Baby:

[00:00] Chris: "Beyond Inc. has entered an asset purchase agreement to acquire the global rights to Buy Buy Baby for $5 million, reuniting the brand with its former corporate parent, Bed Bath and Beyond."

This strategic acquisition is part of Beyond's broader effort to rejuvenate the Buy Buy Baby brand through a comprehensive three-part strategy:

1. Partnership with Kirkland's: Launching up to five small-format Bed Bath and Beyond stores.
2. Fintech Collaboration with Tzero: Exploring the tokenization of Buy Buy Baby's intellectual property (IP), offering digital dividends to current stakeholders, and attracting new investors.
3. Blockchain Integration: Utilizing Tzero's blockchain technology to create digital wallets for storing financial assets and personal records such as birth certificates and medical records.

Chris emphasizes the complexity and innovative nature of this approach:

[00:30] Chris: "If it wasn't complicated already, it's going to get even more complicated. But it's important."

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Strategic Implications and Reactions

Ben's Skepticism

Ben expresses doubts about the viability and rationale behind the Buy Buy Baby brand's resurrection:

[01:53] Ben: "I just don't know that there's a reason for Buy Buy Baby anymore. ... I just don't see myself as a parent going to Buy Buy Baby to store birth certificates and financial information like that is just a bridge too far."

He questions the brand's appeal in the current market, citing the shift of consumer traffic to other mass and specialty retailers. Additionally, Ben is wary of integrating blockchain technology for personal data storage, finding it potentially off-putting for parents.

Dave's Analytical Perspective

Dave provides an analytical perspective on Beyond Inc.'s current market performance and the strategic merit of the acquisition:

[03:09] Dave: "Beyond as a vehicle is not really working at the moment. So revenue is down 20 odd percent. It's still a billion-dollar retailer. ... $5 million is a pretty low-risk gamble to make."

He notes that Beyond's declining revenue, negative EBITDA, and reduced customer traffic make the acquisition a low-risk investment. Dave also highlights the potential value of acquiring Buy Buy Baby's customer and transactional data:

[04:30] Dave: "One of the things that they're also buying is the data and a database. So there might be $5 million worth of customer and transactional data in there alone."

Chris's Supportive Analysis

Chris concurs with Dave's assessment, viewing the acquisition as a strategic steal:

[04:57] Chris: "I think $5 million is just super cheap at the end of the day ... bringing that into the fold ... even the SEO value of Buy Buy Baby as a destination to shop has to be incremental to Beyond."

He underscores the online business potential and SEO benefits, suggesting that the acquisition could significantly enhance Beyond's digital presence. Chris also points out the executive experience within Beyond, which could be pivotal in successfully integrating and managing the Buy Buy Baby brand.

Furthermore, Chris raises a critical question regarding the acquisition's appeal to larger retailers:

[05:50] Chris: "Why weren't more people in this bidding race? If I'm Target or Walmart, I would just buy it to protect."

This observation highlights the strategic advantage Beyond Inc. might have secured by acquiring the brand at a relatively low price, potentially outmaneuvering larger competitors.

Ben's Concerns on Integration

Despite recognizing the potential benefits, Ben remains cautious about the practical aspects of integrating Buy Buy Baby into existing retail spaces:

[06:09] Ben: "It doesn't even make sense to put into a Kirkland store. ... Does that further degrade your Kirkland's home business when you're starting to throw random stuff in the back of it?"

He worries that the addition of a baby-centric brand could disrupt the established focus of Kirkland's stores, leading to a disjointed customer experience and potentially diluting the brand's core offerings.

Dave's Rebuttal on Merchandising Flexibility

In response, Dave argues that Beyond Inc.'s diversified brand portfolio—comprising Overstock, Zulily, and Bed Bath & Beyond—provides the necessary flexibility to integrate Buy Buy Baby without adversely affecting existing operations:

[06:52] Dave: "They've got the routes to be able to sell inventory in case it's not working, or to be able to add extra categories across Overstock and into Zulily. For $5 million, it's worth a go."

He suggests that with multiple platforms at their disposal, Beyond can strategically manage inventory and category expansions, mitigating the risks associated with introducing a new brand into their retail ecosystem.

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Conclusion and Consensus

The discussion culminates in a consensus among the hosts that Beyond Inc.'s acquisition of Buy Buy Baby is a calculated risk worth taking, given the low investment cost and potential strategic benefits:

[07:43] Chris: "It's worth a go."
[07:44] Ben: "It's worth a go."

While acknowledging the inherent challenges, the hosts agree that the acquisition aligns with Beyond Inc.'s broader strategy to diversify and strengthen its market position amidst a turbulent retail landscape.

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Notable Quotes

• Chris Walton on the complexity of the acquisition strategy:
  “If it wasn't complicated already, it's going to get even more complicated. But it's important.”
  [00:30]

• Ben expressing doubts about the brand's relevance:
  “I just don't see myself as a parent going to Buy Buy Baby to store birth certificates and financial information like that is just a bridge too far.”
  [01:53]

• Dave on the acquisition as a low-risk investment:
  “$5 million is a pretty low-risk gamble to make.”
  [03:09]

• Chris Walton highlighting the SEO and online value:
  “... even the SEO value of Buy Buy Baby as a destination to shop has to be incremental to Beyond.”
  [04:57]

• Ben questioning the integration into Kirkland's stores:
  “It doesn't even make sense to put into a Kirkland store.”
  [06:09]

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Final Thoughts

This episode of Omni Talk Retail offers a comprehensive analysis of Beyond Inc.'s strategic move to acquire Buy Buy Baby. While recognizing the potential for data leverage, online growth, and brand revitalization, the hosts also critically assess the challenges of market relevance and seamless integration within existing retail structures. The consensus leans towards optimism, viewing the acquisition as a worthwhile endeavor in the face of declining traditional retail metrics.

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For listeners seeking detailed insights into the evolving strategies and challenges within the retail industry, this episode provides a balanced exploration of acquisition dynamics, strategic partnerships, and the integration of innovative technologies like blockchain.

Transcript

[Chris]

Beyond buys Bye bye Baby for $5 million according to retail dive. Beyond Inc. Has entered an asset purchase agreement to acquire the global rights to buy By Baby. The Buy by baby brand for $5 million, which reunites the brand with the former with its former corporate parent Bed Bath and Beyond. Beyond is attempting to grow the Baby in apparel and accessories brand with a three part strategy. Wait for this folks. The first prong relies on Beyond's October partnership with Kirkland's which allowed for the opening and operation of up to five small format Bed Bath and Beyond stores. The second and third parts entail two offerings beyond is exploring with fintech company Tzero which holds a special purpose broker dealer license, including the tokenization of some of Best of Bye Bye Baby's intellectual property. Whoa. Okay, pay attention here folks, because then it now it starts. If you weren't complicated, if it wasn't complicated already, it's going to get even more complicated. Really. But it's important. Beyond wants to offer digital dividends to current holders of beyond and make an offering of new investors who want to want a share of the Bye Bye Baby ip. The goal is for the token to provide a revenue share on the brand's omnichannel revenue along with loyalty benefits across Beyond's platform. Additionally, T0's blockchain technology could enable Bye Bye Baby to create a digital wallet that holds both financial assets and personal records like birth certificates, medical records and life milestones. Holy cow. And are you excited that Bye Bye Baby is getting what is now a third life and in the way it's being described?

[Ben]

Ben, I think we need your accent here to do the correct Monty Python. It's not dead yet. I'm not dead yet.

[Chris]

That's exactly what I thought of when I wrote that.

[Ben]

I don't know, Chris. Like, I just, I've tried with the Buy Bye Baby concept as, you know, with babies rust. Like I'm trying to really dig deep and find something that a reason for being for these companies and I'm just really struggling to, to do that. I just don't know that there's a reason for Bye Bye Baby anymore. I feel like, especially in another superstore format, I just, I think that we've all just without having a consistent retailer in the space for the last couple of years, I think that the traffic's just moved to other mass retailers where they can get some of these things and then back down to specialty retailers. Like if you really want that unique buy, try before you buy experience. I think we've just we're just seeing this happen so much better in some of the specialty retail stores. And lastly this whole blockchain thing with the birth certificates thing. Like I just, I'm not an expert on that stuff but I just don't see myself as a parent going to buy my baby to store birth certificates and financial information like that is just a bridge too far. But, but I could be alone on this island. I don't know where you two fall.

[Chris]

Well, well, Ben, let's find out. What are you thinking? I'm curious what you think of the deal too, like if you got any thoughts on that.

[Dave]

And I think that's where I've been spending a bit of time. So Chris, I'll let you talk about some of the merchandising elements because there's, there's that you, there's a whole right to play question. Yeah, I'm not sure and I completely agree. The competitive landscape has completely changed and it's only got harder. So what's the reason? So it's really, really easy to be very, very cell, cell baby on this. The thing that I'm looking at is what does it mean for beyond? So I kind of, yeah, went back to the figures, listen to the Q3 statement. You know, beyond as a vehicle is not really working at the moment. So revenue is down 20 odd percent. It's still a billion dollar retailer. But EBITDA is negative, traffic's down, average order frequency is down, average order value is down. So this creation isn't delivering. If you're a billion dollar retailer and all your indices are running in the wrong direction, 5 million is a pretty low risk gamble to make. And if that adds a whole another category into your store, another reason to visit, another opportunity to have a bit of footfall, I can't quite see why not. But I mean it's a pretty negative place to be from to do it. But I kind of feel it's worth a go. And even when you look at in the details of the transaction, one of the things that they're also buying is the data and a database. So is there, there might be $5 million worth of customer and transactional data in there alone. So look it, I think, I think it's worth a go. Even, even at a top line doesn't excite.

[Chris]

Yeah, I think those, I think, I think those are great points. I 100% agree with you. I mean in a lot of ways it feels like a steal. $5 million is just super cheap at the end of the day and you're Right, Ben? Because there's the online portion and then there's the store portion. And the online baby business is a, is a, is a big business. Like a lot of people buy their products online, they register online, you get that data. And so bringing that into the fold and even the SEO value of Buy Bye Baby as a destination to shop has to be incremental to beyond. And I have to think that alone is worth $5 million. Then you get the option value of potentially going into stores through Kirkland or through standalone stores should they want to in key markets too, where they know the concept could still work. Because I, because I imagine they know how to run this better than the previous acquirers knew how to run a retail store as well. Because, you know, their CEO has a lot of experience. I mean, I think he owns Camping World or did at least at one time as well. So he knows the retail business. So I think if anything too. Last point I make, I think when I, when I hear you talk about it, Ben, I feel like it's kind of an indictment that why weren't more people in this bidding race, you know, like why, why didn't more people want to take on some element of this for $5 million, like if I'm, if I'm Target or Walmart, I would just buy it to protect.

[Ben]

Well, those two make sense, I think. But just because it's cheap, does it mean that you should buy it and then it should especially. I mean, I can get it on board with the, with the online bit that you're talking about, Chris, but I really have a hard time with. It doesn't even make sense to put into a Kirkland store. Like, it just seems like a very disjointed experience to me to like have baby pop up in there. And does that further degrade your Kirkland's home business when you're starting to throw random stuff in the back of it? I don't know, but.

[Chris]

Well, I don't know that. That depends on the execution. Right, But I think like you said, that's the option value, the, the online value, you know, the online non term. I got to think the online long term value of this business is more than $5 million in cash flow, but I don't know.

[Ben]

Yeah. All right, Ben.

[Dave]

I guess the other thing, and I completely agree about the juxtaposition that it could be about putting into the wrong place and that's, that's kind of where the merchandising. Right. Right to play is. But I think what I am mindful of is, you know, Dave. Yeah. They've brought back the Overstock brand name so that they have the Overstock platform. They bought Zulily again for, for kind of short term deals. They've got the Bed Bed Bath brand as well. What that gives is a number of outlets to be able to move inventory around. So they've got, they've got the routes to be able to sell inventory in case it's not working, or to be able to move some and to be able to add extra categories across Overstock and into Zulily. I kind of. That. I can see that. I think if, if we're talking $25 million, I think it'd be very different, but for 5 million, it's worth a go.

[Ben]

Yeah, fair.

[Chris]

It's worth a go.

[Ben]

It's worth a go. It's worth a go.