The ‘Beyond’ is brokerage: Bed Bath & Beyond’s surprising bet on real estate

For decades, American consumers have wondered what the “Beyond” in Bed Bath & Beyond actually refers to. Well, as of Wednesday morning, one thing is clear: It refers to real estate brokerage, mortgage, title, insurance and homeowner financial services, after the firm announced it signed a definitive agreement to “Homes are not static. While the home itself is an anchor asset, fixed to a location and held over long periods, the individual or family attached to that home is constantly evolving,” Lemonis wrote in the letter. “Life stages evolve us, needs and tastes change, risk and priorities alter over time. Real value is created not just by the home itself but by everything that touches it throughout its lifecycle, from furnishing and maintaining to insuring, financing, improving and ultimately moving. Our strategy is built around serving the home as a living platform or operating system and the customer as the evolving holder of that asset. We create loyalty with customers by connecting every part of their home life through technology, making life simpler, more affordable and securely connected over time with blockchain.” 

Bed Bath & Beyond’s three pilars

Bed Bath & Beyond breaks down this strategy into three pillars: omnichannel retail, homeownership and transactions and home services. These pillars include things like the company’s retail brands like Kirkland’s, Bed Bath & Beyond and The Container Store, services related to a home sale transaction and installation, renovation, maintenance, project management and related services. 

Since announcing this strategy in January, the firm has undergone a series of acquisitions, expanding its portfolio of brands as it looks to build out its “Everything Home” strategy. 

In the past six months, Bed Bath & Beyond has acquired Lumber Liquidators and Cabinets To Go parent company “I just don’t think it is going to have a material impact on how brokers respond because I don’t actually see a whole lot of sense in this transaction,” Kulkarni said. 

However, Kulkarni’s Alloy Advisors co-founder Russ Cofano has a different take. 

“I think what they are trying to do is build a consumer ecosystem around the home,” Cofano said. “It is another example of what “You have this home sale transaction and then they are looking at other things they can parallel on top and see the customer,” he said. 

But like Cofano, McClelland also sees some potential for this deal to make some waves in the brokerage industry.

“It is clear that they want to create this flywheel effect of all of the different components of the homeownership journey,” he said. “I don’t think a brand can do everything and just because customers come to you to buy loofahs and epsom salts doesn’t mean they are going to buy a house from you.” 

Kulkarni agrees, noting what he most frequently associates with Bed Bath & Beyond is 20% off coupons he can use to buy bedsheets. 

“I am not going to go to Bed Bath & Beyond thinking that I am going to use these people that are selling me discounted sheets for the most important financial transaction of my life,” Kulkarni said. 

But RVs aren’t real estate 

Despite his doubts, Kulkarni noted that Bed Bath & Beyond CEO Lemonis has previously been successful creating an end-to-end consumer transaction ecosystem in the RV space. 

“I think he is trying to make the same bet here, but I think there are two big challenges that he has. Number one is that in the RV space, the entry point is the actual RV purchase, so the consumer is getting into the ecosystem at the most expensive stressful part of the transaction. Once you do that, there’s a little bit of trust built up, and you’re going to buy other services from his companies,” Kulkarni said. “But this is flipping that, as the entry point is Bed Bath & Beyond. You are betting that someone who is going to spend hundreds of thousands of dollars on a home is going to do so through an entry point of buying 20% off bed sheets.”

Due to this, Kulkarni feels Rocket Companies’ take on the end-to-end ecosystem is much more promising as it captures the consumer through financing and not retail. 

Cofano, on the other hand, believes with enough investment of time and capital, Fathom Realty could be the firm’s consumer entry point.

“I am wondering if they are going to put money into building the Fathom platform out and use Fathom to drive retail sales, flipping that script and not relying on somebody looking at bedsheets to pick a real estate agent,” Cofano said.

Recycling the playbook

While Bed Bath & Beyond’s entrance into the real estate brokerage industry may come as a surprise, this is far from the first time a more retail focused player has tried its hand in brokerage. Most notably, in the mid-2000s Cofano agrees that it is unclear how this will turn out for Bed Bath & Beyond, but he does believe it is part of a broader trend we are seeing in the industry.

“This is part of a broader picture that says that the real estate transaction is going to become part of a larger ecosystem. I’m willing to watch this thing play out and see if it has legs,” Cofano said. “Also, the fact that someone has tried this before and it didn’t work, doesn’t mean that it won’t work today because we are in such a different era. Consumers today behave differently because of AI. We are in such a place of massive change, and I think that opens the door for people to try things that may not have worked in the past, but may work now because consumer behavior has changed.” 

While some in the industry have mixed feelings about outside firms entering the space, McClelland thinks it provides the industry with some wonderful opportunities. 

“I think it is great because it helps those of us who have been in the industry for too long, who just accept that this is how things are done, to think about things in a different way,” he said. “We need that creativity because maybe things could be better or maybe there is another way of doing things that would be smarter. I love all of the ideas coming into the industry right now.”