When we talk about the retail apocalypse, the discussion tends to center on the mall-based apparel chains and department stores that have been closing locations or filing for bankruptcy as they grapple with declining foot traffic.

But there’s another segment where serious trouble is also rearing its head: home goods.

Two major companies in this category, Bed Bath & Beyond Inc. and Pier 1 Imports Inc., are mired in problems that look increasingly unsolvable. Bed Bath & Beyond saw its shares tumble 21 percent on Thursday after it reported declining comparable sales for the ninth time in 10 quarters. And Pier 1’s stock fell nearly 20 percent in a single day last week after it saw an even ghastlier plunge in same-store sales and discontinued its full-year guidance.

Particularly in the case of Pier 1, you might be wondering why I am even bothering to call out and diagnose its failings. After all, at this point, it’s practically a penny stock. 

But their missteps offer lessons that apply in other corners of the retail industry. And their distress isn’t happening in a vacuum. Each still has a surprisingly huge store portfolio, meaning they are co-tenants with big-box and other chains that can ill afford to be neighbors with a retailing dud. Customers’ disenchantment with Bed Bath & Beyond and Pier 1 also represents a pick-up opportunity for everyone from Target Corp. to Williams-Sonoma Inc.

Bed Bath & Beyond’s weakness is perhaps best demonstrated by the dramatic erosion of its gross margin over the last several years. Much of that is attributable to its relentless couponing — a tactic that anyone with a mailbox is all too familiar with.

In the latest quarter, fewer of the coupons were redeemed, but there was an increase in the average coupon amount, the company said on its Wednesday earnings call. Think about that: The decreased uptake suggests people are tiring of this bait, and yet Bed Bath & Beyond has responded by … just offering more lavish discounts? Smells like desperation to me.

Bed Bath & Beyond isn’t going to win shoppers back with promotions or its Beyond+ membership, which is essentially a perpetual “20 percent off your purchase” coupon. It needs better customer service, more distinctive merchandise, and more inspiring store displays. It is making some effort in such areas, but, as I’ve previously argued, it’s clearly not enough.

Pier 1, meanwhile, is attempting to mount a turnaround with a plan that calls for, among other things, offering more enticing entry-level price points.

Executives explained this decision at an analyst day this spring. They said they had thought their key competition was Crate & Barrel, Williams-Sonoma and Pottery Barn; but a “rigorous analysis” in the last six months led them to determine its primary competitors are the likes of Target, TJX Cos.’s off-price HomeGoods chain, and fast-expanding At Home Group Inc.

Here’s why I find that alarming: Simply from my perch as a journalist covering retail, I could have told you that Pier 1’s competitive set was Target and HomeGoods. How were leaders so out of touch with their customers that they didn’t know this?

Also, notice that Amazon.com Inc. wasn’t mentioned on that list of primary spoilers. Often struggling traditional retailers are portrayed as victims of Jeff Bezos’s juggernaut. And surely, Amazon is a factor in the woes of these home-goods giants, as is insurgent e-commerce store Wayfair Inc.

But Bed Bath & Beyond and Pier 1 are suffering in no small part because they are being outgunned by their old-school peers. And that is their worst sin. They have failed to understand the changing dynamics in the legacy part of the business.

At this point, Bed Bath & Beyond and Pier 1 each need nothing short of an extreme home makeover to return to relevance. And I have little confidence either has the vision — or the patience from investors — to pull that off.

To contact the author of this story: Sarah Halzack at shalzack@bloomberg.net

To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

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