Reports suggest that Bed Bath & Beyond (NASDAQ:BBBY) will serve wine and beer to its customers at its new 120,000 square foot store with a restaurant, opening this month in Brooklyn. This move comes after another retailer Barnes & Noble (NYSE:BKS) announced that it would open a bar restaurant serving wine and beer in addition to breakfast, lunch and dinner at its stores. As an increasing number of retailers look to develop a competitive edge over online players, restaurants inside stores can ensure that consumers spend a long time at these stores and consider them more as "destinations" for shopping. According to retail expert Warren Shouldberg, creating retail stores which are more than a place to buy stuff can drive traffic in these stores. We believe Bed Bath & Beyond's experiment of opening a restaurant in its stores can work in its favour, increasing the time spent by consumers at its stores and luring them away from online shopping to its new "destination" thus driving revenues in the long term.
Driving Store Traffic Through "Destination" Experience
As brick-and-mortar retailers struggle to grow store traffic, human experiences which cannot be replicated online can be a key traffic driver. As Warren Shouldberg puts it, "you can't go out to eat online." A restaurant within a departmental store can improve the shopping experience, make it more social and attract more consumers. Retailers from Macy's (NYSE:M) to Urban Outfitters (NASDAQ:URBN) are adopting this strategy to fight online competition. IKEA recently announced that it is giving its 41 restaurants in the U.S. a makeover, given the high foot traffic in them. As consumers are attracted to stores with restaurants, this strategy can drive traffic and consequently revenues for Bed Bath & Beyond. As per our estimates, the average revenue per square foot for Bed Bath & Beyond stores will increase from $234 in 2016 to around $246 by the end of our forecast period.
