Mattress stores rife because overhead is low, and bedbugs
CHICAGO — Shortly after Melissa Marik moved into a new apartment in February, a Mattress Firm store moved in a block or two away from Marik — and from another Mattress Firm. She was baffled. “I never even see anyone in the stores,” said Marik, 27, who was walking down a mile stretch of Chicago’s Lincoln Park neighborhood that boasts five Mattress Firms, two American Mattresses and a Sleep Number store.
Even the chief executive officer of Mattress Firm, Ken Murphy, agrees Chicago probably has a few too many — but there’s a method behind what some may see as the madness of mattress stores seemingly on every corner.
In its best markets, Houston-based Mattress Firm aims to have a store for about every 50,000 people. That means Murphy would eventually like to have about 200 stores in the Chicago area. Today, there are 235.
Some duplicative or unprofitable stores will be
closing but not right away. Mattress Firm is reviewing its real estate footprint with an eye to trimming stores but hasn’t yet decided how many or which stores to shut down, according to the company’s first-quarter financial report. Most closures will come as store leases end, Murphy said.
Even 200 is a lot of stores specializing in a product that for many customers is a once-in-a-decade purchase.
“Car dealers come closest, but there are no other retail chains that focus on big-ticket discretionary products with that many stores,” said Wedbush Securities analyst Seth Basham.
Roughly 9,000 specialty bed and mattress stores in the U.S. generated about $11.5 billion in revenue in 2015, according to a report last year from market research firm IbisWorld. So why are there so many? The answer has a lot to do with Mattress Firm’s push to grow through acquisitions.
Two years ago Mattress Firm, the U.S.’ largest specialty mattress retailer, acquired Back to Bed and Bedding Experts. It bought another competitor, Sleepy’s, last year and finished rebranding those stores by July 4.
“While in many respects it’s been a great opportunity to get as populated in the market as quickly as we have, the downside is we have real duplication of stores right on top of one another,” Murphy said.
It still has competition from other specialty mattress chains, including Sleep Number, in addition to furniture stores and other national retailers that sell mattresses.
Furniture stores and department stores were once the only places to buy a mattress, said Jerry Epperson, a furniture and mattress industry analyst with Mann, Armistead & Epperson. But manufacturers, which wanted to encourage people to replace their mattresses even if they weren’t buying a new set of bedroom furniture, started promoting the idea of dedicated mattress stores, and they’ve been spreading rapidly since the 1990s, he said.
Industry analysts’ take on whether the U.S. has too many mattress stores depends on how well they think retail stores and online mattress startups will fare against traditional mattress specialists.
But Murphy said there’s “a logic to the apparent madness” of the store-on-every-corner approach.
A new mattress — expensive and nonessential — was an easy purchase to delay during the recession, which has likely led to some pent-up demand, said Rice University marketing professor Utpal Dholakia, who got interested in the mattress business when a British student wondered why every American strip mall seems to have its own mattress store. Industry analysts also say a spate of bedbug infestations may have prompted at least a few extra sales.
Mattresses are a relatively high-margin product, and stores don’t need that many employees, meaning each location doesn’t need to sell a huge number of mattresses to break even, industry analysts said. And every store does double duty as advertising — important for a product most people don’t think about until they need it.
Chains such as Costco — traditionally known for a more limited, low-end selection — have benefited from customers’ growing comfort with researching mattress options online and ordering directly from the retailer, Basham said.
But how much of the mattress game they can win is an open question, and traditional specialists are fighting back with efforts to improve online sales and expand their range of products to give customers a reason to shop more frequently.
Specialty stores still have a wider selection, and plenty of people are still willing to make a dedicated trip to check out options and get advice on what to buy, industry analyst Epperson said.