New mattress trend unrolls in state
Verlo among retailers selling bed-in-a-box
In Appleton and Watertown, they’re squeezing increasing income out of one of the biggest trends in years to hit the oncesleepy mattress industry.
In Milwaukee, they’re working to grab their share too, and trying not to get pinched by the new competition.
Across the United States, a few internet-based startups and their scores of imitators have shaken up the bedding world.
Aided by machines — some of them made in Wisconsin — that can squish a king-sized mattress pancake-flat and roll it up like a sleeping bag, the bedin-a-box business has emerged as yet another challenger to traditional retail.
Few would have guessed 10 years ago that mattresses could be sold online, sight unseen, and shipped directly to consumers in boxes not much bigger than a three-drawer file cabinet. Anyone who has lugged a full mattress up a flight or two of stairs helping a friend moves knows how unwieldy the bulky things are.
But never underestimate the power of the web, the ingenuity of young entrepreneurs and the manufacturing expertise in places like Wisconsin.
“The online mattress business really went from nothing to a $1.5 billion business in the blink of an eye,” said Kathy Thornton-Bias, president and chief operating officer of Milwaukee-based Verlo Mattress. “This whole industry has been disrupted by the idea that maybe you don’t have to try the mattress before you buy it.”
Verlo doesn’t want to get left behind by the trend. The chain of 37 sleep shops just launched its own mattress-in-a-box line, dubbed Verlo-to-Go.
Other traditional mattress retailers have been doing the same — a prudent step, in the view of Mark Jannke, an industry veteran based at a Watertown factory with a growing business supplying the boxedmattress niche.
“They need to make sure they stay with the times, be-
cause they’re going to lose business if they don’t adapt to the way people are buying these days,” Jannke said.
The online mattress business has been pioneered by firms such as Phoenix-based Tuft & Needle. Started in late 2012 by two Silicon Valley refugees with $6,000 of their own money and no outside investors, Tuft & Needle says it took in more than $100 million in revenue last year and now has 150 employees.
Another startup, Casper, claims an even more rapid rise. The New York company, which launched in 2014 and whose investors include actor Leonardo DiCaprio, reportedly doubled its sales in 2016 to $200 million.
Those numbers are nowhere near the more than $2.5 billion in revenue racked up in 2015 by Mattress Firm, which operates more than 3,500 stores nationwide. But the growth of the online sector got the big retailer’s attention. Mattress Firm also has moved to offer boxed mattresses to customers online.
“This is a real challenge for brick-and-mortar retailers,” said David Perry, executive editor of trade journal Furniture Today. “This is a fullblown phenomenon right now. There is a huge amount of talk about it in the industry.”
It’s also a source of opportunity for some.
Jannke is vice president of product development for Symbol Mattress, a Virginia company that has a 152,000square-foot, 80-employee factory in Watertown. In February 2016, Symbol installed a machine there that compresses foam mattresses and rolls them up so they fit in a cardboard box 18 inches square by 44 inches high.
After just 15 months, the plant is producing mattresses-in-a-box for more than 25 online retailers. And Symbol has limited that contracting work so it can ensure capacity for its own production, Jannke said.
“Ten years ago, I never would have thought it was possible,” he said. “I never thought people would spend $600 to $1,000 on a mattress that they never saw or touched.”
Symbol didn’t have to go far for its mattress squisher. The machine came from C3 Corp., an engineering and manufacturing firm in Appleton.
Established in 1994, C3 built its first compression equipment about five years ago, but it’s only since 2015 that the market has taken off, said Mark DesJardin, who oversees business development and marketing for the company.
Since then, C3 has sold more than 40 of the big machines, which can exert anywhere from 8 to 40 tons of pressure and cost upwards of $300,000.
With the rise of the mattress-in-a-box trend, the company has nearly doubled its staffing in the past 14 months — from 25 to 45.
“And we’re still adding,” DesJardin said. “We’re adding a second shift now to our manufacturing side.” C3 also is looking to hire another five or six engineers.
“We’re in a huge recruiting push right now,” DesJardin said.
With the machines, a fully puffed mattress is fed through a curtain of plastic film until it lies between two massive steel plates. Four hydraulically driven pistons flatten the bedding by squeezing out the air.
The machine heat-seals the plastic around the mattress, which then is folded in half and rolled into a cylinder, ready to be boxed.
Verlo makes the great majority of its mattresses in small factories attached to some of its stores, but the company’s supplier makes the boxed version, since Verlo doesn’t have a compression machine, Thornton-Bias said.
The retailer will sell its boxed mattresses both from its stores — most customers should be able to slide the containers into their cars — and online.
“Our kind of secret weapon here is that we are a brand that has credibility and trust and goodwill from our consumer, particularly the people who have been Verlo customers for generations,” Thornton-Bias said. “It’s not like a startup where you have to tell people how great your product is or build reviews or build customer service scores. We have all that, because we’ve been in business for almost 60 years.”
There’s also another difference between Verlo and online retailers: Web-based firms such as Casper, Tuft & Needle and Leesa allow moneyback returns of mattresses (they end up being donated to charity or dumped) up to 100 days. Jannke thinks the ability to return is crucial to the online model.
Verlo will make comfort adjustments for customers but doesn’t take returns simply because someone decides a mattress isn’t satisfactory. Of course, Verlo customers can try out a mattress in a store before buying.
Furniture Today last estimated the online share of U.S. retail mattress sales in 2014. Then, it was 6%. Some industry observers think the total is now 10%, Perry said.
“That would be a huge jump in just two years,” he said. “I don’t know if it is or not; I’m not going to estimate it. But I will tell you there’s wide agreement in the mattress category that the direct-to-consumer channel is growing very rapidly.
“Remember the old dot-com days where everybody was jumping in?” Perry said. “Well, that’s what we’re in with this. This is considered a really sexy, cutting edge business.”
Jerry Epperson, a founder of Richmond, Va.-based investment banker Mann, Armistead & Epperson and perhaps the best-known analyst in the furniture industry, once thought the mattress-in-a-box business was a fad. While still harboring doubts about the online retailers — there are now about 100, he said — he has concluded that they fill a real need, primarily from young adults.
“I used to tell people they were the pet rock of the mattress industry,” Epperson said. “But (now) I don’t think so.”