ONLINE START-UPS EYE MATTRESS MARKET
Beds line the perimeter of Sleep Country Canada’s downtown Toronto store. In all, there are 62 mattresses to test out and one salesperson, armed with extensive product knowledge and in-depth history of the industry, who invites customers to test out the beds. He insists this isn’t the sort of purchase that can be made online, where a few new players are knocking on the market’s door.
Bricks-and-mortar retailers such as Sleep Country, Hudson’s Bay, Sears and furniture retailers including The Brick and its parent, Leon’s, used this traditional sales approach to rack up $1.7 billion in mattress and foundation sales last year.
And while analysts debate whether rising home sales or aging baby boomers are pushing mattress sales up, there is a handful of online upstarts looking to grab some of those sales by offering free door-to-door delivery of a foam-based mattresses and a full refund if customers aren’t satisfied.
Ari Herberman, co-founder of Toronto-based Endy Sleep, said there isn’t enough transparency in advertising or when consumers interact with staff at traditional mattress retailers. “There are so many gimmicks around sales that will run for literally quarters at a time.”
In the past 10 years, mattress sales jumped 46 per cent, figures from Statistics Canada show. Deloitte’s compound annual growth rate formula suggests a more modest 3.9 per cent rise.
One possible explanation for this increase is that Canadians are spending to furnish their newly constructed homes, said John Archer, a senior adviser at retail consultancy firm J.C. Williams Group.
CMHC data show housing completions have moved relatively in line with mattress sales in the past few years. The industry is still recovering after the recession, said Jennifer Lee, Deloitte’s national retail leader. However, Lee said higher disposable income and an aging population that’s more inclined to drop cash on higher-quality mattresses will drive sales even higher in the coming years.
Whatever the catalyst, several ecommerce start-ups hope to exploit it. They contend there’s a better way to shop and it isn’t being courted on the retail floor. They all say the dominant players’ business model is flawed, and while price is a major reason, it’s not the only one.
Endy Sleep, for example, offers one memory foam model in four sizes and the price ranges from $650 to $850. Herberman said if the customer doesn’t like it and returns it, then Endy isn’t for them.
Part of Herberman’s beef with the traditional sales model is that it’s unnecessarily complicated. The usual cost culprits — real estate, factory-to-sales-floor shipping, commission and salary — can be stripped out, he said, to make prices more reasonable and salvage reasonable margins at the same time.
“Cutting out the retail aspect simplifies things,” he said. “We circumvent the gimmick and the up-sell model.”
New York-based Casper, which started shipping to Canada in November, also said consumers are better served without complex product lingo that CEO and co-founder Philip Krim says is endemic in showrooms.
“Usually, it’s a commission salesperson that’s greeting you and taking you through a process where you don’t know a great deal of information about what you’re buying,” said Krim, who considers Canada a significant part of Casper’s expansion strategy.
Edmonton-based Novosbed is considering an unmanned showroom to complement its online channel. It would ensure the company wouldn’t revert to “that pseudo-science, in-your-face sales pitch that’s ubiquitous in the industry,” co-founder Sam Prochazka said.
Many consumers consider mattress shopping to be an overwhelming experience, with prices that vary from hundreds to thousands of dollars. But even if the start-ups have convincingly narrowed that range, Sleep Country stands by its well-known jingle, “Why buy a mattress anywhere else?” And its sales back that at $323 million in 2014, a fifth of the overall market. Sears did not reveal specific mattress sales figures; Hudson’s Bay Co. did not offer comment for the story; Leon’s did not return calls.
Prochazka forecasts Novosbed’s sales will triple this fiscal year, putting it on track for upward of $10 million. Endy Sleep declined to release sales numbers, citing ongoing financing negotiations.
Sleep Country, though, isn’t batting an eye. A prospectus filed earlier this month outlining its intention to go public included plans to open as many as 70 new stores in the next five to seven years.
The company, which declined to comment for this article, has claimed it has “unaided brand awareness” and “strong supplier relationships” on its side, including such brands as Tempur-Sealy. It argues in its prospectus that the Canadian market faces a low risk of “online cannibalization and ‘showrooming,’ ” — the tendency to browse in-store and buy on the web — partly because mattresses are a tactile-dependent purchase.
Sears sees advantages in a hybrid approach, while The Bay allows customers to order mattresses by phone, but not online. A Sleep Country salesperson said the company intends to roll out accessory products for purchase online, although vice-president of marketing Laura Baker declined to confirm that. Sears’ online mattress sales are growing, but the company said it still sells three-quarters of mattresses in-store. “Trying it out is still important to customers. A mattress is a very personal purchase,” said Sears spokesman Vincent Power.
Endy, Novosbed and Casper all contend consumers need to take more than a few minutes to decide if they’ll get a good night’s sleep. They offer full return policies that range from 100 days (Endy and Casper) to 120 days (Novosbed, whose return rate is three per cent). Sleep Country lets customers make an exchange within a 60-day period.
“If we’re asking customers to purchase something that they’re not able to lie down on or physically touch as they can in a showroom, they need some kind of insurance policy,” said Herberman, noting Endy donates returned mattresses to local shelters.
Endy has, however, found a unique way for consumers to test their mattress without buying one. It partnered with Toronto’s boutique Drake Hotel. If guests want to know what they slept on, they’ll see Endy’s ads on the nightstand.
While retiring baby boomers would seem like prime candidates to buy mattresses, Endy’s biggest share of customers are between 24 to 35 years old. Herberman says it’s a compelling demographic made up of “a young, tech-savvy group of people who are guaranteed to be moving a number of times within a short time span.”