Lie down, re­lax and or­der on­line

On­line re­tail­ers eat­ing into mat­tress stores’ cushy prof­its

South Florida Sun-Sentinel (Sunday) - - Money - By Rachel Siegel The Washington Post

Brick-and-mor­tar mat­tress stores aren’t rest­ing so easy.

That’s be­cause on­line re­tail­ers are lay­ing claim to what may have seemed like sa­cred ter­ri­tory for their phys­i­cal com­peti­tors: mat­tresses. The plush sur­faces where hu­mans spend a third of their lives may have seemed im­mune to ecom­merce just one decade ago. But not so any­more, given a boom in on­line mat­tress start-ups, de­tailed on­line user re­views, free ship­ping and no-has­sle re­turns.

Phys­i­cal re­tail­ers were told a cau­tion­ary tale this week when Reuters re­ported that Mat­tress Firm, the coun­try’s largest mat­tress re­tailer, is con­sid­er­ing fil­ing for bankruptcy. The com­pany is sad­dled by ex­pen­sive store leases and might be pressed to shut­ter some of its 3,000 lo­ca­tions, sources fa­mil­iar with the sit­u­a­tion told Reuters. As of Mon­day, the com­pany hadn’t made any fi­nal de­ci­sions, and did not re­turn a re­quest for com­ment by The Washington Post.

Mat­tress Firm was al­ready on shaky ground af­ter los­ing Tem­pur Sealy In­ter­na­tional, the maker of Tem­pur-Pedic mat­tresses, as a sup­plier last year. It has also been dogged by fi­nan­cial trou­bles of its par­ent com­pany, Stein­hoff In­ter­na­tional Hold­ings, in the wake of an ac­count­ing scan­dal.

But an­a­lysts agree that for Mat­tress Firm and other brick-and­mor­tar re­tail­ers, there are broader com­pli­ca­tions at play. Their most se­ri­ous com­peti­tors are on­line re­tail­ers who have found quick suc­cess with bed-in-a-box mod­els — of­ten mat­tresses that come com­pressed and vacuum-sealed to your door and then ex­pand to their full sizes once un­wrapped.

No need to come to a store, no need to lay down and feel for your­self.

Just like ev­ery­thing else.

“If you told [shop­pers] 10 years ago, ‘you’re go­ing to buy a bed-in-abox and you’re go­ing to love that,’ they’d say ‘what?’ ” said Brian Yar­brough, a con­sumer re­search Casper raked in over $100 mil­lion in sales in 2015 and opened its first per­ma­nent lo­ca­tion in New York ear­lier this year.

an­a­lyst at Ed­ward Jones. He com­pared the shift to early skep­ti­cism that couldn’t break into sell­ing ap­parel “be­cause peo­ple want to touch and feel it.” (Amazon chief ex­ec­u­tive Jeff Be­zos owns The Washington Post.)

But here we are. On­line mat­tress start-ups — in­clud­ing Nec­tar, Tuft & Nee­dle and Leesa — have won cus­tomers over with of­fers to buy mat­tresses on­line and try them out for a few months. Com­pa­nies will of­fer full re­funds for re­turned mat­tresses and, in many cases, donate used mat­tresses to char­ity.

Casper, for ex­am­ple, raked in over $100 mil­lion in sales in 2015, its first full year. The mat­tresses are sold at Tar­get stores, and ear­lier this year it opened its first per­ma­nent lo­ca­tion in New York. The store was out­fit­ted to feel like a

bed­room where cus­tomers are en­cour­aged to re­lax and even snooze. More than a dozen other pop-ups have opened na­tion­wide in the past few years.

Mean­while, stores like Mat­tress Firm have to con­tend with cav­ernous show­rooms and ex­pen­sive store leases. Mat­tress Firm closed about 70 stores in 2017, ac­cord­ing to a re­port from the fi­nan­cial ser­vices and in­vest­ment firm Wed­bush. An­a­lysts there es­ti­mate that the com­pany could close 600 to 1000 stores this year.

Charles Lindsey, an as­so­ci­ate pro­fes­sor of mar­ket­ing at the Univer­sity at Buf­falo School of Man­age­ment, said brick-and-mor­tar stores — from Toys R Us to JCPen­ney — have clearly suf­fered as shop­pers ven­ture on­line. Stay­ing com­pet­i­tive would re­quire those

com­pa­nies to ramp up their on­line plat­forms and “have this 360 de­gree pres­ence so that they’re avail­able to con­sumers in a seam­less man­ner.”

Peo­ple “like to shop on­line, but they also like to do some ex­pe­ri­en­tial shop­ping from time to time,” Lindsey said.

Mat­tress Firm isn’t out of the fight. The com­pany claimed a third of the in­dus­try mar­ket share as of a De­cem­ber 2017 re­port by IBISWorld. The com­pany gen­er­ated an es­ti­mated $3.8 bil­lion in sales in 2016.

“There are still go­ing to be con­sumers who want to test drive th­ese things,” said Meghan Gu­at­tery, a re­tail in­dus­try an­a­lyst at IBISWorld. “Peo­ple spend so much of their lives on their mat­tresses and in bed that they’re will­ing

to take the time to go to a store to re­ally test it out, and make sure the thing they’re buy­ing is what they want.”

But that may not al­ways be the case. Seth Basham, eq­uity re­search an­a­lyst at Wed­bush, said 12 to 15 per­cent of mat­tress in­dus­try sales is mov­ing on­line. That fig­ure, he said, is in­creas­ing by three per­cent­age points per year.

Lindsey said com­pa­nies like Mat­tress Firm should fo­cus on boost­ing their on­line pres­ence that can reach cus­tomers on their phones and so­cial me­dia. Mil­len­ni­als in par­tic­u­lar seek out “ex­pe­ri­en­tial ap­peal” that will draw them to­ward a com­pany on all plat­forms, he said.

“Whether they can do that or not,” he con­tin­ued, “that’s cer­tainly a dif­fer­ent an­i­mal.”


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