Mattress Firm: Losing by betting on bricks in the age of clicks

Mattress Firm the largest US mattress retailer continues to struggle because of pressure from D2C players and its miscalculated expansion strategy.

In 2018, US largest mattress retailer, Mattress Firm, filed for chapter 11 bankruptcy protection. In the age of e-commerce, Mattress Firm aggressively expanded store footprint, growing from 700 stores to over 3500 stores1 in little over five years including the acquisition of two of its retail competitors Sleep’s and Mattress Barn. It has since emerged, after closing several hundreds of stores. So how did US’s largest Mattress retailer join several large retailers such as Borders, Sears, and Forever 21 among others to become a digital loser?

Like its retail peers, Mattress Firm miscalculated the threat of e-commerce. It instead, heavily bet on expanding footprint, to a point that across the country, several Mattress Firm stores were located within a few block of each other1. Mattress Firm, didn’t believe Direct to Consumer (DTC) upstarts such as Casper posed a credible threat and were late to leverage the bed in a box mattress category. Instead of migrating more and more sales online to realize potential cost savings it expanded retail, realizing some synergies through acquisition but continued to lose market share to ever increasing online players, including the likes of Amazon and Wayfair.

D2C players such as Casper were able to ship mattresses in compact boxes, right at the consumer’s doorstep and offer a 100 day money back guarantee. They were able to also offer a competitive product at a cheaper price point by eliminating the fixed cost associated with running retail outlets, sales staff and multiple product offering. Casper tried to solve the pain of buying a mattress in a retail store and prided itself on both having superior customer experience and a better product. In a 2015 video below, the CEO of Casper shares how his product is superior and ultimately improves customer experience.

Casper: Waking up a sleeping industry

A new D2C entrant Nectar sleep is further taking customer centricity and trialibity to a new level. They are offering a 365 day money back guarantee in addition to lifetime warranty. They also claim that their product construction is superior by having the most comfortable mattress in the market. The below video shows their recent ad campaign

Nectar Sleep is offering a 365 day money back guarantee, lifetime warranty bed in box delivered to the door.

The main challenges for DTC players continues to be awareness in an increasingly fragmented market and the preference that consumers have to physically try multiple products before making the purchase decision2. D2C players have tried to solve for this by creative Digital marketing strategies that do not always include a specific sale for example Casper introducing a sleep channel on Spotify and Youtube that include sounds to aid sleep.

Casper: Spotify Channel

Per internet Retailer Magazine, in 2015, Casper, a then new unknown small entrant with a negligible market share received 1.5M monthly site visits compared to 850K for Mattress Firm. 2 A key challenge Mattress Firm faces going forward is how to appeal to the millennials by  bolstering its online commerce and digital marketing capabilities. Even today, Caper has over 160K followers on Instagram versus 23K for Mattress Firm (678K versus 480K on facebook).

Mattress firm still has an opportunity to win in the digital age by investing in the next wave of digital disruption in the industry that will include connected devices and smart mattress. In Mintel’s 2019 study3 of the US mattress industry, 37% of consumers expressed interest in Smart Mattresses use to manage health.

While in-store purchases continue to dominate the mattress sale segment, overtime with the convenience and savings online only players’ offer, Mattress Firm is likely to continue to struggle. What Mattress Firm needs is to invest heavily in digital channels to provide a seamless Omni-channel experience to its customers, rebrand itself to appeal to the younger generation, invest in social media and digital advertising channels, developing smart connected mattresses and try to match the D2C players with money back guarantees.

 

[1] Calkins, L., Feeley, J. and Townsend, M. (2018). How a Frenzied Expansion Brought Down America’s No. 1 Mattress Seller. [online] www.bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2018-11-28/how-a-breakneck-buildout-brought-down-america-s-mattress-leader [Accessed 11 Feb. 2020].

[2] Mintel (2017). MATTRESSES. US, APRIL 2017. Mintel.

[3] Mintel (2019). MATTRESSES. US, DECEMBER 2019. Mintel.

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4 thoughts on “Mattress Firm: Losing by betting on bricks in the age of clicks

  1. Great article! It is interesting that massive retailers failed to follow “changing customers”, not to mention new entrants. The omni-channel strategy sounds interesting, but it might not be easy to execute. Even Walmart and Bestbuy had hard time to build the channel and still struggle to optimize both offline and online channels. After all, Mattress Firm sells “mattresses.” Brands or manufacturers can make own online channels or work with Amazon instead of waiting for Mattress Firm to build DTC capability.
    My biggest question, though, is who earns money in this industry? As far as I know, Casper is losing tons of money. Mattress Firm went bankrupt. Manufacturers maybe? The industry might not be a good place for innovators… or for anyone.

  2. I find the brand of Mattress Firm to also be quite interesting – when I think of Mattress Firm, I always think of the big “Going Out of Business” signs like the one you have in your header. I’m curious if maybe Mattress Firm harmed their brand a bit by appearing cheap.

    I feel like if you’re going to have physical facilities for selling something, this gives you an opportunity to have the buying process be even more enjoyable – you can physically pamper your customers and get customer insights no one else has. I’m curious if maybe one way Mattress Firm could pivot would be to re-brand and become a luxury mattress store – something that focuses more on a pampering experience rather than just the buying and selling of mattresses.

  3. Great blog! I agree with London L. above on how the brand that Mattress Firm has somehow created is that of a “cheap, basic” company. Funnily, that’s the image I told too!
    Agree with you on the Omnichannel approach is worthy of a trial, but I wonder if simply keeping a physical store along with digital presence solves the purpose in today’s world. I think the world is moving towards a place where physical is luxury, exclusive and experience is important, while digital is quick and convenient. If that analysis of mine is to be believed, Mattress Firm did not stand a chance. I will enter a physical place to make a purchase, watch a show or study in classrooms only if the experience is what sets it apart. A “cheap, basic” Mattress Firm-like store gives me no incentive to leave my couch where I can easily shop around, compare prices and get someone to come to my place to deliver me the items. The retail experience has to be more than just a store.

  4. Great analysis! I agree with you on the diagnosis and how wrong strategic decisions led Mattress Firm to file for Chapter 11. And I also agree that a multichannel approach is the way to go to try to catch up to their competitors value proposition. I wonder if they have the operational capabilities to pull this off, or if they should just focus on potentially acquiring one of these DTC companies and try to merge both value propositions into one shopping experience.

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