In the past, if you wanted to buy a new mattress, your only choice was to visit a retail showroom, lay on dozens of different beds, and—in a matter of moments—attempt to decide which one you’d like to sleep on for the next decade. All while a pushy salesperson hovered nearby.
Today though, there are dozens of direct-to-consumer online mattress companies that claim to deliver the same quality and value as national brand mattresses, but with prices that are up to 80% less. Not only this, most of these options also come with lengthy in-home trials, where you’ll literally pay nothing—including shipping or delivery—if you’re not completely satisfied.
In this guide, we’re going to take a closer look at the rapid increase of the online foam mattress companies, while answering two important questions:
- Why are these companies popping up everywhere?
- Do they deliver better deals than the mainstream competition?
Why Are There So Many Online Mattress Companies?
According to a recent Freakonomics podcast, by some estimates, there are at least 9,200 retail mattress stores in the U.S.—three quarters the number of Starbucks! Why?
Utpal Dholakia, a Professor of Marketing at Rice University in Houston, TX who was interviewed for the podcast, tells us that it all comes down to markup.
For example, profit margins for grocery stores and many other retail industries, such as clothing, are generally in the single digits (even below 5%). Mattresses, on the other hand, can be marked up 100% or more, primarily due to ultra-low manufacturing costs.
To drive this point home, we’re told that under the traditional retail model, a mattress that sells for $1,000 might only cost $250 to manufacture. However, this isn’t all profit, since the company has a lot of other built-in costs, such as sales, marketing, franchise fees, retail labor and rent costs, and more.
In a nutshell, despite the inherent costs, it’s extraordinarily profitable to manufacture and sell mattresses. As a result, everyone wants a piece of the pie, which is why you’ll find an abundance of mattress stores in just about any strip mall in America.
The Recent Popularity of Turnkey Products
Remember the built-in costs we just discussed? What if there was a way for companies to minimize them—largely by eliminating the retail component—and then pass the savings along to consumers? This way, they’d be able undercut the national companies and grab a piece of the larger pie.
Well, this is the fundamental approach that just about every online-only mattress company operates under. But how are they pushing out the middlemen? What tools are they using?
Sam Prochazka, co-founder of Novosbed, who has offered direct-to-consumer mattresses since 2009, tells us that it largely hinges on the turnkey business model already present within most of the mattress industry. What do we mean?
Whether you’re a freshly minted online competitor or a major player who’s been around for decades, Sam points out that most mattress companies don’t manufacture in-house. Instead, this is handled by third-party factories (known as OEMs) who source the materials and produce mattresses according to the company’s specifications.
Except for top-level companies, however, who can afford the custom tooling process, Sam says that the vast majority of OEMs are limited in what they can manufacture; factors like foam densities, grades, thicknesses, and order (firmer layers are always on bottom, softer layers are always on top) are tightly restricted. In other words, the factory provides companies with a limited set of options, and they choose to create their product accordingly.
On the downside, this business model limits manufacturing options, which is why most companies offer very similar mattresses. But on the upside, according to Neal Van Patten, President of Spindle, a custom online-only mattress manufacturer, it also allows most of these entrants to begin building and shipping their mattresses to consumers after little more than setting up a website.
In fact, Yogabed, one of the more popular online mattress brands, was started out a home office. Some entrepreneurs have used this simple model to start multiple bed-in-a-box companies, such as Phillip Krim, CEO of Casper, who also founded Angel Beds, Tranquility, and Dream Number.
To drive home the point even further, given this low barrier to entry, Sam tell us that more than 40 bed-in-a-box companies entered the market last year alone.
But how do all of these new companies differentiate themselves?
The Power of Storytelling
Because of these manufacturing limitations, you’ll often find that many online-only brands appear relatively the same, with similar color schemes, foams, and firmnesses. Even among bed-in-a-box brands sold at places like Costco for the better part of a decade, you won’t find a whole lot of deviation.
In fact, often times the only differentiating factor is the foam layers contained in their mattresses.
With such similar products, Neal Van Patten notes, “the challenge for a lot of these companies is building awareness through marketing.” In other words, it’s up to them to sell a not-so-unique product by telling a unique story.
Neal continues, “The innovation [that led to this popularity] was the marketing and storytelling. The story resonated with people because when you go to a traditional mattress store, the commissioned salesperson is incentivized to sell the most expensive mattress. They want to sell you a $3,000 mattress and not something under $1,000.”
Sam seems to agree when telling us, “Some companies are marketing companies first and mattress companies second.”
Like we mentioned at the beginning, many consumers are sick of this stale business model, and these new online companies make them feel more empowered during the purchasing process, while potentially saving them a boatload of money.
At least this is the narrative we’re always being told. In reality, will you save money by buying your next mattress online? Let’s continue exploring.
Do Online Mattress Companies Deliver Better Value?
To give you an idea of just how much money circulates within the mattress industry, despite their immense popularity, the Freakonomics podcast notes that online brand Casper only accounted for about 6% of total mattress sales last year. However, this translated into $100 million in revenue, which is expected to double this year.
Clearly, even a small market share can mean big money in the mattress industry. But just because many of these online brands are steadily increasing their market share by appealing to more customers, does this necessarily mean you’re getting a better deal and value than at a retail store?
To answer this, let’s first talk about what you’ll get for your money.
Do Online & Retail Mattress Come with Equivalent Features?
According to Herme Bloom, owner of Home Mattress Center in Wilmington, DE, many of these online mattresses—including top choices like Casper—aren’t “significantly different than most of the memory foam products available in retail stores.” Coming back around to the turnkey concept, he adds that Saatva “is manufactured by one of the Top Ten bedding manufacturers. It is not different than the bedding these companies produce for regular retail and department stores.”
So, at least from a features perspective, there might not be a significant distinction between comparable online and in-store mattress options.
What about from a price perspective, though? Will you get a lower price for a similar mattress by shopping online?
While online mattress companies often focus squarely on price, next, we’ll talk about why it shouldn’t always be your number one factor.
The Value Proposition
If you’ve been a HighYa reader for long, you know we often emphasize value over price when deciding which products are deserving of your hard-earned money. And when you’re comparing online and in-store mattress shopping, there are a couple important value-adds you might not immediately recognize.
First, Jerry Epperson of investment banking firm Mann, Armistead, and Epperson, has been studying the mattress industry for 45 years. In the Freakonomics broadcast he was quoted as saying:
“You have to be a strong marketer to be in the mattress industry because you’re really selling identical rectangular slabs. And the consumer has no clue what’s inside.”
The point? Online mattress companies often go to great lengths to provide in-depth information about their mattresses, such as important foam specs like types, weights, origin (natural or man-made), chemicals used during manufacturing, properties (sinkage, bounce, etc.), and more.
“You have to be a strong marketer to be in the mattress industry, because you’re really selling identical rectangular slabs. And the consumer has no clue what’s inside.”
Alternately, you won’t have a lot of this information available when shopping for a retail mattress—at least not without asking the salesperson to fetch a spec sheet for every option in your price range. Not to mention the fact that you’ll have to remember all these specs while you shop between stores.
As such, you can generally spend much less time learning all the nitty-gritty details when shopping for a mattress online, versus in-person. And in today’s age, time is money. So, by saving you a great deal of time, even a similarly priced online mattress might deliver more value for your dollar than a retail one.
Another value-add to consider is that purchasing a retail mattress often includes additional fees for delivery. Even if you own a truck and pick the mattress up from the warehouse yourself, it will still cost you time and gas money.
On top of this, you could also be subject to restocking fees if you decide to return your store-bought mattress, not to mention steep pickup and re-delivery fees.
Given the higher level of value consumers might find with online mattress buying, is the sky the limit for this burgeoning industry niche?
Will This Online Mattress Buying Craze Continue?
Considering the sharp increase in the number of online mattress companies vying for your business, it’s not hard to imagine that the market will eventually reach a tipping point. So, you might want to enjoy all these options while the market can still support them.
Returning again to our conversation with Novosbed co-founder Sam Prochazka, he tells us that even among some of the online-only frontrunners, many remain unprofitable. In fact, since his company closely monitors different key metrics, he can already see some companies pulling back their presence.
Sam said that the survivors are now battle-hardened, which is going to make it even more difficult for new competition to enter the playing field. Will this result in a race to the bottom in the interim?
Posed with this question, Sam mentioned that all of these companies have “substantial fixed costs”, such as the price of foam and other goods, as well as things like logistics. He also noted that current prices are about as low as they can get, so he didn’t foresee them dropping too much.
Michelle Fishberg, Co-Founder and CEO of Slumbr, a company focused on sleep wellness, has a slightly different take:
“I anticipate we’ll see a shakeout here, as the cost to acquire a customer online continues to go up. These competitors are setting a new bar in price expectations in the category, which drives ASPs (price) down. Which eats into margins. So, there will be less margin left to acquire a customer. Dozens of entrants in [the] bed-in-box [market] will exacerbate the problem and will cause a shakeout; most will not be economically viable long-term.”
To differentiate Novosbed from the competition, Sam notes that he began working only with American companies in 2011. Combined with the fact that the company is headed by four engineers, this means he and his team are now involved in every design, manufacturing, and delivery component, including the cover, fabric, threads, zippers, and even how their mattresses are compressed and rolled.
Given everything we’ve talked about, while you might find equivalent mattresses from online and in-store brands, we think online companies are still set to continue their market disruption. Why?
We think their more streamlined business models—while delivering fewer options—could ultimately provide more value for the money than their retail brethren, if not always lower prices.
» For Further Reading: Best Bed-In-A-Box Mattress Buying Guide