Bed-in-a-box businesses are booming by betting most people won’t send them back.
Not too long ago, buying a mattress with a click instead of a trip to a store was virtually unheard of. But now that easy delivery processes and generous return policies have helped online mattress retailers gain traction with consumers, entrepreneurs have taken notice. No fewer than six startups are vying to become the online mattress retailer of choice. The latest entrant is Helix Sleep, which three Wharton grads launched this week. Helix joins Casper (one of Inc.’s 30 Under 30 startups), Tuft and Needle, Leesa, Saatva, and Novosbed in what is quickly becoming a very crowded market.
Here’s what’s fueling the online mattress boom.
Brick-and-Mortar Straw Men
Why would three Wharton grads enter this crowded field? In addition to all of the high-profile startups, you have heavyweight incumbents (mattress makers like Tempur Sealy and retailers like Mattress Firm) to deal with. For Helix, which has raised $800,000 from friends and family, the “starting point is customer issues with the current system,” says Kristian von Rickenbach, one of the three co-founders. You can boil down those issues to two major points: Price: As with the other online players, Helix’s prices run in the high triple digits. And while you can now click to buy more varieties of a sub-$1000 mattress than you could at any point in human history, all of the online players can still use the higher prices of brick-and-mortar retailers–whose mattresses can cost as much as $3,000–to set their own sub-$1000 prices in flattering relief.
Selection and customization: Here’s where Helix aims to differentiate itself from some of the other online players. To alleviate the paint point of an overwhelming number of mattress options, Casper sells only its own brand in six different sizes. Helix, however, is betting that a little bit of customization will be more compelling than the one-size-fits-most product approach. “A tall, 250-pound man needs a different mattress than a short, 125-pound woman,” says co-founder Adam Tishman.
A Smooth Customer Experience
Of course, the challenge is how to present consumers with multiple, customizable options while still providing a smooth and fast online shopping experience. Helix, which is based in New York City, aims to do this in two simple steps. First, shoppers complete a short (two-to-three minute) questionnaire addressing height, weight, sleeping style, and firmness preference.
Next, based on responses, Helix creates an individualized mattress along four parameters: feel (how plush or firm you like it), support (how far and evenly your body sinks into the mattress), temperature regulation (how much heat you lose throughout the night), and something called “point elasticity” (the ability of the materials in the mattress to compress without affecting the quality of the mattress). Does this mean no two customers will get the same mattress from Helix? No, not exactly. “It’s impossible to create a completely different mattress for every person from a manufacturing perspective,” says Tishman. But he believes that Helix’s designs–which he says number in the “low double digits”–can “cover 95 percent of the population.”
And the company doesn’t view its dozen-or-so designs as a static thing; they plan to adjust accordingly, once customer data begins to roll in. Even in the pre-launch period, Helix has tweaked its ability to create an accurate sleep profile, based both on data (from its beta-test sleepers) and anecdotal experiences. For example, the company learned that terms like “soft” and “firm” can be highly subjective, and vary depending on geography.
“Most people in the northeast prefer a firmer feel than in south,” says Tishman. That’s an interesting finding, in and of itself. But it also means that when you ask someone in the south for their mattress preference on the sliding scale of firm to plush, you have to recognize that their “firm” answer does not mean the same thing as when someone from the northeast says “firm.”
Steady Growth, Big Margins You might wonder whose approach–Casper’s or Helix’s–will prove to be wiser. But it’s closer to the truth to call the $15 billion (U.S.) mattress industry an ever-expanding pie, with room for both traditional, brick-and-mortar players and the bevy of online upstarts. Many of those upstarts are making serious money. Both Tuft and Needle and Casper are selling more than $1 million in mattresses a month. Saatva posted $29 million in 2014 sales and expects at least $50 million this year.
Yet to say the mattress establishment is atremble at the prospect of a disruption from the upstarts would be a strong exaggeration, notes Joshua Borstein, analyst with Longbow Research.
“They are a needle in a haystack compared to Tempur Sealy, with its $3 billion in sales,” he says. In Borstein’s view, the mattress giants–both makers like Tempur Sealy and retailers like $2-billion Mattress Firm–are “kind of monitoring the situation,” but as yet unmoved to action, since the upstarts are scarcely denting the bottom lines of the old vanguard.
The established players can afford to sit back because they are thriving. According to industry consultancy Mann Armistead & Epperson, sales for bedding retailers have grown by an annual average of 9.6 percent over the last 12 years. For Helix, the growth of the overall market was a major enticement, as were the relatively low levels of e-commerce penetration for mattress sales. “It’s around 5 percent,” explains Tishman. “And if you compare it to fashion or furniture, those are more in the 15-20 percent range.” Helix’s conclusion, based on these numbers and anecdotal research, was that there were consumers who (despite existing online offerings) still didn’t feel comfortable purchasing a mattress online. If Helix’s personalized solution could help bridge that gap, then Helix could contend for a profitable piece of the industry’s continued overall growth.
A Rising Tide
It’s still too early to tell what, if any, kind of shake-up will happen to the online mattress market. But pretty much anyone you talk to will praise the job Casper has done of marketing the idea of buying a mattress online. “To be honest, we’re bigger than Casper,” proclaims Saatva founder Ricky Joshi. “But they’re doing a great job with the hype.”
It sounds like a dig. But Joshi means it as praise. While Casper is far from the inventor of bedding e-commerce–nor is it the only one garnering Warby Parker comparisons–it is easily the leader in capturing the public’s attention via social media and the business media. And all of that attention brings consumers to other online mattress startups too.
“Casper and a few others have brought a lot of attention to the fact that there are several alternatives,” says Daehee Park, co-founder of Tuft & Needle, for whom Bonobos founder Andy Dunn acts as a formal advisor. “A rising tide lifts all boats.” With Helix joining the voyage, that rising tide now has one more boat to support.
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