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At the San Francisco research lab of online mattress-in-a-box brand Casper, you can find mechanical engineers and technical engineers, but don’t expect to find any ex-mattress industry employees.
That’s a fact Casper CEO and Co-Founder Philip Krim would proudly tell you when you ask him about Casper’s plan to stand out from an increasingly crowded field, where newcomers are eager to steal share in an industry that’s seen rising demand from consumers who are spending more on their sleep-related gear as part of the growing wellness focus.
“We like to have new ideas,” Krim said in an interview. “You see continued disruption in the industry….It reinvigorates us to think differently.”
Thinking differently will be crucial for Casper as the five-year-old startup’s increased competition is not just coming from other direct-to-consumer mattress brands including publicly traded Purple as well as Tuft & Needle, now owned by the largest U.S. mattress company Serta Simmons following a merger. Both Amazon and Walmart have also unveiled their own mattress-in-a box private labels.
“Before Casper came along, no one invested in online,” Krim said. “We don’t mind competition. We think our approach is highly differentiated. We call ourselves a sleep company….What Nike did for exercise and what Whole Foods did for organic, we want to do for sleep. … There’s renewed (consumer) investment in sleep as part of the wellness trend. The sleep category will be huge. We have a long way to go.”
A look at some of the new products Casper introduced this year will help explain what Krim meant by sleep company. The Hybrid mattress line containing both foam and springs that can be packaged and shipped in a box via UPS is just one thing. Casper has also unveiled a $129 Glow Light that it said can help consumers sleep better. In a sign of consumer demand, the item — with three months of planned inventory — sold out in the first three weeks, Krim said.
“We think holistically about sleep,” he said. “More people are making the investment in sleep.”
Industry data backed up his point that consumers are shelling out more for their sleep business, despite the shakeups in the mattress industry —Mattress Firm, for one, came out of bankruptcy protection in November only after shutting hundreds of stores, and both Mattress Firm and Serta Simmons CEOs recently stepped down.
The U.S. mattress industry has grown 20% over the past five years to $17.3 billion in 2018 and is forecast to increase by another 9.3% to $18.9 billion by 2023, Euromonitor data shows. Without doubt, a part of the growth and shakeup is driven by the likes of Casper.
Since it was founded in 2014, Casper has grown its share of the U.S. mattress market to 3.2% in 2018 from basically zero, ranking it No. 7 among all mattress brands, according to Euromonitor. In contrast, no. 1 Serta’s share inched up 0.4 percentage points to 20% over the same period. No. 2 Simmons and No. 3 Sealy’s share both declined slightly to 13.1% and 10.1% respectively.
Casper has sold mattresses to over 1 million consumers with sales topping $400 million last year, Krim told me. Like many other online-born brands, brick-and-mortar will be a key part of its growth strategy. With 23 stores in North America, mostly in the U.S., Casper plans to increase its physical footprint to hundreds of locations in North America in the next few years, he said.
The company’s products also are sold at Target, which has a stake in the startup. Casper officially joined the unicorn club this year, with valuation exceeding $1 billion, after it raised $100 million in the first quarter in its latest funding round, Krim said, declining to comment on whether the company has hired underwriters with plans to go public.
Rivals Eyeing The Market It’s Credited With Pioneering
However, as much as Casper, at its current size, likely still has plenty of room to grow in the expanding mattress market, holding or increasing its market share likely won’t come without some tough fight.
For instance, in a study of seven major online mattress brands, Casper and Purple have traded places for No. 1 spot the past two years, according to ecommerce research firm Edison Trends. Even though Casper reclaimed the top spot in the year through March 31, with a nearly 37% share among the seven brands measured, beating Purple’s 32%, Purple, which is also sold at retailers including Macy’s and Mattress Firm, outsold Casper for the third time in the past year, Edison Trends data shows.
Meanwhile, Tuft & Needle, at only about a quarter of Casper’s sales and ranked No. 3 in the study, has seen its share increase to 10% from 6% the past two years, according to Edison Trends. (Saatva, Leesa, HelixSleep and GhostBed round out the rest of the seven studied.)
Meanwhile, according to Rakuten Intelligence, Casper’s share in the total U.S. online bed and mattress market dropped to 5% in the year through March 31 from 5.2% a year earlier, while rival Tuft & Needle’s jumped to 4.5% from 2.7% and Sleep Number’s surged to 23.3% from 18.4%.
No. 1 Amazon, which sells Casper as well as its own AmazonBasics and Rivet collections and an exclusive Tuft & Needle line, increased its market share to 32% from 30.5% through more beds and mattresses bought on its site. Walmart.com, selling brands including its own Allswell mattress, saw its share inch up to 3.2% from 3.1%, according to Rakuten Intelligence, which studies online receipts.
Casper’s Krim declined to comment on Casper’s bottom line and whether it’s making money. But recent results from its publicly traded rival Purple may offer some clues about the state of things in the industry. Purple’s 2018 revenue rose 45% to $286 million, but its loss widened, thanks partly to higher marketing spending and increased product and freight costs.
The business for sleep is far from sleepy, and with it, the sobering reality that winning market share will likely continue to come at the expense of profit.
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May 7, 2019 at 02:22PM
Forbes – Entrepreneurs