To the Mattresses: A Disruption Is Turned on Its Head

SMITH BRAIN TRUST – Online ecommerce mattress startups like Casper and Leesa have been disrupting America’s brick-and-mortar mattress retail segment in recent years.

But now, that disruption is being turned on its head, as those online firms look for a physical store presence, says P.K. Kannan, the Dean’s Chair in Marketing Science at the University of Maryland’s Robert H. Smith School of Business.

“All companies want growth, and for these online mattress companies, the only place they perceive rapid growth opportunities is offline. And for the offline mattress companies, they look at online as the place to grow. The other side is always greener,” Kannan says.

Online mattress seller Casper says it plans to open 200 physical stores in the next three years. Casper, one of the better-known names in a crowded field of online mattress sellers, already had been testing pop-up stores at shopping centers across the country. The brand also sells through partnerships with Target, Nordstrom and Amazon. Online mattress-maker Leesa is also getting in the partnership game, striking a deal with upscale furniture retailer West Elm.

Serta Simmons Bedding, meanwhile, isn’t taking the competition from e-commerce lying down. The legacy brand, which has long sold its mattresses through the struggling Mattress Firm retail locations, last week announced plans to buy up direct-to-sleeper mattress brand Tuft and Needle, as it seeks a foothold in the expansive segment of the mattress ecommerce.

For Serta, the tie-up is an acknowledgment of the popularity of buying mattresses in what once seemed an unlikely place: Online. In the early days of e-commerce, many people believed that mattress purchases were so personal that they required a consumer's physical touch. “It was an experience buy,” Kannan says.

That changed, Kannan says, as consumers became increasingly comfortable buying things – even high-dollar-value, experiential items – online. Consumers generally trust online product descriptions and reviews, and they like the ease of clicked-and-delivered services. The promise of no-worry returns, meanwhile, erased any lingering reticence for many.

Online mattress companies had found their groove and an audience eager to buy a mattress online, without a showroom visit, reassured by glowing testimonials from other customers. The consumer base grew, reviews proliferated, growing the base even more. “Many of these companies, they deliver the mattress to you in a small package and they open it and, over a little time, it expands. And it is all very interesting,” Kannan says.

More and more sellers entered the booming market. And then, a shift. Growth slowed, as the market became saturated.

“What you are seeing now as a result is the creation of omnichannel options, sellers with a showroom and an online means for buying a mattress,” Kannan says.

For ecommerce startups, those showrooms may help ease another worry: Product returns. It’s a worry that Kannan says has grown as the customer base expanded from the initial, enthusiastic adopters to a broader audience with varying expectations. “When the policy says ‘If you don’t like the product, you can return it,’ that’s what many people will do,” he says.

About 40 percent of clothing ordered online is returned, Kannan says. In-store clothing returns, meanwhile, typically come in around 7 to 10 percent.

“As you continue to push your product out to more and more people, you will begin to attract the people who are less comfortable with online buying, and those customers are going to be more likely to return your product,” he says. 

And that’s not cheap. For mattress sellers, the reverse logistics involved in product returns come at a high cost, with delivery workers dispatched to the customer’s house to pick up a product that then must be destroyed or refurbished and sold as used. It makes brick-and-mortar overhead look fairly attractive.