March 11 (Bloomberg) -- Entrepreneur Earl Kluft spends a lot of time lying down on the job. As founder and chief executive officer of luxury mattress manufacturer E.S. Kluft & Company, he tests many of the $2,000 to $50,000 beds -- each of which are made by hand in his Rancho Cucamonga, Calif., factory.
Kluft, 62, was born into the mattress-making business. His grandfather started DeLuxe Bedding Company in Los Angeles in 1946. At the age of 14, Kluft began working in the sewing room. By 18, he was helping design fabric and coordinating production with textile mills. He made mattresses, loaded trucks, and worked in sales and as a supervisor.
Fast-forward to 1990. Kluft had acquired all the shares in the family business, and was running the show. Since 1986, when he had designed the first $2,000 bed for Bullock’s (now Macy’s), he had thrown himself into creating luxury mattresses. In 1996 he launched the brand Chattam & Wells, which lavished mattresses with details like 24-karat gold corner vents and Belgian damask.
Then, with the hope of expanding nationally, he sold the business in 1999 and stayed on as a consultant. The new leadership scaled back on the luxuries that Kluft felt distinguished the brands he had built. Disenchanted, he resigned in 2003. In 2004 he bought the trademark names and equipment of struggling Aireloom, a company he had revered in his boyhood, for $1.2 million. His goal: make the best mattresses in the world without relying on overseas production. He retained half of Aireloom’s staff and recruited from his former company to create E.S. Kluft & Company.
Now he sells the luxury handmade beds primarily through 350 brick-and-mortar locations in the U.S., including department stores such as Bloomingdale’s and Macy’s, and through these stores’ websites. With $44 million in revenue in 2010 and a $50 million target for this year, his company is the only domestic manufacturer of luxury handmade beds with national distribution, he says. Ready to expand production, Kluft is scouting the East Coast for locations for a second factory that could double his 100-employee workforce this year. He spoke recently with Bloomberg.com contributor Megan Shank for this as-told-to Entrepreneur’s Journal:
Not everyone can make a beautiful mattress, just as not everyone can be a major league pitcher. You need to have a feel for it. It’s an art, not a science. We have a young kid here in his 20s who I will put up against anyone in the world. He is that good. We started him out with guides and measurement tools. A week later, I returned and the props were gone. He stitches beautiful beds. There is another guy we got out of another mattress factory to do welting. When he first arrived, I wouldn’t even let him touch the better stuff. Today he’s the best.
Our $2,000 bed is an opening model. Our most expensive bed is the Cameo. It retails at $50,000. We cater to the luxury buyer -- those with seven-figure net worth who drive fancy cars, stay in five-star hotels, eat in fine restaurants, and wear cashmere, not wool. Everybody knows a decent diamond ring is $50,000 -- why spend that much on a mattress? Sleep is important. Of course, you can go to Sears and buy a thousand-dollar oven and it will cook food fine, but if you buy a Viking stove, things will turn out beautifully. If you’re driving a Lexus and you think it’s a Mercedes, you’re misguided.
When the first crunch hit, we almost didn’t feel it. When the major crash happened, we felt it for about nine months. That’s when we really focused on educating people about our mattresses, emphasizing the fact that your mattress is the most important thing you have in your house. Our customers always had the money. They just felt they had to tighten their belts a bit like everyone else.
We’re always thinking about ways to improve. We’ve gradually changed our mind that thicker is always better, because it was starting to get ridiculous -- beds were 24 inches thick! That trend began in the 1980s when customers perceived value from bulk. We wanted something that felt thick but wasn’t so big. Now we’re making some mattresses that are 14 inches to 16 inches thick.
We continue to broaden our retail outlets. We’re in 50 Macy’s, 23 Bloomingdale’s, and we’re going to be selling in a couple of Warren Buffett’s furniture stores -- we’re already in RC Willey, and we just had a meeting at Nebraska Furniture Mart’s Kansas City store, where we’re doing a test run, and hand-tied a mattress for them. Several managers told me it was the best meeting they’d ever attended. We’re going to push the store to higher prices. Retail loves us because they make money on better stuff. But I’m not motivated by money. I’m motivated by praise for our beds, by the knowledge that someone sold two of our $40,000 beds on a single day. I’d love to get Warren Buffett on one of my beds.
We position ourselves as competitors with [luxury mattress brands] Hastens or DUX. The difference is that they have their own stores, whereas we sell in department stores that sell other brands. We’ve also licensed four countries to manufacture and sell our beds -- Indonesia, Australia, Mexico, and China. We adjust the products we sell abroad. For example, in Mexico, we top out at $5,000 beds, but they’ve done well. In China, on the other hand, we’re going to show a $33,000 bed in a couple weeks and we expect to sell some.
We want to demonstrate to the world that Americans still make quality products. I want to lead the charge to bring the prestige back to the American brand. As America figures out the best way to survive in a fiercely competitive global economy, we’ve got to move up the value chain. We can’t afford to be low-cost producers anymore. My biggest hope is that we can train a workforce identical to the one we have in California for our second factory.
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