Source: Mattress Firm

Mattress Firm to Take On Startups With Online-Only 'Dream Bed'

  • Product designed for first-time shoppers and millennials
  • Company looking to bounce back from last week's stock plunge

Mattress Firm Holding Corp., a nearly 30-year-old retail chain, has seen the success that bedding startups are having with millennials and wants a piece of the action.

The company is introducing a mattress called the Dream Bed that it will sell on a dedicated website, seeking to compete with e-commerce companies like Casper Sleep Inc. The product will debut on Oct. 1, aimed squarely at 20- or 30-something shoppers who are already comfortable ordering a bed online.

Like Casper, Mattress Firm is selling the product for less than $1,000 and offering a money-back guarantee, helping ease concerns about purchasing a mattress without testing it first. The Dream Bed has a foam mattress that can be rolled up into a box, making shipping easier. And to top off the millennial outreach, there’s a feel-good component. In an approach used by Toms Shoes and other startups, Mattress Firm will give away one of the beds for each one it sells.

“We know the millennial consumer wants to see the world a better place than they inherited,” said Ken Murphy, the president of Mattress Firm. “There’s a proliferation of bed-in-a-box options out there, and we thought there was a better way to do it.”

This product’s debut follows a rocky second quarter for Mattress Firm. The company’s earnings fell short of analysts’ estimates last week, and it slashed its profit forecast for the year. That sent the shares plunging 23 percent on Friday, the biggest one-day drop since they began trading in 2011. The company said sales slowed in energy-industry hotbeds like Houston -- where it’s headquartered -- because of falling oil prices. The company did, however, increase same-store sales for the eighth straight quarter.

Stock Slump

Mattress Firm shares fell an additional 4.5 percent to $44.15 on Monday, bringing their year-to-date decline to 24 percent.

Retail startups have been disrupting brick-and-mortar chains by targeting millennials, who aren’t as tied to traditional ways of shopping. They will eventually be the world’s largest consumers, but they have yet to become huge buyers of big-ticket items like furniture.

“The real driving force was the recognition of the opportunity to better connect with a really important, but new consumer,” Murphy said. Millennials are “just now beginning to contemplate things like purchasing mattresses.”

A twin version of the Dream Bed will sell for $699, and a queen goes for $829. Customers will have 180 days to return the bed for a full refund. Casper, meanwhile, sells a twin for $500 and a queen for $850. It has a 100-day refund period, according to its website.

Marketing Strategy

The “bed-in-a-box” idea isn’t really new, even for Mattress Firm. The company already had such a product, which will form the basis of the Dream Bed effort. But the marketing will be nontraditional, relying on events at bars and restaurants in major cities like San Francisco and New York. The company also will put on parties when it donate beds to charities.

The number of people willing to make a major purchase like a mattress without testing it out first remains to be seen. About 3 percent of mattresses are currently bought online. E-commerce represents about 20 percent of sales in other sectors of retail, by contrast.

“Who’s to know if this will be a fad with a small niche, or if the idea will have greater resonance?” Murphy said. Either way, “we want to be all things to all people at all times. We are trying to head in that direction.”