Bring It

June 2, 2014  by in Business Strategy, Industry   

Furniture Stores Battle Mattress Specialty Shops For Share of A Very Profitable Category.

The proliferation of mattress specialty stores should have full-line furniture retailers carrying the category in a tizzy. If you’re among the latter and pay no attention, kiss your bedding sales goodbye. Take a look at Mattress Firm. The Houston based sleep specialist added 75 locations in Colorado and Arizona this past April with the acquisition of BedMart and Mattress King stores. It also bought up 55 stores in two markets where it already had a presence, Austin and Dallas, Texas, with the acquisition of Sleep Experts. If you haven’t seen it already, expect a wave of advertising that will cull customers from your floor if they’re looking for a mattress. The good news is that you can count on the advertising dump from stores that make bedding their living to get people in your market to think about buying a mattress. The bad news: Shoppers might pass you by.

THE “APPLE” EFFECT

When it comes to a mattress, the average home furnishings retailer might think people will head their way. Some will. Others won’t. Consumers tend to glom onto specialists. “We’ve taught our public that generally speaking the specialty stores do a better job,” said Jerry Epperson, industry analyst and partner at Mann, Armistead & Epperson in Richmond, Va. “When we look for a specific product, we just tend to look for a store that specializes in it. “It’s natural that shoppers looking to buy a computer gravitate toward a consumer electronics retailer—furniture retailers beware.” Epperson’s concerns for traditional retailers and the business they might do in bedding go back a long way. “When I first started in this industry furniture stores sold electronics, they sold appliances,” he said. “Some still do, but most don’t. I don’t want us to lose the mattress business as well, especially since it’s so profitable, and it affects the sales of accompanying bedroom furniture.”

LEARNING LESSONS

Full-line furniture stores can learn some lessons from their mattress specialist counterparts. Some traditional retailers, especially major regional chains, are listening, and opening dedicated sleep shops. Those include HOM Furniture, Morris Furniture, Art Van, Cardis Furniture and Steinhafels. “Bedding retailers offer consumers the convenience of being able to park close to the door and get in and out fairly quickly without having to walk an entire mall or showroom to find the mattress department,”said Rob Klaben, vice president at Fairborn, Ohio-based Morris Furniture Co. “This is why we have created our Better Sleep Shops in our showrooms that have their own entrance with the department right at the door.” The retailer’s newer stores boast separate entrances for the sleep shops, and plans are to add separate entrances to existing locations where possible. “Mattress stores also have dedicated sales associates that only sell mattresses,” Klaben said. “All our Better Sleep Shop sales associates are certified sleep experts that only sell mattresses and related products.” These stores are tying an established brand in their markets to a category that adds a lot more to their bottom line potential than another imported bedroom set. “I’m a big fan of Art Van’s Pure Sleep,” Epperson said. “It’s a great concept, but I’m not convinced that furniture stores can’t do a good job selling the category on their own. Jordan’s does a fantastic job—they have people in lab coats that are sleep specialists—the other salespeople steer customers their way if they’re shopping for bedding.“It’s all about the way they market and approach the bedding category,” he said. 

The whole impetus behind retail buying group Furniture First’s development of its Mattress 1st concept is helping its traditional retailer members compete against mattress specialty stores. The idea is to provide those members with a national specialty chain’s impact on consumer mind share while putting their own local recognition and merchandising touches to work in building mattress sales. Knorr Marketing brought the concept to Furniture First; and retail designer Martin Roberts is consulting with the consortium on individual stores for merchandising and display. The program kicked off in May 2013, and in its first year, has 15 approved Mattress 1st locations with more on the way, according to Furniture First Director of Mattresses Andrew Kauffman, who offered a progress report at the buying group’s symposium last month in Ft. Lauderdale, Fla. “Specialty stores are identified as having expertise, and they offer a specialty experience in the store,”Kauffman said. Mattress 1st has two options: a store within a store; or a freestanding specialty store. “We’re looking to provide a national chain-type presence in the category for members,” Kauffman said.“It’s turn-key, ready to set up.” At the Furniture First gathering, members shared success stories of ramping up their bedding presence as mattress specialists in their markets. Dewey Furniture, Vermillion, Ohio, opened a separate Mattress 1st location in the back of its existing furniture store. Mattress percent of sales volume climbed from 9 percent before the move, when mattresses were mixed with other goods on the floor, to 15-plus percent of volume. “Salespeople and customers are energized,” Kauffman said. “The bedding department is averaging a 30 percent increase since last October.” Mattress and bedding volume at Waite Park, Minn., retailer Callan Furniture was around 8 percent of volume, and its bedding department lacked flow before its conversion to the Mattress 1st model. Now, bedding accounts for 15 percent of volume; and bedding sales are now up 35 percent year-over-year in the first full month of being open under the new approach.

PLAY TO STRENGTH

Furniture retailers might not have the focus of the mattress specialists, but they do have some business advantages, said Keith Koenig, president of Tamarac, Fla.-based City Furniture. “The specialty store explosion has been good for the industry and a good reason for furniture retailers to wake up and revitalize their mattress category,” he said. “When I started out, we just sold waterbeds. We were the ultimate specialist, and I understand the strength of a specialty store. The customer thinks of you for the category and that you’re an expert.” That said, a lot of full-line stores have some advantages. “First, in general mattress specialty stores have higher occupancy costs as a percentage of revenue,” Koenig said, adding that retail specialists usually have higher personnel costs and a harder time gauging staffing than full-service stores. “Furniture stores have built-in value opportunity,” he said. “They typically have a lower cost structure. MAP products not withstanding, generally (specialty stores) look for higher margins.” The other advantage if you can get a mattress shopper in the door: “Shopping a mattress specialty store is not, in general, an exciting experience,” Koenig said. “Ms. Consumer tells us—and this is based on a lot of research and focus groups—that she looks to furniture stores for inspiration. “On top of that, and no disrespect because they’ve been very successful, (specialty stores) are a lot of mattresses with some POP and sales associates.” Plus, when City sells a mattress, its salespeople also know to pitch a bedroom or at least some other furniture to go with it. City has eschewed the dedicated store approach. “I’ve had the opportunity to work with a lot of senior people (at mattress specialty stores), and it seems the costs are higher,” Koenig said. “We’d have to raise all our prices in the category. We run our mattress departments at a lower margin than a specialty store could afford.” Rather than open specialty sleep shops, City’s works to execute its business model as well as it possibly can. “I’m not saying it’s not a good idea to open specialty shops, and I’m not saying we’ll never do it, but we’ve just had bigger fish to fry,” Koenig said. Epperson noted that traditional retailers square footage for bedding often is larger and more diverse than specialty stores. “Furniture stores also tend to have more of the complementary items like bed top and pillows,” he said. “That’s a big profit center if you can sell it.” Epperson said one retailer friend bragged that he was the biggest Simmons dealer in the state. “I asked, ‘Do you advertise that?’” he said. “Traditionally, you bring (customers) in with the brands, but convert them to something with similar features but a better margin.” 

With all the branding in the category, he added, there’s more mattress-to-mattress comparisons than retailers see in say, wood furniture. He added that the bedding industry has come far from the days when blue-and-white-striped ticking was considered an acceptable standard for mattress appearance. “The only (visual) impression you get of that mattress on the sales floor is that cover,” he said. Koenig recalled visiting a major sleep chain when shopping for a niece who was moving into an apartment with a short-term lease and who didn’t want to spend a lot of money on her mattress. “I’d seen the advertising, but when I went to the store, I had to go into basically a closet to see it,” he said. “That’s not our value proposition (at City). We want to give a customer looking for an affordable set the chance to choose one from an attractive selection.” Even if you aren’t, a wealth of retailers across the country are giving more attention to their bedding department. “Our bedding business has gone way up the last couple of years,” said Richard Andrews, president of Andrews Furniture in Abilene, Texas. “But the specialty chains like Mattress Firm are popping up all over the place. Those guys are spending money hand over fist to buy up stores and expand.” Andrews runs a 30,000-square-foot store, with 24,000 square feet of warehouse space. Mattress sales are 15 percent of volume. “Four years ago we were pedaling along trying to get 10 percent,” Andrews said, crediting the efforts of vendors such as Tempur-Pedic to highlight the health benefits of good sleep as an influence. “Our average ticket is much higher, and our penetration is probably up over the last three years. Our Web site says, ‘Sleep Better Tonight.’” Callan’s Furniture, Waite Park, Minn., is learning from the specialists. “First, their focus is on the task at hand, selling mattresses,” said Patrick Callan, president. “Second, they simplify the consumer experience and the buying process. Callan’s has incorporated the store-in-a-store approach, using Furniture First’s Mattress 1st concept as a template for a 3,500-square-foot boutique to sell mattresses. Key vendors include the Tempur-Sealy family, including Stearns & Foster, and Furniture First’s Mattress 1st and Health 1st private labels. “We’d planned to retrofit our mattress department in 2014 anyway, and Mattress 1st fit our program,” Callan said. “We’re a significant player in our marketplace, but we knew we were still leaving a lot of mattress sales on the table.” Callan’s had a soft opening for its mattress department in February and a grand opening in March. 

The effect on the retailer’s mattress sales was immediate. “The smallest increase (month over month) has been 35 percent, and the largest was well over 100 percent,” Callan said. Coconis Furniture created a separate bedding entrance for its South Zanesville, Ohio, main store, and plans to implement the same strategy moving forward. “We’ll do the same thing with our new store in Heath,” which opens in July, said Randy Coconis, president. “It will be a specific destination but at the same location.” Coconis also plans to switch a third location to the Mattress 1st concept. “In my town, we have Mattress Firm, coming; Sleep Outfitters opened last year, and Mattress Mart,”Coconis said. “The younger generation doesn’t think about furniture stores carrying mattresses. They’re used to going to an Apple store when they need a computer or phone.” The impact at Coconis Furniture has been immediate: “Since we’ve moved to the new front entrance, our mattress business is up 50 percent since January,” Coconis said. Coconis also is considering free-standing bedding stores, and is moving to mattress price tags that show flat pricing for the mattress alone, or with a good, better, best story on adjustable bases for appropriate products. “We’re doing that on everything that takes an adjustable base,” Coconis said. “In our training, we’re also requiring our salespeople to ask along the line of ‘Now that you’ve found the perfect mattress, let’s look at the foundation.’ In-store demonstrations are the key to that. “We’ve always marketed free delivery on mattresses,” he said. “Now we’re moving to free delivery on a $799 and up mattress with the purchase of a mattress protector with a 10-year warranty. In the last 30 days, our protector sales have gone up 30 percent.” In the mean while, think about what mattresses can do for your sales.“I love the mattress business, because if it weren’t for this category’s innovation, creativity and marketing efforts, everyone would be selling an identical slab,” Epperson said. Unlike many furniture categories, bedding vendors have managed to convince the public that real differences exist among products that can look remarkably similar on the sales floor.