Rest Area? Online Players, Specialty Products Add Energy to Mattress Category

January 19, 2018  by Jane Chero in Business Strategy, Industry   

Since the end of the Great Recession, mattresses have been Old Reliable for just about anyone selling home furnishings.

Quarter after quarter, the category has registered comfortable single-digit sales increases while continuing its strong track record of profitability. Aided by the souped-up marketing budgets of many vendors, and financial incentives that include everything from local advertising rebates to special sales commissions, it consistently has produced healthy retail margins.

There are no signs that pattern is going to change anytime soon, but that doesn’t mean the category has been free from drama.

Last year began with Tempur Sealy International parting ways with its largest customer, Mattress Firm, in a classic he said/she said divorce. And it ended with Mattress Firm’s parent company, South Africa-based Steinhoff International, facing scrutiny over “accounting irregularities” that led to the resignations of its longtime CEO and board chairman.

And in between, traditional vendors and retailers got worked up about the rapid rise of so-called “bed in a box” producers who sell mattresses online and don’t mind tweaking the noses of traditional players.  Mattress Firm got its nose so bent out of shape, in fact, that it sued one of the largest online players, Tuft & Needle, accusing the company of making false and disparaging statements about them in its advertising.

Another big online player, Purple, is about to become a public company (and may already be one by the time you read this). That’s important because, amid charges by traditional vendors that the sales figures tossed around by some online players are wildly exaggerated, it will give everyone a more accurate picture of the company’s finances.

(In presentations to potential investors last fall, Purple has claimed it had sales of more than $50 million in 2016 and was on a “run rate” to hit almost $200 million for 2017.)

But regardless of who’s right, the market share battle is not going to end soon, because a new online player emerges seemingly every week to challenge traditional vendors and retailers. And of course, many traditional vendors have developed their own bed-in-a-box programs, and a few online players are getting their products placed in brick-and-mortar retailers.

That’s a lot of drama for a category marked by slow, steady growth.

According to a proprietary industry model developed by Impact Consulting Services, parent company of Home Furnishings Business, bedding sales in the third quarter of 2017 were 4.8% ahead of the third quarter of 2016. That pushed the industry over the $4 billion mark in the quarter.

The 4.8% third-quarter growth was better than the first two quarters of last year, however. The industry model showed that the second quarter was 3% ahead of the same quarter in 2016, while the first quarter was 3.4% above the opening quarter of 2016.

For the first nine months of 2017, industry sales totaled $11.34 billion, a 3.8% increase from the first nine months of 2016.

Much of the growth for the past decade has been driven by specialty bedding, which essentially is any mattress that’s not an innerspring model. That point was driven home by an Impact Consulting survey of recent mattress buyers, in which roughly 48% of them said their most recent mattress purchase was not an innerspring model.

According to the survey, 40.9% of respondents said they purchased a memory foam mattress, while 4.55% bought an air mattress such as those produced and sold by Sleep Number, and 2.27% said they bought a latex foam model.

And since no respondents admitted to purchasing a waterbed -- yes, a few vendors still make them – that meant the remaining 52.3% bought an innerspring mattress.

While that may seem like bad news for producers of innerspring bedding, it’s not as horrible as it appears since many models classified as “innerspring” now have a combination of specialty foams – some of which are gel infused to help keep the sleeping surface cool -- and innersprings. These hybrid models are some of the top sellers today, despite the difficulty deciding how to label them.

Retailers and manufacturers will be happy to know that a plurality of respondents – 45.5% -- said they bought a king-size mattress. A queen mattress – the size leader in most surveys – finished second in this one with 36.4%. Another 11.4% said they bought a full-size model, and just 6.8% said they bought twin size.

Not surprisingly, bedding specialty stores were the most popular retail locations for a mattress purchase. Some 36.4% said that’s where their most recent purchase was made, while 29.6% said they used a traditional furniture store. In addition, 11.36% each said they bought their mattress at a mass merchant and on the internet, while 6.8% said they used a wholesale club.

Department stores trailed the field with only 4.55%.

And the industry’s long-running message of urging consumers to replace their mattress every eight to 10 years seems to be having an impact, as more than half the respondents (54.6%) said a mattress should be replaced every six to 10 years. Another 27.3% said it should be replaced 11 to 15 years after the purchase, and 11.4% said it should be within five years of the purchase. Only 6.8% said replacement should be in 16 to 20 years.