Across North Clyburn Avenue’s two-and-a-half-mile stretch, from Old Town to the neighborhood at Lathrop, eight mattress stores exist. In addition to that, countless home stores sell mattresses, furniture, and a host of other bedding items along the same stretch. It might seem excessive for a product many consumers rarely purchase as can, the ever-growing list of major online brands – Allswell, Saatva, Helix, Leesa, Purple, Casper, Tuft & Needle etc – fighting hard to get under the covers of consumers.
According to global data giant Statista, revenue in the mattresses industry will grow from approximately $28 billion in 2017 to more than $43 billion by 2024.
In the United States, there are more than 9,000 mattresses stores. These stores belong to three main brands; Bedding Experts, Mattress Firm and Sleepy’s. Mattress Firm is perhaps the largest mattress seller in the US – even after they closed some shops. Their mantra is simple; they target 50,000 people with a single store. Employees are paid on commission, and their simple stores have low overhead costs.
The Downside of Too Many Stores
Last year, industry giant Mattress Firm, considered filing for bankruptcy. Part of the company’s problem was its huge network of retail stores. As part of its strategy, the Houston-based retailer viewed many stores within cities as an effective way to build visibility as well as spread out distribution costs and advertising. In a bid to take over cities and build a national brand, Mattress Firm was snapping up rivals such as Sleepys. Their vigorous expansion sometimes left the firm with too many stores located just apart. Some company executives opined that the company simply had too many and it was just a matter of time before their strategy backfired.
During last year’s December call with investors, Steve Stagner, Mattress Firm Executive Chairman, who has since been appointed CEO, said the company intended to close roughly 200 stores in 18 months. The firm has 3,304 locations, as of March 31, 177 fewer compared to the year before.
The company lost more than $154.4 million mainly on additional costs associated with rebranding stores. Revenues declined 17% compared to a similar period the previous year.
Is a Change in Perception and Improvement in Tech to Blame?
Today, Americans aren’t afraid of spending a fortune on their mattresses. Just like in the past, people now see their bed as an investment. According to Roger Ekirch, author of At Day’s Close: Night in Times Past, most middle-class homes spend up to a third of their home’s value on a bed. He opines that the quality of a mattress is a social prestige. The 19th century saw numerous innovations in mattresses. The coil spring, innerspring and box spring beds were invented. Mass production of these mattresses started in the late 1800s. When Simmons and Sealy were founded in 1870 and 1881 respectively, mattresses became standardized. People started buying mattresses in large numbers as they were considered basic needs and not items of luxury.
Why are There Too Many Stores in the Country?
Back to the million-dollar question – why do we have too many stores in the country? Is it true that more mattress stores than Starbucks shops? The following two main factors might inform the huge growth of mattress stores in the country:
- Favorable economics
- A surge in demand
Most retailers will tell you that retailing is notorious for its water-thin profit margins. For instance, grocers typically earn margins of not more than 5%. The case is different when it comes to mattresses. According to Consumer Reports, mattresses boast markups of up to 40-50%. The profits are even higher once a mattress costs more than $1000. Indeed, that’s a lot of profit considering that most mattresses on sale are priced over $1000.
What’s more, many mattress stores usually carry very little inventory. On top of that, they pay salespeople majorly via commissions. Therefore, overhead costs are very low by retail standards.
A Surge in Demand
The 2008-2012 recession resulted in a rise in pent-up mattress demand. At the time, most Americans concentrated more on fueling their cars, paying their rent, and putting food on the table. Spare cash for buying new mattresses was non-existent. Everything changed during the last 3 years. An improvement in the economy has resulted in freeing up of the pent-up demand that was created by the recession offering a momentum for mattress sales. Moreover, there was a boost in mattress accessory sales courtesy of the countrywide bed bug epidemic that was started in 2010. Due to all this, mattress retailers are responding by opening new stores across the country to capture new customers.
According to some observers, we may be heading towards a glut of mattress retail stores. Only time will tell if their observation is true.