http://www.businessweek.com/articles/2014-04-22/will-a-web-only-mattress-startup-keep-serta-and-sealy-up-at-night

E-Commerce

Will a Web-Only Mattress Startup Keep Serta and Sealy Up at Night?


It was a heady morning at Casper headquarters on a trendy cobblestone street in south Manhattan. The startup had just launched its modest assault on the old-fashioned mattress business.

“We’ve got six orders already,” said Luke Sherwin, one of a handful of co-founders.

With the tagline “the mattress reimagined,” Casper is betting that bedding will work in a Web-only, direct-to-consumer business model. It has promised a great mattress and a shopping experience free of slick sales tactics.

Once a Casper mattress is stitched together in Georgia or Pennsylvania, it is vacuum-sealed, crunched into a “W,” and jammed in a box roughly the size of a large mini-fridge. Delivery in the U.S. takes five days or less. When a customer cuts the package open, the mattress expands to full size in 60 seconds.

The product, a 10-inch wedge of foam with nary a spring in it, seems comfy enough, but challenges to the endeavor are abundant. Chief among them, according to Casper’s co-founders, will be persuading customers to buy a mattress without trying it first. Also, the company makes only one product—albeit in six sizes. There’s no extra-firm, super-soft or pillow-top—no version with water or alpaca wool or “KoolGel.”

There’s also the limiting factor that Casper’s ideal customers—those frustrated by the shopping experience of mattress chains—have probably already bought something to sleep on.

Casper’s mattresses  aren’t cheap. The twin, its smallest size, costs $500, while the king goes for $950. “If somebody is going to go to Ikea to look at mattresses, they’re probably not considering this,” said Jeff Chapin, co-founder and product chief.

What the company has going for it is some tech mojo. Its website, for example, is simple and sleek. Its brand is catchy, calculated, and search-engine optimized via a crisp, white blog. And its overhead is low—there are six full-time employees working their way through their savings and a $1.6 million pile of venture capital they collected early this year.

Pick your product, and you can find a similar supply-chain and aesthetic setup: custom shirts, eyeglasses, coffee. The Casper team knows a bit about the mattress business. Chapin used to make products for Sealy (TPX) when he worked at famed industrial design shop Ideo. Chief Executive Officer Philip Krim sold thousands of beds at an online startup hatched in his University of Texas dorm room.

Casper offers a 40-day money-back guarantee to reassure reluctant shoppers, although it admits it won’t be able to collect and resell the products. Ideally, mattresses of disgruntled customers will go to charity, though Casper is still working out details on that. Meanwhile, the company is hoping to strike partnership deals with hotels and Airbnb sites to get some exposure.

As for its one-mattress-fits all approach, Casper said it has split the difference and made a mattress that most customers would prefer—just a tad on the firm side. A layer of Memory foam is topped with a sturdier latex foam that has “an energetic springiness;” according to the Casper crew, that’s great for times when one is lying in bed, listening to Barry White, and … well … doing things other than sleeping.

The company is hoping the limited number of choices will spur buying, a strategy built on research that suggests customers are put off when faced with too many options. Sherwin, the creative director, notes that mattress shoppers who spend a couple of hours flopping around on a bunch of different models are particularly prone to “post-purchase anxiety” over whether they made the right choice.

The “Big 3” of bedding—Serta, Sealy, and Simmons—control roughly half the market, according to Furniture Today. All of them rely heavily on department stores and a handful of regional retailers for distribution, a step in the supply chain that adds an additional layer of cost and confusion.

Not only do retailers mark mattresses up significantly, they also give them different names, so it’s virtually impossible to comparison-shop. Everything is on sale at all times, so pricing is opaque as well. (Here’s the story of record on all this, by Slate’s Seth Stevenson.)

Americans buy 35 million mattresses a year, so Casper doesn’t have to challenge Sealy and Serta to build a cushy business. Warby Parker is a good example. The company appears to be thriving with its relatively affordable line of eyewear. Still, Luxottica Group (LUX:IM), the Italian conglomerate that owns Sunglass Hut, LensCrafters ,and a bevy of other big eyewear brands, has done just fine since Warby got into the game.

Kyle-stock-190
Stock is an associate editor for Businessweek.com. Twitter: @kylestock

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