Why Startup Mattresses Cost Less

Few narratives are as satisfying as that of the small but intrepid hero bringing down the big, arrogant giant, aided by the giant’s own hubris. David stoning Goliath, the Rebellion torpedoing the Death Star, the Karate Kid crane-kicking Cobra Kai’s Johnny (kind of): That’s the kind of up-from-nothing story that newer Web-based mattress companies such as Casper, Leesa, and Tuft & Needle want to tell you about their products.

In short, the upstarts say: “We can sell you a mattress at a lower price, and it will work fine, because Big Mattress has been deceiving you for a long time.” To an extent, such claims are true, and Big Mattress really did create its own most significant threat by cutting quality, confusing customers, and reaching for huge profits. But the smaller players are doing a good bit of exaggerating, too. We looked into all of these concerns when we researched our guide to the best mattress available online, and we thought we’d expand a bit on this tale of plucky upstarts, giants, and mountains of marketing.

Big Mattress and its huge pile of money

The mattress industry is dominated by four brands inside two companies, and the business is hugely profitable for all of them. You have Simmons and Serta (both acquired by a private equity firm in 2012). And then you have Tempur-Pedic and Sealy (Tempur-Pedic bought Sealy in 2012). Together, these four brands control more than 77 percent of the traditional mattress market (figures from Statista; subscription required). They make hundreds of styles of mattresses, with different lines, model names, and softness levels, usually exclusive to each retailer and department store. What’s the difference between a Tempur-Cloud Luxe Breeze, a Tempur-Flex Supreme Breeze, and a Tempur-Contour Elite Breeze? A better question: What were you planning to do with your day?

While mattress makers insist on naming beds like Las Vegas nightclubs, mattress retailers—both showrooms and department stores—obscure details and turn up the pressure on shoppers. Consumer Reports managing editor Steven H. Saltzman told AlterNet in 2010: “[Y]ou can't see under the hood. It's all a mishmash of foam, fiber and fill." Seth Stevenson’s November 2000 Slate guide to mattress buying captures the madness best; the experience was not any better in 2012, and hasn’t improved today. The New York Times asked in 2014, entirely rhetorically, “Is there any home purchase more confusing and fraught with anxiety than buying a mattress?” Along with the model-name confusion, you have the indistinguishable white squares under bright lights, the pressure from salespeople to try out so many models that you end up confused as to which one felt how soft, and the seemingly endless series of “blowout” sales.

Within this fog, bed makers and retailers can hide huge markups. Consumer Reports, which has been valiantly reviewing mattresses and explaining the industry for years, has cited the profit margins at 30 to 40 percent for wholesalers and another 30 to 40 percent for retailers. In January 2016, Consumer Reports advised mattress shoppers to track and demand sale prices, because “huge markups allow [retailers] to lower prices by 50 percent or more during their frequent sales.” Tempur Sealy’s gross profit margin (revenue minus the direct cost of making mattresses) has been above 37 percent and as high as 53 percent since 2003. For comparison, while certainly not in the same industry, Ford Motor Company’s gross profit margin was between 3 and 7 percent in those same years (when it wasn’t negative).

In other words: Selling rectangles of cotton, springs, and foam is a killer business model.

Cutting the baby in two

Private equity firms, noticing this free-flowing cash, purchased Sealy and Simmons in the late 1990s. Soon after, the two mattress firms essentially stopped competing with each other and focused on boosting profits with price hikes and markup boosters such as increased thickness.

When prices got too high and sales scaled back, the firms controlling Sealy (Bain Capital, headed by Mitt Romney prior to his stints as governor of Massachusetts and a presidential candidate) and Simmons (Thomas H. Lee Partners) pushed each mattress maker to cut costs by designing a no-flip, or one-sided, bed, writes Josh Kosman, author of The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis, in a recap on Salon. The mattress companies decided to remove the bottom cover and to fill the bottom half of the mattress with cheaper support springs or foam. Although the durable life of the mattress would decrease from 15 or 20 years to less than 10 as a result, marketing efforts pushed “no-flip” as a feature, and mattresses continued being cigars-and-yachts profitable.

Except, as Kosman told Fresh Air’s Terry Gross in 2009:

What ended up happening in the middle of [the 2000s] is Tempur-Pedic came out of nowhere. And Tempur-Pedic offered a very nice sleep on a—I guess they call it, you know, it's those foam beds, and those mattresses, on the high end, which is all that Sealy and Simmons at this point were now competing in, they started to really outsell Sealy and Simmons.

So one-sided foam mattresses enter the market, aided by Tempur-Pedic’s aggressive marketing and Sealy/Simmons’s stagnation. Still, Tempur-Pedic beds were mostly $2,000-and-up models, with traditional markups of 50 to 80 percent. Some early rivals, such as BedInABox and Amerisleep, began to offer direct-purchase foam mattresses at a significantly discounted price. But it wasn’t until after 2010, when enough people had become comfortable with buying online, that a whole party of challengers arrived.

A different kind of mattress (and marketing)

The way John-Thomas Marino tells it to Re/code and writes on his business's Our Story page, he and his new wife were so disappointed by their $3,200 memory-foam mattress in 2012 that he and a coworker at a tech startup, Daehee Park, decided to investigate. Posing as small-mattress-store owners, they claim, the two priced that mattress at just $300 to make. After doing research and finding the right bed maker, they founded Tuft & Needle later in 2012. Casper and Leesa would follow in 2014 (all three are picks in our guide to the best mattresses you can buy online). Now, well over a dozen established foam-mattress firms sell single models online, all with similar tales of disdain leading to creation.

The fix for the confusing, money-burning mattress-buying experience, as the newcomers claim, is a website that features just one all-foam mattress model for sale, roughly between $500 and $1,000, surrounded by light-toned wood, exposed brick, and MacBooks. The website says exactly what each layer of that mattress is made from. Buy that mattress, and it gets vacuum-sealed in plastic, folded in half, rolled up, stuffed into a box, and shipped to you by UPS or FedEx. You have around 100 nights to sleep on it, and if you don’t like it, the firms arrange for it to be picked up and donated, recycled, or otherwise disposed, and you get a full refund. Traditional mattresses, even those with “comfort guarantees,” often demand fixed or cost-percentage return penalties, along with redelivery charges.

Nick Robinson, who started his Sleep Like the Dead site in 2008, told us that the new Web-based sellers’ biggest strength is their focus on strong customer service and support. “From what I’ve seen, there’s a dedication by some of these firms to just about anything possible to ensure customers are satisfied with their product.” That, and the aggressive marketing, including blogs, the hiring of journalists for a “Web publication about sleep,” affiliate programs (which, full disclosure, is how we earn money from all of the guides we publish, including our mattress guide), a significant social media presence, and display ads that (believe me) track you all over the Web.

There is no überfoam

And then you have the biggest marketing angle: one mattress that works for everybody. Casper calls it “the perfect mattress,” Tuft & Needle has foam that “adapts to every individual’s body,” and Leesa has a “universal feel.” But if there’s anything you learn in researching sleep—and sleeping on mattresses—it’s that no one mattress is perfect for everybody. As the knowledgeable administrator of The Mattress Underground forum relates:

[I]f there was such a thing as a single mattress that was universally comfortable then there would only be a few mattresses needed in the industry. The reality is that they are targeted to the part of the bell curve that is attractive or suitable for the largest percentage of people (which is in the medium to medium-firm range).

The best-rated mattress company on Sleep Like the Dead, BedInABox, had an 84 percent customer satisfaction rating across nearly 400 customer opinions when I interviewed Nick Robinson, the site’s founder and editor. “Claims of universal comfort are, in my opinion, misleading,” Robinson said, “when 16 percent of any firm’s customers, let alone the best-rated, would say otherwise.” And while the newest companies may aggressively test and prototype unique foam blends, their mattresses (with the exception of the Brooklyn Bedding offering) are made on contract by existing mattress firms—and all of them are made in the US, which, while novel these days, is how most beds are made.

Don’t blame the young firms entirely, though: Nobody has the secret key to what people really want from a mattress. Research on mattresses, as it relates to sleep, is almost nonexistent, and what little we have comes funded by the mattress industry. The best study around, funded by a mattress industry group, had 128 healthy people without sleep disorders pick their ideal bed from seven mattresses with different firmness levels and then sleep one month on each. The findings, as Kaleigh Rogers details at Vice, were rather shrug-worthy:

[T]he “best” bed varied greatly between individuals—each mattress was the “best” for at least 12 percent of the participants, and no single mattress was “best” for more than 16 percent of participants. … [T]he subjects did not choose the mattress that ended up being their individual “best bed.”

Room to spread out (and mature)

The US mattress industry takes in about $14 billion every year, according to Furniture Today. Casper earned $20 million in revenue in its first 10 months of business in 2014, while Tuft & Needle saw $9 million in revenue in 2014. That same year, the three biggest public mattress companies—Tempur Sealy, Select Comfort, and retailer Mattress Firm—raked in $5.4 billion in sales. Bloomberg noted in March 2015 that mattress startups had yet to sell 100,000 beds at that point. But people might have said something similar about a bookseller named Amazon at one point, too.

The mattress business is messed up, but the giants have time to learn from the startups. The whole industry could shift toward transparent products, low-pressure trials, and enthusiastic customer support. That would be a real come-from-behind victory for everybody who has ever had to buy something to sleep on.