You might buy a cup of coffee every day, but you only buy a new mattress once every decade.
So, why are there so many mattress stores these days? Sleep is a serious business — so much so, that there are now more mattress stores in the U.S. than there are Starbucks. Yes, you heard that right.
Mattress stores are everywhere and often found clustered together on the same busy street. Mattress Firm, one of the nation’s largest mattress retailers, alone has more than 3,500 company-operated stores across the country. In major cities, the retailer, which operates under a number of names, the goal is to have one store for every 50,000 people. In Chicago, there are 235 individual locations. In Austin, Texas, there are 76.
According to the latest market research, there are roughly 9,000 mattress stores nationwide. That’s about 600 less Starbucks stores. There were 8,222 company-owned Starbucks last tallied (note: this number only counts actual standalone Starbucks stores, not the kiosks you might see in airports, grocery stores, etc.) , according to 2017 data from Statista.
It might seem ridiculous for one company, like Mattress Firm, to have dozens — even hundreds! — of locations in one city, but there is a method to that madness.
Let’s start with the business reason first: It’s super cheap to make mattresses and the markup is typically pretty big. On average, you’re looking at a 900 percent markup, according to one recent study. Mattresses that cost more than $1,000 typically have even bigger markups, as high as 1,200 percent or more.
Now, let’s imagine a buying experience in your typical mattress store. There aren’t stacks of mattresses waiting to go home with you. All inventory is typically stored at a central warehouse for all of the stores. And that salesperson you’re working with? That guy likely relies on commission and very little — if any — base salary.
In other words, the overhead is really low in the mattress game and a single retail location may only have to sell a couple dozen mattresses each month to cover rent, pay employees and keep the lights on.
Sticking to our coffee comparison from above, there’s also a reason why there are nearly as many Starbucks locations in the country. The average markup in the coffee business flirts with 80 percent. Granted, the price of a Frappuccino is only fraction of the price of a new mattress, but you get the idea.
The economics are pretty favorable for mattress companies. People are constantly moving to new cities and when they move into a new home, a new mattress tends to be one of the first purchases.
The economics… part two
It should be said that this boom of mattress stores has really taken off in the past five to 10 years. Ten years ago was right when the housing market was about to crash, causing the worst economic recession we’ve seen in the U.S. since the 1930s. When money is tight, a new mattress really isn’t high on the priority list if you already had one to sleep on.
There were also less marriages during the recession (one of the first things newlyweds purchase is a mattress!) and many recent college graduates didn’t move to the city for their first grown-up job during that time. They moved back in with mom and dad and slept in the bedroom they grew up in.
Fast forward to today, unemployment is down and disposable income is up. If you were putting off a mattress purchase, you may now have enough extra income to upgrade.
Retail vs. online
It’s no secret that the online mattress company industry is growing — and quickly.
“The online mattress business really went from nothing to a $1.5 billion business in the blink of an eye,” Kathy Thornton-Bias, president of Verlo Mattress, told the Milwaukee Journal Sentinel earlier this year.
Much of the growth has been driven by the rise of “bed in a box” brands, like Casper, Leesa, Purple, and dozens of others. These companies give consumers the ability to buy a mattress with the click of a button, have it delivered to their house in a compact box, and test it out for around 100 nights risk-free to see how they like it. No more need to go to the local mattress store, deal with a pushy salesperson, and pay an over-inflated price for a mattress.
While online direct-to-consumer mattress buying is growing rapidly in popularity and is likely to change the industry, it still accounts for around 6 percent all bedding sales. In other words, the mattress store model isn’t dying any time soon.
As awkward as it can be to go into a retail store and lie on the same mattress and box spring that hundreds of others have done throughout the week, Americans still like to see what they’re going to shell over hundreds, and potentially, thousands of dollars for.
There are a few reasons for that. The major mattress manufacturers who spend a lot on marketing to make sure you know all about Posturpedic and the other hot names in mattresses require customers to go into a showroom to make a purchase. If you go online to look at these same big brand products, you also see a handful of different options and several names, but not a whole lot of information. That’s intentional, forcing you to go into the showroom and find out the difference between a firm and semi-firm, gel vs. non-gel, or memory foam vs. hybrid.
Jerry Epperson, a furniture and mattress indsutry analyst, told the Chicago Tribune last year, that marketing is key.
“If you think about how mattresses have been marketed, it’s all about health issues,” he said. “If you read the ads, mattresses cure everything but balding.”
Achy neck? Bad back? I guess you’ll have to go into a retail store and have an expert tell you which mattress is best for you.
Mattress stores taking cues from online bed-in-a-box brands
Of course, the online mattress boom is going to be an interesting business story to watch in the next year or two and how it impacts the thousands of brick-and-mortar mattress stores across the country.
Companies like Verlo, which has a chain of dozens of mattress stores, decided to offer an online, mattress-in-a-box option called “Verlo-To-Go.”
Even Mattress Firm has an online product only available through them called Tulo.
Those major retailers have seen the success of Tuft & Needle (More than $100 million in revenue in 2016) and Casper, which had $200 million in sales in 2016.
They don’t want to miss out on that piece of the pie.
We live in an Amazon world where everything from our groceries to our cleaning products are delivered to our front door. So, why not our mattress? Most online stores have pretty in-depth surveys to help identify your sleep needs and they also offer incredible free trials, making it easy to return your purchase if you’re not satisfied after a few months.
Online has even less overhead than the retailers, allowing them to charge less for product.
Why are there are more mattress stores than Starbucks?
One, it’s really profitable and a lot easier to make a profit compared to other retail ventures.
For now, the online shopping threat isn’t enough to kill the business model, but it is starting to make a dent. The major retailers need to be ready for it, though. Just last month, Mattress Firm announced it will be closing 200 of its under-performing stores. Could this be a sign that the mattress store bubble is starting to burst? Time will tell.