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The Mattress Industry: From Boom to Evolution

July 31, 2023 3 min read

The mattress industry has been a wild ride, full of twists and turns, in recent years. From a once-thriving direct-to-consumer (DTC) market, it has experienced a wave of mergers, acquisitions, and bankruptcies, leaving both industry insiders and consumers puzzled about what's next.

Back in 2019, the DTC mattress category was booming, but perhaps a bit too much. CNBC reported that there were over 175 companies vying for market share in this space. Among them, Casper, a pioneer in the DTC mattress world, was particularly prominent. With a valuation of $1.1 billion and an IPO that garnered much attention, it was considered a DTC darling. However, the hype didn't last, and the stock price plummeted to under $7 after going public. Eventually, Casper was acquired by private equity firm Durational Capital Management.

The pandemic provided a temporary surge in sales for e-commerce mattress companies as more people sought comfort in their homes. However, this wave soon subsided, and even once-promising startups like Purple experienced a decline in DTC sales.

Despite the challenges, the mattress industry soldiers on. Some companies are learning from the past. CEO of an ecommerce brand, acknowledged that they missed the boat on the heyday of cheap Facebook ads, but that turned out to be a blessing in disguise. They now focus on acquiring customers in a more sustainable way.

As the industry adapts to changing market dynamics, newer mattress startups are learning to grow more steadily, prioritizing long-term sustainability over rapid expansion. The days of the venture capital boom may be behind them, but these companies are setting themselves up for a more secure future.

Amidst this evolution, mergers and acquisitions have become the norm. Serta Simmons filed for Chapter 11 bankruptcy in January, and the announcement of Mattress Firm's acquisition of Tempur Sealy raises concerns about further consolidation. Analysts worry that such a merger would create a behemoth company dominating the category, making it difficult for smaller brands to compete.

Even publicly-traded companies like Purple are facing challenges. Their full-year revenue in 2022 dropped by 20.7% compared to the previous year, with DTC revenue decreasing by 30.3%. Advertising spend decreased significantly during the same period. However, Purple is not giving up and is diversifying its product lines with the acquisition of gel-based mattress manufacturer Intellibed.

Some predict that after a period of volatility, the mattress industry is stabilizing and showing signs of returning to growth. The pandemic may have initially accelerated mattress purchases, but external factors like a decline in the housing market and inflation have slowed the industry's momentum.

One significant shift in the industry has been the convergence between legacy brands and DTC companies. More established players are embracing DTC tactics to stay competitive. Naturepedic, for instance, began as a wholesale-focused organic crib mattress brand in 2003. However, it rebranded and launched a DTC business in 2019, which gained momentum during the lockdowns of the Covid era.

Despite the continued operation of numerous mattress companies, analysts believe that more consolidation is on the horizon. Starting a mattress company may be relatively easy and inexpensive, but driving growth in the face of rising costs is becoming more challenging.

In conclusion, the mattress industry has come a long way since its boom in the early 2010s. From the excitement of DTC startups to the current era of mergers and acquisitions, the landscape has changed significantly. The key for companies in this evolving market will be to find a balance between sustainable growth, adapting to consumer needs, and navigating the ever-changing business environment. As the industry continues to mature, only time will tell which players will emerge as the true winners in this sleep-worthy game of mattresses.