We Need a Warby Parker for Mattresses

Given these, Bed In A Box (http://www.bedinabox.com/) started with what seemed like it could be a potentially disruptive business model. They make-to-order mattresses (will even make custom sizes) and ship Tempurpedic-like memory foam mattresses directly to you via UPS. They suck all the air out of the mattresses so the boxes they come in are reasonably sized. Inside the box, there's a backpack-style sack which makes the mattress easier to carry. I hauled a Queen-sized mattress up four flights of stairs easily.

I've purchased two mattresses through them and they are high quality and extremely comfortable. The first purchase they were easily 50% the cost of any quality mattress I could find elsewhere (including Costco, Sams Club, etc.), especially if you factored in the cost of delivery. I was surprised that when I went to buy another mattress from them their prices were markedly higher.

I wonder if consumers were concerned that the low prices indicated low quality (not the case in my experience) or if they were unable to get the volume to sustain a low margin, high velocity business.

As an extra bonus, this would make putting sheets on easier as there's no wrong way (short of inside-out, I guess).

The problem with mattresses is that it's a product where you need a salesman. There's a bunch of different products that look similar, but have significant differences. You want to match the customer with what they want (or tell them what they want) so that they don't return the thing.

Plus, there are some inherent logistical differences between a pair of eyeglasses that can be dropped in an envelope and shipped to anywhere in a day or two. Distribution and warehousing is expensive, the product needs to be delivered quickly (and picked up if the customer is displeased).

There is a market for discount mattress sales outlets on the internet -- but just as online furniture and appliance outlets haven't "disrupted" the market, mattresses online are unlikely to either.

http://www.amazon.com/Sleep-Innovations-12-inch-Memory-Mattr...

The damn thing was ~100lbs in a giant box, and I got it shipped to me free. It's super comfortable and well worth the money - remember you sleep for like 25% of your life.

Mattresses seem like less of a specialty-item than eye glasses, so I wonder if big online retailers like Amazon can just cut out the middle man and service 80-90% of customers?

The pricing structure, where they hide the models by using different names across retailers, is 100% true. They absolutely do that to prevent price shopping.

The markup math is off. Mattresses are a high margin business, but most of those mattresses you see in specialty retailers are not built until someone buys one. You see, those mattresses are custom to the customer - from the tick (stitching pattern, which creates a firmer or softer surface) to the foam density, to EVERYTHING. It's like ordering a car where the car is measured to a specific person's height, weight and engine preference. You can imagine what a returned mattress is worth. Pretty much nothing. The margins have to cover all of that. Are the margins good? Yes. Would a small company be able to cut their margins to make one-off custom mattresses and compete? ...maybe.

Finally, there are retail outlets - Costco, Ikea, that buy from those mattress companies in bulk and sell generic mattresses much cheaper.

So, yeah, there's some market there but not as rich as some might think.

I'm not arguing that the mattress industry isn't ripe for disruption, but very rarely is value delivered directly related to the cost of production.

COGS is often difficult to accurately estimate (how much do you allocate R&D and other overhead?).

An iPhone 5 may only contain $110 worth of silicon, but the value delivered is a lot more than the raw material cost. Jony Ive's salary represents a tiny fraction of each iPhone, but his design and influence represents a significant chunk of the profit.

1. Oligopoly market structure CHECK 2. Insane gross margins CHECK 3. Opaque and misleading product naming CHECK 4. Expensive distribution through unpleasant channels CHECK CHECK CHECK

They might be surmountable, but that doesn't make this a better opportunity than a lot of the other opportunities out there, especially for a startup. The costs involved with disrupting the mattress industry as a manufacturer AND retailer are better left to a larger company. Like IKEA, as the article itself pointed out.

http://saatvamattress.com/

My Luxotica/Ray Bans were made in Italy and (on sale) aren't any more expensive than the Chinese made Warby Parker sunglasses.

I believe it's still the case that prescription eyeglasses can be bought with pre-tax dollars under a "use it or lose it" flex savings plan. I assume vision plans, which often include large purchase credits for eyeglasses at least biennially, are also tax deductible benefits.

The result is often relatively price-insensitive consumers who "have" to spend $200+ on glasses lest they not be taking full advantage of their benefit.

http://finance.yahoo.com/q/ks?s=MFRM+Key+Statistics

Take note of the margins, this isn't Microsoft sized here.

They have almost 900 stores in 27 states.

The article therefore is based on the idea of manufacturing your own mattress and selling web based. Unfortunately this would require warehouses around the country and a manufacturing facility in this country to make the mattresses. Although I'm not sure, I would imagine it would not be cost effective to ship a mattress from China (although I guess Mexico is possible) because of the size and weight. So this is not selling sunglasses or fashion eyewear which can easily be manufactured overseas as well as easily shipped (and returned).

These days it doesn't seem like outbound distribution is too big of a deal (many mattresses are shippable in rolled or compressed-box form), it's the reverse logistics that are tricky. Once the genie is out of the bottle, good luck getting it back in. I'd love to be able to try out a mattress, like Zappos shoes or Bonobos pants, and return them for free if I'm not 100% happy. Maybe someone needs to invent an easily-compressable mattress so I can purchase online with total confidence.

http://www.originalmattress.com/eliminating-the-middle-man

Unfortunately they don't have a presence on the West Coast.

What kind of mattresses are people buying, and what sort of retailers are they going to, where this seems like an immensely extortionist industry?

I'm sure the need for the entire thing to respond to your body the way it does probably prevents such a thing, but that sure would make it easier to own one.

If an industry is overweight PE, you can bet that the market analysis looks fantastically attractive (competition isn't too fierce, suppliers have little power, buyers have little power, not many substitutes, and little perceived threat from new entrants). If a clever entrepreneur can render that last condition false and enter that market, that entrepreneur has the opportunity to shrink and consolidate a $huge market that's owned by PE players into a $smaller market that is owned by the entrepreneur.

PE controlled competitors will, generally, not be particularly agile, because PE tends to capture value by leveraging the heck out of a currently viable business model. It's a model that works really well as long as base assumptions hold true, but startups can ruin that for them.