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Any thoughts on why markup stays so high if the industry is actually cutthroat? Competition should be driving margin way down.

by egdod 7y ago

kazinator 7y ago
Could depend on where the markup is and whose margin. If all those retailers are themselves buying from a small number of suppliers, they could be paying a lot of that markup, while their own margin is razor thin due to cutting each others' throats.
Zimahl 7y ago
I'm not OP, but I'd guess its because there is a really limited market for mattresses. People of course need and want them, but the turnover is (or can be) a very long time. I have a mattress in our guest bedroom that I used in college, over 20 years ago. It could probably be replaced, but will probably only get replaced with our main mattress when we replace it. It's fine for the minimal guests we have or when my wife or I sleep in it when we are sick (and don't want to keep the other awake). So for mattresses you really can't afford low margins if you want to stay in business. I can't imagine mattress stores sell more than several mattresses a month. As for why Casper and Purple mattresses are so much when you are supposedly removing the middle-man (the physical stores), I'm not sure. Because they can? I don't really understand why someone would buy one of their mattresses that you can't test out at a store, when you can pay the same price at a store and test out all your options.
- hnick 7y ago
  Said another way, none of us need to buy mattresses often enough that we are mattress-buying-experts, so we're chumps easily taken advantage of. This could apply to cars (and it does a bit) but the higher price and social factor makes people understand them more. Mattresses are just cheap enough (with just enough "bargains") that it's easier to just get it over with. For your last point I'm from Australia so our brands are different but we have plenty of the online foam mattresses. I got one because mattress stores felt a lot like a car sales lot last time - clingy, pressure tactics from someone with a massive information advantage. The online companies all had full refund policies so there's limited risk apart from time.
  - lotsofpulp 7y ago
    > Said another way, none of us need to buy mattresses often enough that we are mattress-buying-experts, so we're chumps easily taken advantage of. But there are people who do buy them often enough - hotels! I like to find a Marriott/Hilton/Hyatt/IHG standard mattress and it should be good enough. Ask a hotel manager to hook you up, should only be $250 to $500 at most for a King.
    - jfim 7y ago
      That's a pretty clever trick. Thanks!
    - hnick 7y ago
      Ah yeah, great idea. I heard the same about sheets. They get ones that last through many washes.
- MichaelDickens 7y ago
  > I don't really understand why someone would buy one of their mattresses that you can't test out at a store As someone who bought a mattress online: 1. You don't have to go to a store, which makes it much more convenient to buy. 2. If you don't like it, you can return it for a full refund, so there's no possibility of wasting money on a mattress you don't like.
benibela 7y ago
Something is very wrong in the US I think I paid around 30€ to buy a foam mattress in Germany
- pkaye 7y ago
  Can you link to a website of how that mattress looks like?
  - ce4 7y ago
    Not exactly 30€ but starting from 50 (when you subtract the 20 or 30% discount of some of the cheaper models): https://www.lidl.de/de/matratzen/c11480 https://www.lidl.de/de/matratzen/c11480 Edit: Here's the german discounter store archive, it lists past sales of the three largest chains Lidl, Aldi north/south. Just search for "Matratze" and you can check past sales up to 15yrs ago: https://www.discounter-archiv.de/suche.php https://www.discounter-archiv.de/suche.php
    - jjeaff 7y ago
      Hard to say without trying them out. But by the looks of them, I would say those are more like sleeping pads than what I would consider a mattress.
- abawany 7y ago
  Zinus foam mattresses in the US are quite affordable (~$200) especially when they have their sales going.
  - 135792468 7y ago
    That’s the one I was thinking of. Nice mattress for the price.
eyegor 7y ago
I would chalk it up to the fact that no one has tried (in the US). A startup could easily jump in on the cheap memory foam mattress game, but most mattress sellers are not startup folk. It's just so low effort to buy from serta, casper, etc. with absurd markups since that's the market rate. The "competition" looks a lot like the used car racket, but you don't need to join the car dealership cartel to sell mattresses. I'm guessing the big manufacturers have contracts that spec out minimum reseller prices with threats to stop supply. It's just ridiculous to think that all mattress sellers would risk easily being undercut running 2000+% markups. As for a startup, generally people don't buy mattresses that often, but I know I would if they were 100$. Even cheap ones end up around 5-700$, which is nowhere near an impulse buy. As a result, I only replace a mattress if it's completely worn out, which takes a solid 10-15 years. Funny how popular it is to replace the 800$ phone every 1-3 years but 1-3k$ has to wait until the mattress is unbearable. Everyone I know has this attitude for mattresses.
- twostorytower 7y ago
  A few thoughts here. 1) There are already lots of cheap memory foam mattresses that are relatively well reviewed on Amazon for example this one for $200 https://www.amazon.com/dp/B00474X5DO/ref=cm_sw_r_tw_dp_U_x_z3YtEbVJPRY5H https://www.amazon.com/dp/B00474X5DO/ref=cm_sw_r_tw_dp_U_x_z... (not a recommendation, just looked it up). 2) The average markup isn't 2000%. You can look at Casper's COGS in their S-1. Also, the return rate is built into the cost, so that adds to it. 3) In general, a cheap mattress is going to be perceived as low quality. It's like how nobody wanted Warby Parker glasses when they were priced around $20. Then they changed the price to $99+ and they actually improved sales.
- 135792468 7y ago
  Thought so too until I got into the industry. The establish players have run up marketing costs so that your average cost per acquisition can get out of hand quickly. It’s really hard to crack profitability with a cheap mattress. I’d have to look at my data to see CPC costs but i tried a lot of angles and channels to generate sales cheaply and struggled to find anything sustainable. CPCs, ad dollars, imagery, affiliate commissions hell, It’s only a matter of time before some affiliate comes in this thread pumping their garbage mattress review site. Half of them you can even get listed on without them asking for a special deal or rate.
Polylactic_acid 7y ago
Because its really hard to objectively rate a mattress. IKEA sells them at a fair price and they are great, but people in their minds see them as shit because they are cheap so they can't possibly be as good as the $2000 one.
- JMTQp8lwXL 7y ago
  If they were truly as good, word would spread (word-of-mouth) and the market would re-align. Blog posts would be written about how we're all naive for spending $2,000 instead of $150.
  - Polylactic_acid 7y ago
    They are. I'm pretty sure the "$2000 mattresses are a scam" story pops up every few months here. I have even tried to tell people that my $300 mattress is great but people don't listen. The marketing is too strong and its a product they want to spend a lot on since it lasts ages and gets constant use.
  - scarejunba 7y ago
    Doesn't work for diamonds. Same things written about diamonds as mattresses and people still buy diamonds.
  - Nextgrid 7y ago
    The 2k$ mattress companies often pay kickbacks and/or outright buy the blogs on which those posts would be written. The 150$ mattress companies don't do that.
135792468 7y ago
Honestly it’s 90% perception and 10% marketing costs. The market is super saturated CPCs, affiliate commissions and the rest of the advertising eats into the real margin. The rest of it I always saw that people associated more expensive with better when in reality there isn’t that much difference in quality. ie they will all suffer from sagging at some point. Brands play into this too.

Any thoughts on why markup stays so high if the industry is actually cutthroat? Competition should be driving margin way down.

by egdod 7y ago

Any thoughts on why markup stays so high if the industry is actually cutthroat? Competition should be driving margin way down.

kazinator 7y ago

Could depend on where the markup is and whose margin. If all those retailers are themselves buying from a small number of suppliers, they could be paying a lot of that markup, while their own margin is razor thin due to cutting each others' throats.

Zimahl 7y ago

I'm not OP, but I'd guess its because there is a really limited market for mattresses. People of course need and want them, but the turnover is (or can be) a very long time. I have a mattress in our guest bedroom that I used in college, over 20 years ago. It could probably be replaced, but will probably only get replaced with our main mattress when we replace it. It's fine for the minimal guests we have or when my wife or I sleep in it when we are sick (and don't want to keep the other awake). So for mattresses you really can't afford low margins if you want to stay in business. I can't imagine mattress stores sell more than several mattresses a month. As for why Casper and Purple mattresses are so much when you are supposedly removing the middle-man (the physical stores), I'm not sure. Because they can? I don't really understand why someone would buy one of their mattresses that you can't test out at a store, when you can pay the same price at a store and test out all your options.

hnick 7y ago
Said another way, none of us need to buy mattresses often enough that we are mattress-buying-experts, so we're chumps easily taken advantage of. This could apply to cars (and it does a bit) but the higher price and social factor makes people understand them more. Mattresses are just cheap enough (with just enough "bargains") that it's easier to just get it over with. For your last point I'm from Australia so our brands are different but we have plenty of the online foam mattresses. I got one because mattress stores felt a lot like a car sales lot last time - clingy, pressure tactics from someone with a massive information advantage. The online companies all had full refund policies so there's limited risk apart from time.
- lotsofpulp 7y ago
  > Said another way, none of us need to buy mattresses often enough that we are mattress-buying-experts, so we're chumps easily taken advantage of. But there are people who do buy them often enough - hotels! I like to find a Marriott/Hilton/Hyatt/IHG standard mattress and it should be good enough. Ask a hotel manager to hook you up, should only be $250 to $500 at most for a King.
  - jfim 7y ago
    That's a pretty clever trick. Thanks!
  - hnick 7y ago
    Ah yeah, great idea. I heard the same about sheets. They get ones that last through many washes.
MichaelDickens 7y ago
> I don't really understand why someone would buy one of their mattresses that you can't test out at a store As someone who bought a mattress online: 1. You don't have to go to a store, which makes it much more convenient to buy. 2. If you don't like it, you can return it for a full refund, so there's no possibility of wasting money on a mattress you don't like.

benibela 7y ago

Something is very wrong in the US I think I paid around 30€ to buy a foam mattress in Germany

pkaye 7y ago
Can you link to a website of how that mattress looks like?
- ce4 7y ago
  Not exactly 30€ but starting from 50 (when you subtract the 20 or 30% discount of some of the cheaper models): https://www.lidl.de/de/matratzen/c11480 https://www.lidl.de/de/matratzen/c11480 Edit: Here's the german discounter store archive, it lists past sales of the three largest chains Lidl, Aldi north/south. Just search for "Matratze" and you can check past sales up to 15yrs ago: https://www.discounter-archiv.de/suche.php https://www.discounter-archiv.de/suche.php
  - jjeaff 7y ago
    Hard to say without trying them out. But by the looks of them, I would say those are more like sleeping pads than what I would consider a mattress.
abawany 7y ago
Zinus foam mattresses in the US are quite affordable (~$200) especially when they have their sales going.
- 135792468 7y ago
  That’s the one I was thinking of. Nice mattress for the price.

eyegor 7y ago

I would chalk it up to the fact that no one has tried (in the US). A startup could easily jump in on the cheap memory foam mattress game, but most mattress sellers are not startup folk. It's just so low effort to buy from serta, casper, etc. with absurd markups since that's the market rate. The "competition" looks a lot like the used car racket, but you don't need to join the car dealership cartel to sell mattresses. I'm guessing the big manufacturers have contracts that spec out minimum reseller prices with threats to stop supply. It's just ridiculous to think that all mattress sellers would risk easily being undercut running 2000+% markups. As for a startup, generally people don't buy mattresses that often, but I know I would if they were 100$. Even cheap ones end up around 5-700$, which is nowhere near an impulse buy. As a result, I only replace a mattress if it's completely worn out, which takes a solid 10-15 years. Funny how popular it is to replace the 800$ phone every 1-3 years but 1-3k$ has to wait until the mattress is unbearable. Everyone I know has this attitude for mattresses.

twostorytower 7y ago
A few thoughts here. 1) There are already lots of cheap memory foam mattresses that are relatively well reviewed on Amazon for example this one for $200 https://www.amazon.com/dp/B00474X5DO/ref=cm_sw_r_tw_dp_U_x_z3YtEbVJPRY5H https://www.amazon.com/dp/B00474X5DO/ref=cm_sw_r_tw_dp_U_x_z... (not a recommendation, just looked it up). 2) The average markup isn't 2000%. You can look at Casper's COGS in their S-1. Also, the return rate is built into the cost, so that adds to it. 3) In general, a cheap mattress is going to be perceived as low quality. It's like how nobody wanted Warby Parker glasses when they were priced around $20. Then they changed the price to $99+ and they actually improved sales.
135792468 7y ago
Thought so too until I got into the industry. The establish players have run up marketing costs so that your average cost per acquisition can get out of hand quickly. It’s really hard to crack profitability with a cheap mattress. I’d have to look at my data to see CPC costs but i tried a lot of angles and channels to generate sales cheaply and struggled to find anything sustainable. CPCs, ad dollars, imagery, affiliate commissions hell, It’s only a matter of time before some affiliate comes in this thread pumping their garbage mattress review site. Half of them you can even get listed on without them asking for a special deal or rate.

Polylactic_acid 7y ago

Because its really hard to objectively rate a mattress. IKEA sells them at a fair price and they are great, but people in their minds see them as shit because they are cheap so they can't possibly be as good as the $2000 one.

JMTQp8lwXL 7y ago
If they were truly as good, word would spread (word-of-mouth) and the market would re-align. Blog posts would be written about how we're all naive for spending $2,000 instead of $150.
- Polylactic_acid 7y ago
  They are. I'm pretty sure the "$2000 mattresses are a scam" story pops up every few months here. I have even tried to tell people that my $300 mattress is great but people don't listen. The marketing is too strong and its a product they want to spend a lot on since it lasts ages and gets constant use.
- scarejunba 7y ago
  Doesn't work for diamonds. Same things written about diamonds as mattresses and people still buy diamonds.
- Nextgrid 7y ago
  The 2k$ mattress companies often pay kickbacks and/or outright buy the blogs on which those posts would be written. The 150$ mattress companies don't do that.

135792468 7y ago

Honestly it’s 90% perception and 10% marketing costs. The market is super saturated CPCs, affiliate commissions and the rest of the advertising eats into the real margin. The rest of it I always saw that people associated more expensive with better when in reality there isn’t that much difference in quality. ie they will all suffer from sagging at some point. Brands play into this too.