Awakening the Mattress Industry

I guess it was the next logical step.

Near its NYC mattress store, Casper just opened a sleep store. For $25 an hour, you can stop in to snooze. They change the sheets after each customer and give you a private space. Also if you want, pj’s, a beverage, and other “refreshing amenities” are included.  It’s called the Dreamery. (Starbucks has the Roastery?? Do we have a name trend…ery?).

I went to the Casper website to check out the Dreamery. Today, spots are open during every time except for 12:00-1:15:

Mattress Inflation

In a rather established industry with minimal innovation, Casper was one of the first to bring us the bed-in-a-box mattress. Now only four years old, Casper started during April 22, 2014. Since then online copycat firms have multiplied.

As you might have guessed, it is easy to enter the mattress industry. You just need a website, some customer service, an ad budget, a manufacturer, and a shipper. As low as $250 apiece (reputedly), most mattresses are pretty cheap to make so mark-ups can easily equal 100%.

Similarly, the seeming presence of a mattress store in every strip mall reflects industry economics. Employees are usually on commission and there’s no inventory. The store is a showroom that connects customers to a manufacturer with a warehouse. Furthermore, have you ever tried to compare mattresses? It’s tough. The names signify nothing and you really cannot be sure what makes a mattress good or bad. So we try them out.

And that returns us to the Casper snooze store. I suspect they expect some customers will head straight from their naps to buy a Casper mattress.

Our Bottom Line: Mattress Markets

We used to buy our mattresses in furniture and department stores. It took awhile to select one and to get the delivery. The name brands were Sealy and Serta. But during the 1990s we got the mattress store and recently, online mattress sellers. Online, estimates indicate there are as many as 100 firms selling beds-in-a-box. Then you have a proliferation of mattress stores in many communities.

As economists, we can return to supply and demand.

On the supply side, manufacturing costs are low, market entry is easy, and stores, whether physical or online, require no inventory (unless they do their own manufacturing). As for demand, we are buying more mattresses. Many of us live alone, the divorce rate is high (one person gets the mattress), the replacement cycle has shortened and suddenly mattress gels and foams are in the news.

With innovation snagging more buyers and making mattresses cool, we seem to have the massive awakening of what had been a sleepy market.

My sources and more: Thanks to marginalrevolution for again alerting me to an interesting economic event. From there countless articles were possibilities as well as a Freakonomics podcast I vaguely recalled. Racked though seemed to be the first to tell about the nap store while Curbed and SFChronicle had an up-to-date industry analysis. Finally, for the disruption side of the market, I recommend this detailed Rubber and Plastic News article.

Our featured image is from the Casper website.