Mattress retailers can't afford to rest
By Corilyn Shropshire, Chicago Tribune reporter
July 21, 2013
After nearly a quarter-century in the mattress business, Mike Kenna isn't letting the latest round of competitors keep him up at night.
The co-owner of veteran mattress retailer American Mattress has seen rivals come and go, even surviving the recession when housing sales stalled and consumers held back on buying big-ticket items.
But these days, there are signs the mattress industry is on the rebound, thanks to pent-up demand and a rise in consumer confidence. Global sales are expected to reach nearly $12 billion by 2017, rising 3 percent annually, according to market research firm IBISWorld.
The comeback is particularly evident in Chicago, where no fewer than four new competitors have set up shop, angling for a share of the Windy City's already crowded mattress market.
"We've seen where people come into Chicago and haven't really lasted long," Kenna said. "In the next 12 to 24 months things will shake out and the strong will survive."
East Coast-based mattress giant Sleepy's plans to be among them.
The Hicksville, N.Y.-based chain burst into the Chicago market in late June, opening 10 stores and planning at least five more this month. Its long-term goal is to have more than 100 stores in the Chicago area, according to Chief Operating Officer Adam Blank. Michigan-based Art Van Furniture, with plans to open about 20 of its PureSleep mattress stores during the next four years, will be nipping at its heels.
They'll join a new Ashley Furniture's ZZZ's by Ashley store in Highland Park and Abt Electronics in Glenview, the specialty electronics and appliance retailer that last year added mattresses to its lineup. Then there are the countless specialty mattress sellers, department stores and members-only discounters.
"How many mattress stores can we take (is) the bigger question," said Neil Stern, senior partner at Chicago-based retail consultancy McMillanDoolittle.
Greater competition means mattress sellers are having to adapt to lure and keep customers — with tactics like price matching, zero percent financing and same-day delivery.
"It's a very large market, so there's space for people to compete," said Matthew Hudak, a research analyst at Euromonitor International. "If you have a novel format and you have something to offer, you can get into the space."
Consumers typically replace their mattresses every decade or two, raising the stakes for every sale. But there's money to be made in the mattress business, insiders say, because the markups on mattresses and the margins are well into the double digits.
Selling mattresses helps boost the profitability of Jon Abt's Glenview store. "There are slim margins in electronics and less so in the appliance industry, but in furniture, it's the opposite. The margins are better," said Abt, adding that mattress sales in the past year at his store have exceeded expectations by 50 percent.
The quest for a good night's sleep has yielded higher sales in recent years, buoyed by the growing popularity of specialty foam mattresses designed to conform to the body and prevent tossing and turning.
Mattress sellers say a basic queen starts at about $300 but can go as high as $10,000 for foam and other features, including beds that raise or lower the head or feet by remote control.
There are incentives for manufacturers and retailers to innovate, as new product developments can lead consumers to replace their mattress more frequently, industry watchers say. "A consumer with a 5-year-old inner-spring mattress might be willing to trade up to a memory foam … if they are convinced it will improve their quality of sleep," said Jared Koerten, senior analyst at Euromonitor International.
Innovation isn't everything when it comes to selling new mattresses. Volume matters, too. Sleepy's says more than 900 stores in 17 states help it keep prices competitive.
Sleepy's offers about 10 mattress brands, including the well-known "three S's," Sealy, Serta and Simmons, as well as memory foam producer Tempur-Pedic, in retail spaces that average 7,000 square feet.
The company advertises aggressively and trains its "mattress professionals" at a four-week "sleep university,"where experts are brought in to teach about the science of sleep.
American Mattress, with nearly 100 Chicago-area stores carrying Serta and Tempur-Pedic brands, touts its family ownership and customer service. Co-owner Kenna says Sleepy's will provide valuable competition.
"My feeling is that (Sleepy's arrival) should help our business," he said. "Just like Burger King and McDonald's, when McDonald's goes up, Burger King goes right across the street. It comes down to salespeople who can educate the consumer."
Consumers also are doing their own research, experts say, using the Internet to compare products and prices, and read reviews.
Take Al Robinson and Cheryl Lyte who after 15 years and one steadily sagging mattress, decided it was time for an upgrade. They wandered into American Mattress on Clybourn Avenue in Lincoln Park on a sunny Sunday recently, hoping to do some research and weigh their options. Lyte, of Streeterville, stretched out on a popular iComfort by Serta made with foam designed to conform to the body and promote better sleep. "I could fall asleep right now," she said as she closed her eyes. But her partner, Robinson, wasn't convinced. "The mattress industry appears to change every two or three years," he said. "It's nice because the Internet does a lot of your shopping for you … it gets down to the facts of what you're looking for." Instead of buying a new mattress that day, the couple decided to shop around more and make a decision next month. They've narrowed the possibilities to a king-size iComfort or a Tempur-Pedic, and will likely choose based on price, Lyte said.
In a later interview, Lyte referred to the American Mattress store by the name of another locally owned competitor, The Bedding Experts.
That small slip illustrates why mattress veterans and the newcomers have their work cut out for them. Location is a large chunk of the game, especially since consumers can't always distinguish one store from the next, insiders say.
John Bontkowski, who manages an American Mattress in Lincoln Park, noted how competitors dotted Clybourn Avenue, some with more than one location within blocks of each other.
"I can give you countless examples where we moved the store from one spot and it made a difference," he said.
Even though the majority of the store's business is what Bontkowski calls repeat and referral, "we still need the walk-in to build that new business."
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