Mattress Firm Declaring Bankruptcy, Closing Up to 700 Stores: Three Reasons Why This is a Good Thing for Indianapolis
It’s official, Mattress Firm has filed for Chapter 11 Bankruptcy Protection and will close 700 stores.
This was expected, but there are two really surprising points made in the USA Today article I linked:
Of the 700 stores, 200 of them will close within days! That’s quick. No doubt, Indianapolis will be among those 200. Mattress Firm CEO said in a statement that stores will be "in certain markets where we have too many locations in close proximity to each other." As I outline in my comments below, that’s got Indy all over it.
They’re not doing going out of business sales, and instead either transferring products to other stores or will “decide to abandon” the products. What does that even mean? Just throwing them away? That could mean thousands of mattresses “disappearing.” That’s not good for anyone.
Forget the Bed in Box, Skip the Store. We’ll bring the Mattress Store To Your Door.
Mattress Firm explores bankruptcy to close stores.
All in all, it's not surprising, as we've outlined in the blog below. I personally like the USA Today analysis, which states, "Consumers could be the ultimate winner as the furious competition for their business generates deals, price transparency and improved customer service."
We obviously agree.
ORIGINAL BLOG FROM 6/8
Recently, I had some dialogue with a colleague who's deeply engrossed in the mattress industry. His claim was that one of his customers, a large mattress manufacturer whose name starts with the letter 'S', informed him that Mattress Firm, the United State's largest mattress retailer, was planning on closing 1,000 stores. I checked around looking for some support for such a claim, and found this article:
Their language isn't quite as strong, but analysts, along with my contact, seem to be of the opinion that up to 1,000 store closures is a real possibility.
Businesses open and close stores all the time, so why am I writing about this? The point here, for me and Comfort Option, is to make people aware that, if this does in fact happen, it's good news for you.
1. The company has way too many stores anyway.
According to the Business Insider article, Mattress Firm has 3,400 stores in the US. Look around. On the north side of Indianapolis, for example, they literally have 4 stores in a 2.5 mile radius. And 6 inside of 6 miles.
That sort of saturation is more than just plain annoying; it also reveals the extraordinary overhead costs that have to be included in each and every one of their mattress sales. Which leads me to number 2.
2. Their mattresses are too expensive.
In their defense, part of this can't be helped. Since they've carved a niche in the retail space, Mattress Firm will always have to charge significantly more than what the materials in their mattress are actually worth (as a side note, this phenomenon remains true even for the vast majority of online mattress sales, as we outlined in a previous blog post). It's clearly more of an industry issue than it is a Mattress Firm issue.
That said, let's take a closer look at all of the factors behind Mattress Firm's exorbitant costs:
Physical Store Overhead. Anyone in the mood to do the math for the costs of 3,400 stores? Let's try! Let's say the monthly rent for one store is $10,000 per month and that store sells two mattresses per day. That would require $167 per mattress to cover cost. That's a lot of money in itself. But, if every store sold 2 mattresses per day, that would make over $1.1 million dollars of customer money going to storefront costs, EVERY DAY.
Not producing their own products. Mattress Firm, along with countless other retailers both online and in-store, don't actually manufacture the mattresses they sell. This means they pay fabricators (such as us) to do it for them. More middle-men simply means more mark-up for you, the consumer.
Financing breeds higher costs. Mattress retailers love financing these days. I purchased a car last week. As opposed to decades past, car dealers now prefer customers taking loans and financing vehicles rather than paying cash. Gone are the days of getting a discount for paying cash. The problem is, consumers often don't realize that it's usually easier for sales people to sell a $4,200 mattress at $50 per month, rather than sell a $3,000 mattress without financing. What's scary is that it could be same product! If a brand can sell a product worth $3,000 for $50 a month over a 7 year period they wind up with $4,200. And that's only if there's no interest.
Marketing. I hear about Mattress Firm on the radio. I see billboards. I see print ads. I see massive PPC campaigns. I see commercials. They are certainly succeeding in visibility. Those initiatives are tangible costs, though. And they're high.
3. They don't know who they are anymore.
As is the case with many brick and mortar retailers, the onslaught of online sales is an enormous obstacle (remember Borders? And more recently Toys R Us?). Unless you're Wal Mart, physical storefronts have had a very difficult time playing on both sides of fence. And as they try and grow in the share of online sales, they often lose their focus on their main strength - actual storefronts.
That's where Mattress Firm finds itself. One on hand, they market against the Bed-in-a-box revolution. See below.
Then, on the other hand, they've launched a new bed-in-a-box brand called Tulo, which clearly has a ton of money behind if you're at all familiar with PPC programs.
Talk about a conflict of interest. In the store, you tell customers that online mattress sales are risky, and then online you offer a totally different message. In an era where trustworthiness is a huge component in brand loyalty, this is unfortunate.
The Bottom Line?
I'm obviously biased, but the bottom line is that Mattress Firm closing stores is good for you, the consumer. They have too many, they charge too much, and they're losing their identity. Fewer of these stores should create lower costs per mattress at Mattress Firm (although, I'd encourage customers to check on that) and that would make me happy, if so.
The silver lining in this, however, is that it brings truth to light in an industry that has long and intentionally kept its consumers in the dark. The problems are now evident and, hopefully, it is clear that there are better options out there.
Friends, I encourage you to do your research if you're in need of a mattress. Find out what all goes into the cost. Find out who makes it and where it's made. Find out what it's actually made of. Read the warranty before you assume you get a free mattress for 100 days.
Then, if I can be so bold, feel free to contact us. Comfort Option provides a service that no one else in the country provides - Custom Mattresses, made at your house.