22 May 2024, 12:58
By Furniture News Apr 08, 2019

Disruptors disrupted

Each year, Furniture News asks some of the UK’s top retailers to share their views on some of the most significant industry developments, and how these might impact their future. In an excerpt from our annual Year in Review special (which features in the January issue), we ask the panel's members for their thoughts on the future of the online bed-in-a-box disruptors …

D2C mattress brand eve Sleep’s H1 sales fell short of expectation last year, leading to losses which culminated in the CEO’s departure in July, and a renewed focus on the brand’s core markets plus the launch of a £15m fundraising campaign under eve’s new CEO.

Some commentators opined that the business had overstretched itself by spending too much on driving brand loyalty towards a product (a rolled mattress) which is not likely to see repeat purchases for some years.

We asked our panel if they had any fresh thoughts on the bed-in-a-box concept, and whether it had reached its limits.

Steve Pickering (Sussex Beds): There was no real surprise to hear of issues within the bed-in-a-box sector. In my opinion they have fundamental issues in their business model.

The concept is not unique, and is easily copied, with the sector at saturation point. Pricing will constantly come under pressure due to competition and new entrants to the market, while the one-mattress-suits-all format restricts growth, providing little room to increase AOVs.

The cost of marketing will remain high to ensure visibility is maintained, while branding and loyalty will prove difficult due to the length of time between repeat/replacement purchases. Our current recognised national brands are testament to this – they struggle to obtain consistent recognition with the public after years of initiatives and advertising campaigns.

Ross Beveridge (Archers Sleepcentre): My thoughts have not changed on the D2C bed-in-a-box since its inception in the UK market – clever marketing strategy, but no long-term sustainability.

With ridiculously high CPAs before you even produce the product, losses will continue to plague these companies. There has been a shift, with many looking to reduce marketing costs by pairing with large retailers in a bid to sell through bricks-and-mortar stores as they desperately seek a new route to market.

My fear for them here is when you see them on the shop floor next to current product offerings, they just don’t stack up, and, with no choice but to continue to sell direct, retailers are asked to accept poor reduced margins. It’s not for me.

It has at least provided me with a constant barrage of questions at every social engagement from weddings to funerals and everything in-between – and my ‘not again’ disapproving reaction fails to win anyone over! I still can’t believe we are suggesting that a vacuum-packed mattress is a revolutionary product – it’s been in the industry longer than I have.

Gavin Boden (sales and marketing professional): Bed-in-a-box is a great idea, but the 60- or 100-day trial isn’t doing bricks-and-mortar retailers any good. I feel that the bed-in-a-box concept will continue, we will see new suppliers entering the market, and we will no doubt see casualties, because the margins are tight and returns are huge, so if this isn’t managed with experience it can easily go wrong.

Steve Adams (MattressOnline): I’m a firm believer in choice for the consumer, and I do not believe you can create a mattress to suit all preferences. Likewise, not every customer can afford the price point of £599, irrespective of the 100-night guarantee.

To make the model work, they need to add choice and brand awareness – however, without reducing their marketing spend, it’s hard to see how they will ever make a profit. Selling beds and mattresses is difficult, you only see your customer once every seven years if you are lucky, and then you hope they remember who you are!

Mike Murray (Land of Beds): Building a brand is never easy. Unless your product is so unique that people search it out, you’ll need to invest vast amounts of money to get it off the ground. Operators who are already in that space won’t just sit back and not compete – therefore, advertising spend is only going to go one way.

The mattress concept itself is not unique enough to be better than other products, and a high percentage of mattresses are currently rolled and boxed anyway. Having lost their USP (boxed and delivered next day with a sleep trial), disruptors will need to spend more and more on cutting through the clutter and product innovation – eating further into profitability. This means that while many of these companies have done a great job marketing the sector initially, they may not be around to reap the rewards.

It’s clear to see that the original disruptors are now moving towards a hybrid approach – opening their own stores, which a couple of companies are doing in the US. However, this is not going to be cheap. One thing that may happen is some get acquired by larger bricks-and-mortar retailers who prefer to buy the ecommerce infrastructure that the disruptors have built, rather than develop it themselves. Of course, this may have been their exit strategy in the first place – however, as they have not hit profitability, they may not get the offers they would have hoped for at the outset.

Partnering with a network of traditional bricks-and-mortar retailers is probably the best hybrid strategy, which sounds pretty similar to the tried-and-tested approach that's been around for the last 50 years. The question is, will those retailers choose to support and work with companies who – less than 12 months ago – were telling customers to avoid them and buy direct? It’s funny how things work out …

Peter Harding (Fairway Furniture): While we are always wary of new competitors, we are careful we don’t throw the baby out with the bathwater in how we deal with their threat. The mattress-in-a-box suppliers have done some excellent, innovative and effective marketing, but it remains to be seen whether such a lengthy repeat purchase cycle can work for suppliers that rely so much on volume to pay for the extensive marketing and brand awareness work that drives the return on investment their backers will demand.

Looking ahead over the next three to five years, I think the growth of technologies that allow customers to better imagine furniture – of whatever type – that they are interested in, and how it will look in their home, will be significant. The gap between expectation and reality is still quite large for many customers, so helping them make decisions they will be more happy with is crucial.

Read more feedback from our panel in the January issue of Furniture News.

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