With both traditional bricks-and-mortar retailers and digital brands increasingly opting to cover their multichannel bases with a bricks-and-clicks approach, what role will the online pureplay fulfil? Informed by a handful of the industry’s leaders, Paul Farley investigates the place of this unique business model in today’s market …
Unlimited reach, a host of unique audience targeting, tracking and promotional tools, and (relatively) low overheads – pureplay e-tailers have plenty going for them, and, for better or worse, the last decade has seen these online-only sellers redefine the UK bed sector.
Today – with the near extinction of retailers without any online presence – sellers fall into three camps: traditional bricks-and-mortar retailers which also sell online; the converse – e-tailers that have opted to establish a physical presence of some sort; and those digital pureplays which continue to exist solely online.
Once upon a time, the trade shook its collective head at the very notion that people would buy beds online – saying too many tactile factors were involved, and it’s far too crucial a purchase to carry out ‘blind’ – but buy online they have.
While the statistical evidence for the proportion of people doing so often fails to consider the mix of digital and physical ‘touchpoints’ made by consumers during their buying journey, the trend is marked.
Last year, an NBF survey found that 51% of bed/mattress purchases were made online (with little distinction between the age groups choosing to do so). This year, bedmaker Sleepeezee conducted research with PwC which concluded that this number might be closer to one in three. Either way, online penetration in this sector seems to be growing, buoyed by new technology and consumers’ faith in the quality of product and service they find online.
Following an explosion of bed webstores some 10-15 years ago, competition has winnowed out many of the weaker and less reputable players, leaving the pureplays’ market share increasingly consolidated in the hands of a few exemplars of true scale and capability – and further removed from those addressing more specific niches.
The emergence of the bed-in-a-box has further disrupted the traditional landscape, as a raft of well-funded tech start-ups jostle for the attention of shoppers more focused on convenience and brand clarity. However, almost without exception, these engaging upstarts have gradually deviated from the digital-only path, establishing their own pop-up displays and distribution partnerships with national retailers.
Credibility matters – these brands have clearly realised that having a reputable physical presence is crucial to broadening their audiences.
Stand and deliver
Nevertheless, the online pureplay model continues to prosper, thanks to a handful of unique advantages – such as the ability to offer unrivalled product choice and depth of information, and, free from the millstone of expensive prime location rents and rates, to operate on narrower margins while selling at volume.
Yet the model has its flaws. Beyond the sizeable costs of establishing and maintaining search engine visibility, and the strict returns policies they must adhere to, pureplays must also contend with a growing demand for rapid fulfilment (it’s no accident one of the most prominent is called MattressNextDay), and the challenges it presents.
“One of the barriers to ecommerce is the high cost of delivery due to the product being heavy and awkward to lift and carry to individual consumers’ homes all over the country within a very quick timescale,” says Mike Murray, director of retailer Land of Beds. “Therefore, pureplay companies (or any retailer who sells online) must invest correctly and build their infrastructure on a solid foundation if they want to be around for many years to come.”
There’s also the inability to deal with customers face-to-face – a call centre and messaging service can only go so far in persuading and reassuring potential buyers that a bed or mattress is right for them.
Match play
This lack of personal contact has forced online pureplays to compensate by refining and optimising the speed, clarity and reliability of their delivery, so many now offer a truly enviable customer journey. Yet there remains the issue of price – pending a significant rebalancing of the UK’s tax laws, the model seems destined to attract suspicion (if not downright hostility) from its bricks-and-mortar counterpart.
Much of this stems towards the practice of showrooming – a shopper visits a physical store to see if they like a product, then simply searches for the most competitively-priced version online, and buys it there instead. It’s easy for retailers to feel like they’re footing the bills for their rivals, and often losing out at the point of sale. Reacting to this behaviour, suppliers have diversified their offer over the years, often de-branding their retail products to ensure they can’t be price-matched online.
“Showrooming is now a tactic adopted across all generations and no longer limited to the tech-savvy, and this is having an impact on the independents,” says Archers Sleepcentre’s MD, Ross Beveridge. “Retailers are having to protect themselves from online price matching. The same product now has multiple names, or a slight change of fabric on a mattress, or even just means providing your own labels. Some importers are now opting for unbranded boxes.”
Leekes’ MD, Emma Leeke, comments: “The brands are coming to terms with the requirement to provide some level of protection to bricks-and-mortar retailers, which is helping to stop the race to the bottom on price which we experienced in the early days of online trading.”
Ross Beveridge believes greater intervention is necessary: “What is long overdue is a reduction in rents and business rates to reflect the shift to online shopping, which will allow bricks-and-mortar retailers to be more competitive,” he says. “Instead, the rates should be made up by a ‘sales tax’ imposed on pureplay online retailers, levelling the playing field.”
Pricing pressures and rising costs make for a poisonous environment. Yet some find solace in the notion that the devaluation Emma Leeke describes may be isolated to just one end of the market.
“I don’t think technology is good enough yet to make pureplay work effectively at all levels of the market,” says Nick Garratt, MD of the British Furniture Manufacturers association (BFM). “Low-end can probably work because of the smaller investment involved. At the higher end, people will still need to see, touch and feel until technology (AI/VR) is better.”
Gavin Boden, owner of GB Agencies, is less sanguine. “For the bottom end of the market, [pureplay] will destroy bricks-and-mortar stores – but in the middle- to top-market, it will only have an effect on branded business.”
Channel surfing
When online retailers take to the physical environment to establish greater credibility and reach, they generally do so with a formidable arsenal at their disposal – impressive marketing assets and online visibility, an existing customer base, and an appreciation of how to deliver a streamlined customer journey (even if they now have to understand physical display, stocking and ordering points).
Many traditional retailers have succeeded in establishing a strong online presence, but it has taken most some time to adapt to this new world of multichannel (or omnichannel) shopper demand. Regardless of the ground they have ceded to the digital brands, these businesses are fast discovering that a marriage of physical and online sales is working for them.
AKA PR’s Jan Turner says: “My personal feeling is that most consumers feel more reassured by companies which also have a bricks-and-mortar presence. Online and offline feed off each other. Offline provides reassurance, online provides easy access.”
When it comes to her business’ journey, Emma Leeke concurs: “Over the last 10 years we have moved to take a more omnichannel approach to our marketing and trading, with our transactional website seeing consecutive years of double-digit sales growth. In most cases, the customer journey inevitably involves online research, so it is essential to have a presence – even if the majority of customers choose to make their purchase in-store.”
Brands unboxed
The new breed of online disruptor brands have taken their own route towards an omnichannel future. Last November, the NBF published the results of research which found that rolled mattresses accounted for 24% of all mattress sales in 2018 (up 7% from the previous half).
Admittedly, just 7% of these sales were of the disruptor brands’ one-size-fits-all products (UK manufacturers were quick to develop their own offer for retail) – yet their market share was growing fast.
These disruptors, which began their lives as online pureplays, have brought their own, fiercely-branded product to market, while championing the convenience of boxed delivery lengthy trial periods, and prices that reflect streamlined production costs.
These brands are generally peerless marketeers, and know how to capture people’s attention – but, years after launch, many remain unprofitable. Substantial column inches have been devoted to the merits and flaws of these brands’ approaches (with the failures of plc eve Sleep, in particular, laid bare), and speculation that pouring investment into building brand loyalty among an audience which makes repeat purchases only every seven-to-10 years is risky (and perhaps unsustainable) business.
And it’s not just the rolled mattress upstarts that have taken a questionable approach towards growing market share, comments Ross Beveridge: “Many of the pureplay online retailers have embarked on huge loss-making brand-building campaigns as they chase market share with a complete disregard for bottom-line profit, and we have recently seen some of these companies’ values slashed to a fraction of that presented to investors – many of whom will never see a return on their investment. Few may stand the test of time, but I would bet the majority will not.”
The NBF’s executive director, Jessica Alexander, agrees with the sentiment. She says: “It’s a strange world where financial investors throw money at unprofitable businesses and ignore profitable ones, isn’t it?”
Supply and demand
Despite those online pureplays behaving questionably, or throwing good money after bad, there are several digital operators in the UK bed sector which have established themselves as credible, long-term businesses – and they have done so by meeting evolving consumer demand at every turn.
“Understanding what customers desire and how to fulfil their needs is the basis of any good business,” says Mike Murray. “If people want to buy online and pureplay retailers can meet that requirement, then that’s good customer service!
“Ultimately, the consumer will decide whether the pureplay online offering is right for them – however, regardless of whether you are an online, offline or multichannel retailer, you should practise business ethically and be subject to the same standards.”
Steve Adams, MD of online pureplay MattressOnline, states: “A company’s route to market has no relevance to its business format. The leaders of the business, and the culture they nurture, is far more important. A pureplay online retailer can be just as good or bad as a high street store in terms of the offer and their ethics – and it could be argued that pureplay online retailers have to be more transparent than their offline counterparts. They certainly have stricter distance selling regulations to comply with.”
Defiantly digital
With online brands increasingly finding their way onto our high streets and retail parks, it seems many consumers still desire to touch and feel a bed and mattress before buying it.
At the same time, the limitations of the pureplay are likely to grow. With discussion around new digital taxes gaining momentum, and the online marketplace becoming increasingly crowded (the price per keyword required to top the search rankings makes Google look like the only real winner), the format’s future is debatable.
Is every enterprise destined to go physical? Is their market share likely to grow – and will they survive long enough to see it?
“Online is here to stay,” says Jessica Alexander, “but not exclusively, and at the expense of all physical shops. Obviously, there will be long-term, sustainable winners – while many will fall by the wayside.”
As Mike Murray suggested, everything is likely to come down to what the consumer wants, and how well the pureplays can react to their demands. “Longevity falls at the feet of a company’s leaders,” concludes Steve Adams. “Have they built a business that is profitable and sustainable? Whether a business is online or bricks-and-mortar, it’s essential to control costs and react to trends and changes in consumer behaviour.”
Read more bed-focused content in Bed Buyer, a Furniture News supplement dedicated to the National Bed Federation's members and annual show.
