The 300 per cent mark-ups, huge profits, and hundreds of near-identical mattresses being sold under different names and prices – the bed you sleep on every night is taking you for a ride.A Fairfax investigation has revealed strong evidence the mattress industry is taking advantage of uninformed consumers to charge huge mark-ups. The industry itself admits you're a sucker if you ever bought a full-price bed."I would say if we bought a bed for $1000, it would probably sell between $2400 and $3000," says Roger Wilson, who worked as Forty Winks' general manager for 21 years before retiring in 2007.Fairfax has also obtained wholesale price lists for mattresses. These reveal beds that retail for $10,000 are being made for as little as $1500. Mid-range beds, the type that cost $4000, are being manufactured in China for less than $400.Meanwhile mattress manufacturers are working closely with retailers to ensure shoppers cannot comparison shop for mattresses – by selling essentially identical beds under different names, and ensuring competing stores' mattresses have different names.
Welcome to the mattress industry – where they know exactly how much a good night's sleep should cost. Inside a mattress factory. The cost of a good night's sleepHow much should you pay for a bed?Certainly not full price or RRP, admits Forty Winks CEO Con Dekazos. "That's the nature of the industry. It averages around a 30 per cent discount basis, but I would argue that you'd get that almost every day from a bedding retailer."In the retail environment, there are always mark-ups. That's because of the bricks and mortar model – you've got to pay wages, electricity, gas. You can't compare the mark-ups on a bricks-and-mortar versus online model."Forty Winks has been in trouble for this before – the ACCC whacked them with an enforcable undertaking in 2005 for selling products far below the RRP.But even if you buy a bed on sale, the margins are still huge, says former GM Wilson. In addition to marking a bed up 240 to 300 per cent, the retailer gets a "rebate" from the manufacturer for each sale – about 12 per cent of the sale price.
Why do consumers accept such huge mark-ups? Because all mattresses essentially look the same, and manufacturers carefully guard the details of what's in a bed, says one former franchise owner who spoke on condition of anonymity."There is a lot of confusion in that space, because apart from looking at the mattress you cannot tell what's inside it. It's a trust issue, to be honest. You've just got to trust what the seller is saying." Manufacturers and retailers also work together to ensure shoppers cannot comparison-shop mattresses, says Wilson.Each individual mattress chain is given a range of beds by manufacturers including Sealy. But each bed is given a different name and price point for each retailer, ensuring no competing store is selling the same product.Fairfax found 131 different Sealy mattresses on sale at Snooze, Forty Winks, Bedshed and Harvey Norman under names like Trafalgar, Navi, Molise, Threadbo, Veneto, Hotham and Guthega. Every single mattress was unique and couldn't be purchased at another store."
They are dealing with all the major retailers including all the smaller retailers, and they are providing an individual product to each store so they can say this is only available at our store," says Wilson."They'll have a different colour, a different name, and probably a slight difference in the materials that are above the springs."Wade Gunzer, marketing manager at Sealy Australia, says the company tailors individual mattress ranges to meet the needs of each company's customers."Each bed is individual, so it get so it gets a different name. In some beds there might be minor changes, and in some there might be major changes."The former franchise owner puts it differently."Nowadays you could call it the Nurofen rule," he says. "That company was packaging drugs for various things, but they were all the same Nurofen tablet."So how much does a mattress cost to make?There are an emerging group of young upstart entrepreneurs who say they have discovered a secret: mattresses are much cheaper to make than you'd think."
We thought – wow, there is a lot of margin in the middle," says Richard Li of his first impressions of the mattress industry.After calling a few factories, Li discovered he could make a bed thousands of dollars cheaper than the ones that are sold in stores. So he did – he called it Greywing, priced at $1195, and says business is booming.Ringo Chan, founder of Ecosa, is another upstart. His foam mattresses cost up to $1350.He was approached by a major retailer – he won't say which one – who wanted to stock his range. But they baulked when they realised in order for the store to make a profit, they would have to sell it for a 300 per cent mark-up on the amount of money it actually takes to make the bed."They would have to get us to mark-up the price to cover everything," he told Fairfax.Stefan Papas makes OzMattress, an online mattress that includes springs and gel, just like something you might buy in Forty Winks. His top of the range sells for $2100; the mark-ups in-store are so big, he says, that it competes on quality with beds sold for $10,000."
At some point the major manufacturers along with the major retailers decided to take the Australian public for a ride. It's a racket," he says.Wade Gunzer, marketing manager at Sealy Australia, rubbishes those claims. There are no mark-ups, he says. "A lot of technology, innovation and work goes into making these."It's a really unique and precious industry."Greywing and Ecosa's foam mattresses are much cheaper, but they aren't without their own problem. Gunzer says they can never be as supportive as a spring mattress; there are also questions over the mark-ups they themselves charge.A foam bed can be made for less than $100 in China; if that's so, says a critic, how much of a mark-up are they charging?HOW MUCH DOES IT COST TO MAKE A MATTRESS?It is difficult to work out exactly what's in a mattress, because manufacturers are very opaque about the amount of each ingredient that goes into a bed. Fairfax has spoken to two mattress industry insiders, who agreed to reveal the general details of some of their price listsA top-of-the-range bed.