Shortly after Melissa Marik moved into a new apartment in February, a Mattress Firm store moved in a block or two away from Marik — and from another Mattress Firm. "I never even see anyone in the stores," said Marik, 27, who was walking down a mile stretch of Clybourn Avenue in the Lincoln Park neighborhood that boasts five Mattress Firms, two American Mattresses and a Sleep Number.Even the CEO of Mattress Firm, Ken Murphy, agrees Chicago probably has a few too many — but there's a method behind what some may see as the madness of mattress stores seemingly on every corner. In its best markets, Houston-based Mattress Firm aims to have a store for about every 50,000 people. That means Murphy would eventually like to have roughly only 200 in the Chicago area. Today, there are 235.Some duplicative or unprofitable stores will be closing but not right away. Mattress Firm is reviewing its real estate footprint with an eye to trimming stores but hasn't yet decided how many or which stores to shut down, according to the company's first-quarter financial report.
Most closures will come as store leases end, Murphy said.Even 200 is a lot of stores specializing in a product that for many customers is a once-in-a-decade purchase."Car dealers come closest, but there are no other retail chains that focus on big-ticket discretionary products with that many stores," said Wedbush Securities analyst Seth Basham. Roughly 9,000 specialty bed and mattress stores in the U.S. generated about $11.5 billion in revenue in 2015, according to a report last year from market research firm IbisWorld.So why are there so many? In Chicago, the answer has a lot to do with Mattress Firm's push to grow through acquisitions.Mattress Firm, the U.S.'s largest specialty mattress retailer, got into the Chicago mattress market about two years ago when it acquired Back to Bed and Bedding Experts. It bought another competitor, Sleepy's, last year and finished rebranding those stores by July 4."While in many respects it's been a great opportunity to get as populated in the market as quickly as we have, the downside is we have real duplication of stores right on top of one another," Murphy said.
It still has competition from other specialty mattress chains, including Sleep Number and Addison-based American Mattress, in addition to furniture stores and big-box retailers that sell mattresses.Furniture stores and department stores used to be the only places to buy a mattress, said Jerry Epperson, a furniture and mattress industry analyst with Mann, Armistead & Epperson. But manufacturers, which wanted to encourage people to replace their mattresses even if they weren't buying a new set of bedroom furniture, started promoting the idea of dedicated mattress stores, and they've been spreading rapidly since the 1990s, he said.Industry analysts' take on whether the U.S. has too many mattress stores depends on how well they think generalist brick-and-mortar retailers and online mattress startups will fare against traditional mattress specialists.But Murphy said there's "a logic to the apparent madness" of the store-on-every-corner approach.A new mattress — expensive and nonessential — was an easy purchase to delay during the recession, which has likely led to some pent-up demand, said Rice University marketing professor Utpal Dholakia, who got interested in the mattress business when a British student wondered why every American strip mall seems to have its own mattress store.
Industry analysts also say a spate of bedbug infestations may have prompted at least a few extra sales.Mattresses are a relatively high-margin product, and stores don't need that many employees, meaning each location doesn't need to sell a huge number of mattresses to break even, industry analysts said. And every store does double duty as advertising — important for a product most people don't think about until they need it."We want prominent, convenient, high-profile locations our customers will be driving or walking past anyways so that when they do get in the market, we're the natural default option," Murphy said.He thinks there's room for more Mattress Firm stores, albeit not in Chicago. The company had 3,472 as of May 3, and he thinks it could support about 4,500 across the U.S.Mattress Firm is trying to be the first truly national brand in the mattress space in hopes that scale will give it more leverage over vendors, more efficient operations and better name recognition.But analyst Basham said he's on the fence about how big a boost national scale will provide amid growing competition.
Online upstarts are looking increasingly strong in a sector that was once considered internet-proof.The best-known are early entrants like Casper, Tuft & Needle, Saatva and Leesa, but KeyBanc Capital Markets analyst Brad Thomas estimated there are 50 or more brands trying to get a piece of your bedding and mattress dollars.So far, they account for a tiny but growing share of the overall market — about 4.6 percent this year, up from 1.8 percent last year, according to Thomas' June report.Younger customers are more open to the idea of buying mattresses over the internet without first getting to test them in stores, Epperson said. That's partly because millennials are accustomed to shopping online but also because online companies have done a better job marketing things young customers care about, like ease of purchase."If you think about how mattresses have been marketed, it's all about health issues. If you read the ads, mattresses cure everything but balding," he said.When Wedbush surveyed 1,000 shoppers about buying online, only 10 percent said they were willing to do so without perks like free delivery, 100-night free trials and free returns.
But when those services — all of which many e-commerce mattress companies offer — were included, about 30 percent were open to buying online, Basham said.Most larger bed-in-a-box brands sell for between $500 and $999, depending on size. That is the most popular price range for all mattress sales, accounting for about 41 percent of mattresses sold last year, according to the KeyBanc report, citing data from the International Sleep Products Association. Only 5 percent of mattresses sold were priced above $2,000, though they accounted for 18.5 percent by value.Some traditional companies have responded with their own bed-in-a-box options, including Mattress Firm's Dream Bed at $600 to $999 and Sealy's Cocoon at $549 to $950.Meanwhile, online players are also finding ways to cater to customers who still want to try before they buy, whether through showrooms or partnerships with brick-and-mortar retailers.Amy Terpestra is a social researcher who lives in Chicago’s Bronzeville neighborhood.
Last year while driving home through the South Loop, she was struck by a change in the retail landscape that’s been brewing for a while now, but one that she had just suddenly noticed. With no small amount of indignation, she asked Curious City about it: Why are there so many mattress stores in Chicago? Honestly, I have bought one mattress in my adult life and I cannot conceive how a city can sustain so many mattress stores. Amy’s bothered by more than just the sheer number of stores; it’s more that their presence suggests a business model that appears to defy basic economics. Here are her observations: For answers, we talked to front-line retailers, analysts, and industry executives. The bottom line: The likely culprit behind mattress stores’ surge in visibility in Chicago is that we’re collateral damage in a mattress war raging at the national level. And, Amy, you’re probably not going to like this: Chicago, like the nation, has yet to hit peak mattress.
The mattress war has transformed an enterprise that was once sleepy and predictable into one that’s on a clear upswing, with a rise in advertising, higher sales, and more stores. That is, there’s been a nationwide boom in the world of stand-alone mattress retail. According to Dave Perry, bedding editor for the trade magazine , the majority of mattress purchases were once made inside department stores and mom-and-pop furniture outlets. Today, the specialty mattress chains have more than 50 percent of the market, compared to just 19 percent in 1993. “It is a hotbed of activity,” Perry says. “Literally, of course, we hope it’s somewhat of a cool bed since they say a cool bed actually promotes a better night’s sleep. So how about, it’s a cool bed of activity?” Perry, analysts and other industry-watchers list a few reasons for the ongoing trend: Then there’s the cost factor. Mattress stores have low overhead, low labor costs and higher-than-usual profit margins, says Sam Woods, Senior Vice President of Sales for Mattress Firm.
“If you sold three or four beds a day and your average ticket is $1,000, that’s a $4,000-dollar day, times 365. All of a sudden you’ve got more than a million-dollar business there,” he says. That, he adds, is why a single store can get by on just a few customers a day. Plus, each store — complete with a big, bright sign on its exterior — doubles as advertising. Since 2007, Houston-based Mattress Firm has been on a national buying binge, taking over 17 mattress retailers, including Bedding Experts and Back To Bed. , completed in early 2016, brings its total store count to nearly 3,500 in 48 states — almost one-third of the market. That nearly doubles Mattress Firm’s footprint in Chicago to 237 stores. “When that consumer says, ‘I’m fed up, I can’t sleep on this bed any longer,’ we want them to think, ‘Hey, there’s a Mattress Firm right over there,’” Woods says. Of course, as we’ve seen, there are sometimes two — or even three — Mattress Firms “right over there.”
Which raises the question … One way to tell is to look closely at the effect of the acquisitions going on. Is mattress retail necessarily a zero-sum game, where an acquisition tamps down the overall number of stores or sales? Mattress Firm's Sam Woods is bullish on the trend continuing. He points to an example when his company took over a competitor’s store in close proximity to an existing Mattress Firm, when he assumed they would close the weakest location. “Well, what happens is that often those two stores will both improve their performance,” he says. “So, we’re like, ‘Maybe we’ll keep them both open.’” Woods says that “happy accident’ is a big reason why consumers see so many stores around — even, as Amy pointed out, across the street from each other. But not everyone shares Mattress Firm’s enthusiasm for opening multiple stores near each other. “It seems like [Mattress Firm’s] whole philosophy is to put ‘X’ amount of stores around our stores,” says Michael Kenna, president of American Mattress, which has more than 100 stores.
“It doesn’t mean if you open up more stores you’re going to do more business.” During a recent visit to its Addison, Illinois, headquarters, Kenna proudly shows off their giant warehouse. “Seems like every seven years or so we have to move to a bigger facility,” he says. But Kenna’s cautious about flooding an area with too many locations, pointing to other chains that grew quickly and went out of business. Others were acquired by the competition. A 2015 industry report from IBISWorld suggests that, in fact, the number of units sold peaked a few years ago. But that same report notes that because of an increase in premium mattress sales, the industry’s total revenue has never been higher. That same analyst projects the U.S. market will add another 700 mattress stores over the next 5 years. Even with Kenna’s reservations about acquisitions, American Mattress plans to expand. He says the company will add 25 more stores this year “to fill in the gaps.”