SAVE THE DATES: Dream Camp April 30-May 3 & Sleep Summit Oct. 8-11, 2024
dumpster mattress

Ep. 8: Mattress Return Policies: A Proposed Solution

Watch this show → 

Mike and Jeff continue their discussion of mattress return policies, proposing a framework.

They lay out what a sustainable “utopian return policy” solution should look like, and offer a roadmap for how to navigate the tricky path to get there. Part 2 of 2.

Be sure to subscribe wherever you get your podcasts and never miss an episode.

Apple Podcasts | Spotify | Google Play

Full Transcription:

[Mike Magnuson]

Alright, let’s do a little stinger right off the top here.

[Jeff Cassidy]

Let’s; that sounds awesome.

[Mike Magnuson]

Ready?

[Jeff Cassidy]

Yeah, sounds cool.

[Mike Magnuson]

Why don’t you shut up and let me do the stinger.

Hey guys, welcome to Mike It Up. In our last episode, we gave you…

Hey guys, it’s Mi- gosh this is like a mattress review.

[Jeff Cassidy]

It is.

[Mike Magnuson]

Okay, hey guys. Hey guys, welcome to Mike It Up…

[Laughter]

Hey guys, hey guys, hey guys, hey guys…

[Jeff Cassidy]

Maybe we should invent a new ‘hello’. Every video on the internet starts with ‘hey guys’, I think we should come up with our own. Anyway, go with ‘hey guys’ for now.

[Mike Magnuson]

Hey, you guuuuyyyyyss.

[Jeff Cassidy]

Nobody knows what that means anymore.

[Mike Magnuson]

Yeah, that’s true. That’s something from the 1900s. Okay, hey guys welcome to Mike It Up. In our last episode, we made the case for why we think the mattress industry needs to revisit its approach to return policies. In this episode, we’re going to give you our thoughts on what some more sustainable approaches might be, stick around.

Stuck the landing on that for sure, fo sho.

[Intro]

[Mike Magnuson]

Okay, here we are. Last episode of season one, what a journey this has been.

[Jeff Cassidy]

This has been… It’s been something, it’s been quite something.

[Mike Magnuson]

It really has been something that is not other things.

[Jeff Cassidy]

Anyway, it has been much more fun than I anticipated, I’m not going to lie.

[Mike Magnuson]

The last word you could have thought of when you were presented with being on a phone call with me for hours on end was that it could be fun.

[Jeff Cassidy]

Well, yeah.

[Mike Magnuson]

You didn’t say it’s been fun actually, I should be clear. You just said it’s been less ‘not fun’ than anticipated.

[Jeff Cassidy]

No, no. More fun than I anticipated, I did not say-

[Mike Magnuson]

Yeah, I heard less ‘not fun’

[Jeff Cassidy]

I did not say how much fun I actually had anticipated. Fun expectation also, it can go negative on the chart.

[Mike Magnuson]

I’m well aware, that’s why I heard what I did. Yeah, so in this week’s episode, we wanted to dive into some solutions and just to recap for those of you who missed the last episode.0 I keep saying this week’s episode but it’s not like these are going to be released weekly necessarily so we don’t know. I mean, we’re recording this one right after we finished the last one so… Only about 12 minutes have passed since the last episode.

[Jeff Cassidy]

In this next two hour block episode.

[Mike Magnuson]

Yeah and we hope you guys are still on board with these 45-minute snacks of information because that’s what we seem to be capable of creating and only that.

So, we laid out the case for why we think there’s a need for change. That there’s kind of an impending day of reckoning for the industry when the public wakes up to the fact that a lot of extra mattresses are ending up in landfills that kind of didn’t need to. You know, because of the return policies being what they were and because there really are no good outlets for these mattresses.

And we talked about how landfills are obviously a bad option, the donation ecosystem is a good option but it’s saturated, the recycling ecosystem is a good option although not as good as not having made the mattress in the first place but it’s a good option. But it’s nowhere near capable of absorbing all the mattresses that are out there at this point when you think about it from a nationwide standpoint. One thing we didn’t talk about but is worth at least mentioning, is that a secondary market for mattresses does exist.

It’s basically Craigslist and that’s fraught with issues as well, right? Because you’ve got abuse from the consumer side. You’ve got abuse in the sense that they are selling skanky mattresses so it’s a bad experience for buyers. It’s also bad for sellers of mattresses, you know companies that make and sell them, because you’ve got people essentially abusing the return policy and then actually turning around and selling the product so there’s leakage in the model.

[Jeff Cassidy]

Leakage and cannibalization of somebody who could have bought at full price otherwise.

[Mike Magnuson]

That’s right and third; that’s fundamental even if the first two problems were fixed, you’d still have that problem. Which is that any kind of secondary market cannibalizes primary sales of mattresses. So, that isn’t really an ideal solution so really it comes back to this idea that the industry needs to kind of come together and put some thought into what is a more sustainable return policy?

The term I like to use is; what would be a utopian return policy? And as I think about what a utopian return policy would be for this industry, I kind of come at it from a few standpoints. There’s the consumer friendliness, there’s the environmental cost, there’s the cost to other consumers that you want to factor in because obviously anything that has a cost is ultimately going to get passed on to consumers. So, there’s a lot of factors, there’s a friction you want to factor into this.

You also want to make sure you take into account business considerations such as the fact that return policies being more friendly has certainly been something that has enabled sales to happen. So, giving people comfort making a purchase. You don’t want to lose that either so I think about it as; if I boil it down I’m looking for a utopian return policy. I’m looking for one where both sides, really buyer and cellar, have skin in the game, that’s kind of the thing.

So in the old system when you had a 300 dollars return fee plus 15% restocking plus you could only exchange it for something else in the store, all these limitations. That was so consumer unfriendly that it really didn’t necessarily put skin in the game for the retailer because the retailer had no incentive to really make sure the consumer had the right mattress the first time.

They could just sell them something and be like ‘Well, they’re not going to return it. As soon as I get them to say yes, they walk out the door, I’ve got their credit card, and we’re done here. That sale is never coming back.’ So they have no skin in the game in terms of making sure that the purchase was the right purchase the first time.

[Jeff Cassidy]

Yeah and even the retailers who tried their best and they really wanted to find the right match for somebody, the fact that the return policy was like that contributed to the impression that the mattress experience was not customer friendly. So, it contributed to that atmosphere, that customer perception, that customer frustration. That opened the door; the opportunity for the online.

[Mike Magnuson]

And a lot of consumer anxiety resulted from that too so that was bad. What I mean by skin in the game is that both sides need to be invested in making sure that they’re making the right choice the first time, making sure the consumer makes the right choice the first time. So, in the old system I feel like businesses didn’t have enough skin in the game. In the current system I can say for sure consumers don’t really have enough skin in the game.

I mean they’ve got a little bit of cost, there is a real cost to the hassle of making a return but that’s about it. And frankly, that’s not much of a deterrent because a lot of people don’t even realize that there is a cost until they go and try to make the return. So, we try to educate people on the fact that it is a real cost but it requires us telling them that, they don’t intuitively know it. So, they don’t have enough skin in the game to make sure they’re making the right purchase the first time and therefore you end up with this abuse that we talked about in the past.

So, there’s three kinds of abuse. The worst kind would be the serial returner which thankfully we haven’t seen a whole lot of but the next kind that we definitely have seen people do is buying three or four mattresses in order to pick the one that they like the best which is just abuse plain and simple. And then, the most common form of abuse is just the kind of lazy shopper. The one who’s going to basically use the return policy as a crutch, as a substitute for actually doing their homework and actually trying to figure out, the first time, whether this mattress would be good for them and that’s a very common form of abuse.

So that’s really the form that I think we’re most trying to tackle because it’s the most common but obviously anything that gives the consumer skin in the game inherently tackles all of those potential forms of abuse. So, that’s where I come to it, the answer is going to be somewhere in between where we are now and where we came from because those are the two polar extremes where neither side has enough skin in the game and we want to meet someone in the middle where both sides have skin in the game.

And just to cut to it, what we had talked about was an idea where maybe there’s like a 10% return fee with a minimum of a hundred dollars. That seems to me to be a level where, if you needed the confidence to know that you could return it if you needed to then, you probably would still feel comfortable buying it. You’d know; worst case scenario I’m out the 10% but it definitely makes you think.

You know you’re not going to just jump in there with both feet willy-nilly when you know that you’d be out 10% if you’re wrong.

[Jeff Cassidy]

Right and it’s worth a hundred dollars to most people to then think more about finding the right fit.

[Mike Magnuson]]

Up front, yeah. So, it gives you the comfort and the protection for those who have the best intentions and just end up not making the right choice but it makes you think enough to put the work in up front. So, I feel like from a business standpoint, it should cost the business a little bit of money. They should be incentivized to make sure that they are really trying to get someone to make the right choice the first time and obviously even though they’re recouping 10% or a hundred dollars, that’s not going to at all cover the cost of making the mattress and shipping it out.

All of which, especially in the case of an online merchant or I should say at least in the case of an online mattress, are sunk cost. Those are not recouped at all and in fact sometimes there’s even an additional cost to have someone go pick it up from the consumer. So they’re still out money, they still have an incentive in that respect to make sure that the consumer bought the right product and did it the first time. So, I feel like that to me is-

[Jeff Cassidy]

Out much less which is good because-

[Mike Magnuson]

Well, they recoup a little bit-

[Jeff Cassidy]

No, they get the hundred but they also would benefit if people do a little bit more of the work up front to find the right one, that would also reduce the return rate. So they would reduce the rate and get a hundred dollars so they kind of benefit from both sides. Yet the hundred dollars; it’s not so much that it makes me frustrated as a consumer that this is totally unfair. So, like you said, it seems reasonable and it makes me want to find the right one.

[Mike Magnuson]

Yeah, I think that to me is like a nice middle ground. So, I throw that out there to the industry and say this is our thought, let’s discuss. That said, how you get to that, becomes a real kind of prisoner’s dilemma type of question because I don’t see a way without some kind of collective action. Some formal or informal collective action that you do get to, that it’s just the kind of thing where if one person removes free returns and switches to this, it’s just too easy…

It’s too fragmented, no one has enough market power on their own to basically say ‘Yeah, we’re doing this.’ and not lose share or feel a viable concern about losing share due to other people pouncing on that and trying to turn that into an opportunity for them.

[Jeff Cassidy]

Right, it’s kind of like, this is not necessarily the best example but, airlines colluding to raise prices. So one airline wants to raise the price but if they raise the price and nobody else does then their purchases and the number of passengers they get goes way down. So they want to, they’re not allowed to, but they want to collude in order for it to become more profitable for everybody. This is-

[Mike Magnuson]

But in that case, it’s something that’s obviously not good for consumers, paying higher prices. And that’s why collusion is not allowed by the government, to protect consumers. Here, it’s a little bit of a tricky thing because collusion is not allowed for that reason, however this arguably is something that is beneficial really for society and even for consumers, I would argue because of the fact that essentially consumers are paying for other people’s returns right now.

This would lower the overall number of returns and should ultimately keep costs lower in a competitive marketplace. This should keep costs lower for consumers than in a marketplace where there’s a lot more aggregate cost being built into everybody’s prices for returns. So, this is a weird situation where collusion could actually be beneficial to the consumer.

[Jeff Cassidy]

Right, but also to a point you mentioned, it’s a societal cost. The returns and the environmental impact, that’s a cost to society.

[Mike Magnuson]

That’s true.

[Jeff Cassidy]

And there’s this huge externality of who’s bearing the ultimate cost of that but no matter what, it’s a cost to society. So, it’s better for society for that return number to be lower.

[Mike Magnuson]

Given this kind of prisoner’s dilemma dynamic here, I kind of feel like there needs to be some kind of collective action. Obviously, it needs to be done outside of running a foul of any kind of collusion type concerns and maybe one idea for that would be for there to become some kind of a public education effort attached to this that maybe also encompasses a certification of some kind.

Something that says, like a stamp of utopian return policy approved, you know? Like it’s something that you can certify and say ‘Hey, we are taking this action where we do the right thing.’ and consumers can see that and recognize that like ‘Oh yeah, this doesn’t seem as friendly.’ but there’s a bigger purpose here that they can then read about and maybe even see in the press. And that can make them feel better about the rationale behind that and it also can disincentivise other people from trying to capitalize on it because then they look like bad guys for trying to denigrate their competitor for abiding by this policy, this practice.

[Jeff Cassidy]

Right, I think it goes hand in hand with the education piece around the environmental problem. So, that’s something that these days more consumers in theory appreciate. So things like a mattress certification, you see that promoted on websites and that’s promoted there because it’s a value to the shopper but they’re not understanding the negative environmental impact. So, I think part of that education that you’re talking about, if that can be around the environmental impact and that being a driver of this return policy then it can kind of go hand in hand with ‘We have all of these certifications and seals of approval and that’s why we’re doing this policy.’ which makes sense with our strategy of trying to be environmentally conscious and minimize our footprint as a company.

[Mike Magnuson]

I mean there have to be other examples from other industries where people agree to a set of practices, that maybe consumers recognize adds cost or in some ways adds some encumbrances to them that are not as convenient for example, but they’re doing it with this bigger objective in mind. This bigger societal objective or collective outcome in mind and then there’s some certification that they use to kind of put that out there. That helps kind of unify companies and their efforts in this regard.

I think there’s got to be analogues from other industries that we can draw from but something like that probably has to be part of this in order to get the kind of collective adoption of this that’s needed. It’s worth noting that there’s been some other models discussed and even tried, for example-

[Jeff Cassidy]

There’s one that’s still available, it’s Nola. So, I don’t have any data on how it’s doing but with Nola, which is one of the online brands, the consumer has the choice. They can pay whatever the regular price is or they can choose an option with no return. So eliminate the return policy and you save a hundred dollars. So that’s the first one that I have seen that’s trying that and so it would be really interesting to know what percentage of consumers are taking that option.

[Mike Magnuson]

Jet.com was a company founded by the Diapers.com team and ultimately acquired by Walmart.com. I think they’re now some of the ones running the Walmart.com operations now but their premise in trying to insert themselves into an e-commerce landscape that was already well on its way to being dominated by Amazon and Walmart at the time was to incorporate stuff like this. Incorporate data and very differentiated pricing and things like this where consumers could opt in to say ‘Okay, I want no return policy and therefore I’ll get this discount.’ Almost the way you buy an airline seat now, like do you want like three inches of legroom or four?

It’s like you’re piecemealing everything, upgrade for this, upgrade for a working headphone jack, or whatever.

[Jeff Cassidy]

Do you want fights to be allowed on the plane or not?

[Mike Magnuson]

So, there is precedent for it from them. When they got acquired by Walmart, I think all that stuff went out the window so I don’t know how much success they had with it either. Personally, I’d rather see that model implemented the other way around where you actually pay to have a return policy. For example, if you did it the way we’re recommending, the 10% or 100 dollar minimum, then you could pay a little extra up front to have a free return.

[Jeff Cassidy]

That’s interesting, yeah.

[Mike Magnuson]

50 dollars, 75 dollars, or something. It probably has to be less than the 10 obviously or else you wouldn’t do it but something less than that in order to give yourself the comfort of having free returns. I’d prefer to see it implemented that way but nonetheless it’s interesting that people are trying. And by the way, the other way that we’ve seen out there is something that Luxi has done. David Farley has been vocal on this topic of returns and he’s tried to put forth a return policy that works more like you pay a hundred dollars when you-

[Jeff Cassidy]

It’s like a deposit.

[Mike Magnuson]

It’s like a deposit, yeah. And then, you just don’t get that back if you return it or something like that. He’s also been experimenting with other possible ways around this and I can’t speak to the outcomes of that either but just thought it was worth mentioning a couple other possibilities. But we still kind of like this 10% 100 dollar minimum range the best. It’s simple to understand, it’s fairly close to… You know, how it works now is, I mean structurally it’s just adding this one return cost and people are familiar with return costs in other purchases they’ve made so it’s not a completely unfamiliar structure. So, I think it checks a lot of boxes in that respect.

The other thing I thought about on this front was; if there could be some way to make the returned mattresses more valuable. To basically make it so that they’re not totally wasted, right? And they’re not going into some secondary market where they’re going to be massively devalued because of the fact that you have kind of an agency problem of like who knows what has happened to this mattress between the time it was unwrapped and the time I’m buying it. But if you could eliminate that then maybe you could have mattresses that aren’t super cannibalizing because they’re not sold at a massive discount. They’re only sold at a slight discount because they’ve been barely used essentially and you can be assured that they’re clean.

So, kind of like the pre-owned model of cars in a sense and the only way to do that is if you could come up with some kind of a 360 degree encasement that you could put around the mattress that essentially, it’s got to be waterproof, odour proof, bed bug proof, it’s got to protect against all that stuff but it also got to be somehow not affecting the feel so that consumers can actually really try the bed and get a real sense of it.

And then I’m thinking it could be that kind of thing… Have you ever been to a concert in the last few years where the artist doesn’t want their concert to be recorded and they make you put your cell phones in a bag? So they don’t take your cell phones, they give you this bag and it’s like a cloth bag I think. Like a canvas-y kind of thick cloth and it’s got this magnetic seal on it so you can’t use your phone. You have it, you still have it in your possession so you’re not worried you’re going to forget it, or someone’s going to steal it, or anything like that but you just can’t use it.

And the way it works is that if you break that seal, they’ll know that you did that. And when their concert is over, they unlock it for you essentially and they do it through some… I can’t remember if they do it through some app or like an RFID thing but they unlock it for you and so then when you leave essentially you’re taking it out of the bag and you’re off back to your real life. So, I kind of was thinking what if there was a way to make this 360 degree encasement, sealed in a similar way where that magnet could be unlocked remotely, and any tampering can be detected remotely. And such that when, let’s say, the return period ends then basically the consumer could say ‘ Okay, we want to keep the mattress’ and then at that point in time, the company…

Or for that matter, they don’t have to wait till the return policy ends but by telling the company that they’re ready to remove this thing, they would be essentially ending their return policy and the company would remotely unlock that magnetic strip. They’d be able to remove this thing and I interesting return it to the company or something, I don’t know what would happen with that exactly but it was just another possible idea for how could you-

Because in that situation, if they did decide they wanted to return it, the company could pick it up and essentially it’s been fully protected. And the only sense in which it’s not a new mattress is the sense that somebody has slept on it and therefore compressed those materials for however many nights but that is not really that big of a deal. I mean, we’ve all slept on hotel mattresses and not thought twice about that and those haven’t been protected nearly to that degree.

[Jeff Cassidy]

Yeah.

[Mike Magnuson]

Not even close.

[Jeff Cassidy]

It’s just something we choose not to think about.

[Mike Magnuson]

We choose not to think about it but even still we sleep in a friend’s house, like it’s really… The thing that grosses us out is if we think about fluids, or whatever, bed bugs, things like that. That’s what grosses us out but if you could be assured with 100% confidence that none of that could be in play here, if it’s just a matter of the fact that somebody else has lied on this mattress then I think that really doesn’t decrease the value of that mattress that much.

I think for a 20-25% discount, that could still be a viable thing that you could sell.

[Jeff Cassidy]

Well, the other way to do it would be; there’s no bag. Very interesting idea by the way and I thought you were going to say ‘ And I just so happened to have invented this thing and it’s in my garage and I’m selling it for 1.99.’

The other way would be through an entity that certifies. It runs the existing mattress that gets returned through a set of checks that check for all those things. So, they’re going to vouch for the fact that it has no bed bugs, they’re going to vouch for the fact that it has no stains, they luminol it so there’s no blood, whatever. And you get that certification so the consumer can trust that mattress because it’s been certified by xyz. And in the auto industry, that would be whatever-

[Mike Magnuson]

The dealer does.

[Jeff Cassidy]

A dealer does and they call it whatever point inspection or whatever. And they have Carfax, like Carfax was trying to get the history of a car so you can know ‘Did something bad happen before?’, ‘Did they change the frame and this frame is going to break?’, whatever. Maybe that entity, if it’s independent, could also know when that mattress was sold and know how long it had been used. So, the consumer could say ‘Oh, it was only used for one week, great.’ or ‘It was used for 99 days and that’s worth less to me.’

[Mike Magnuson]

One difference though in the car model versus the mattress model is that in the car model things that aren’t broken or dirty they can generally clean or fix a little bit more easily than if a mattress… the skis factor can’t be removed from a mattress even if they do clean. There’s just-

[Jeff Cassidy]

Those would go to whatever recycling or to some other…

[Mike Magnuson]

Yeah so there’d be, unlike the car, you’d have a big portion of the mattresses that come into that centre and get rejected. And so, you’d have the cost of running that centre and then you have the cost of just all the mattresses that don’t pass the inspection. So, it seems like it would be better if you could come up with a solution that just ensured that at least 100% could be resold and avoid the infrastructure.

You’d have the cost of this device that you’d have to put around it but hopefully you could get that back. But you wouldn’t have any overall infrastructure of testing and refurbishing and doing that whatever point inspection. So, I don’t know, those are some other ideas but again that’s something that’s a little bit more conceptual whereas this 10% 100 dollar policy is something that we could implement tomorrow, if we just had the right kind of solution for how we could properly incentivize companies to adopt it.

And again, I think that comes back to some kind of collective education/certification effort but that’s where I think we would love to be part of that. I think we could be a neutral third party that has credibility, that could ultimately help put our brand and our expertise behind that certification, that sort of education process as well and say ‘ Hey, this is what we think is best.’ We can speak on behalf of both the industry as well as consumers. I really fundamentally believe this is a win for consumers even though at face value some people might not see it that way but I can help bridge that gap and make that case.

So we’d certainly be game to be part of that solution and so we would invite people to reach out to us who feel… You know, one of the great things about this podcast, we hope, is we fly our flag and hopefully we find our people through this and people come to us and say ‘Yeah, this is something we agree with as well.’ And so-

[Jeff Cassidy]

Yeah and even if somebody, a listener, doesn’t have much interest in the return policy idea in and of itself but maybe have an interest in the environmental impact and educating consumers about that, we would also encourage you to reach out to us. That, as Mike mentioned at the start of this, that’s something that’s very important to us and very troubling for us just as humans, Mike and myself. And so, if we can help educate on the environmental side, we absolutely want to do that and that’s something that I think people in the industry coming together to try and tell that story together would be great.

[Mike Magnuson]

Cool, so there you go guys. We welcome discussion on this topic and we look forward to being part of that. So with that, I feel like this could be season one coming to a close here. It’s bittersweet.

[Jeff Cassidy]

I think so. Sweet, it’s just sweet.

[Mike Magnuson]

To think not long ago, we didn’t even have a podcast and now both of our moms have listened to us talk for many many hours at this point. We’ve already completely failed on our admission to keep this content snack sized or at least as we define snack size. We just totally set ourselves up for failure, 15 minutes is what we said?

[Jeff Cassidy]

I do eat a lot though so I need a lot of food for it to be a snack. We got to hit two hours for it to be a meal. Let’s not hit two hours.

[Mike Magnuson]

Let’s not even open that possibility, I think we should continue to aim for 10 to 15 minutes and we’re going to continue to come up around 45 minutes, If this is any guide.

[Jeff Cassidy]

And let the record show that when this concept was discussed, the talk was ‘ Alright, let’s do 10 minutes.’ We don’t even do an intro in 10 minutes.

[Mike Magnuson]

Or for that matter a sign off.

[Laughter]

Okay so here we go, with that said we should sign this off and thank you all for listening. Whoever you are, if you are listening, anyone? But we do appreciate it and we welcome you. Please subscribe and give us your feedback or leave us a review. It helps other people discover the podcast and also we’d love to know what you like about it and what you’d like to see.

[Jeff Cassidy]

So, yeah suggestions on how to improve and suggestions for topics.

[Mike Magnuson]

Yeah, we look forward to doing more of these and to connecting with all of you guys. So thank you again and thank you until next time, we’re out.

Zeen is a next generation WordPress theme. It’s powerful, beautifully designed and comes with everything you need to engage your visitors and increase conversions.

Top