Nectar’s founders Ran Reske and Eric Hutchinson talk about how one of the fastest-growing bedding brands on the planet is moving into retail — and doing all they can to drive foot traffic. Nectar’s creative advertising and product positioning has made the brand a standout in the crowded direct-to-consumer space.
In this interview, you’ll see how this explosive D2C brand is picking partners and investing huge amounts of money in strategic marketing. About Nectar’s Founders: Before Nectar, Eric started several companies including Madison Reed, a direct-to-consumer haircare brand. Ran (pronounced Ron) served in the Israeli army, played pro basketball, and worked at a venture capital fund.
The Nectar brand is part of Resident Home, which has a portfolio of brands including Dreamcloud, Awara, Bundle, Level Sleep, and Wovenly.
Full Transcription:
Mark Kinsley:
Hey, it’s Mark Kinsley with the Dos Marcos Podcast. Welcome to the show. I’m gonna play you a little snippet from a live Podcast we just did as part of the furniture. Today’s betting conference, we were speaking featured, we did drink tequila during the show. So maybe there’s still some of that in my system. But Quinn, I made a huge announcement. And that announcement really maps back to Nationwide’s primetime event last February, of course, for those of you who listen to the show, you know, that’s where we gave a big speech about driving foot traffic. And we had everybody that was there for the speech write down an idea that actually drove foot traffic to their store. And that idea that little mustard seed has grown into something bigger.
Mark Quinn:
The retailer’s in that room so many postcards. And we said, Tell us what are your best traffic generating ideas. So we collected all those. So all of those examples are in the book that we’re coming out with. We can’t tell you the name of it yet.
Mark Kinsley:
But this is a big announcement.
Mark Quinn:
We’re writing a book.
Mark Kinsley:
No, the book is done. And it’s gonna drop in the fall. And here’s what we need when making the announcement without knowing he’s making the announcement, which I love. But you can get your copy of the book and here’s the thing, the first 100 orders are going to get dose indestructible Dos Marcos tequila shot glasses, of course, tequila is the official beverage of the Dos Marcos Podcast. But you have to go to mattresspodcast.com/book and get on that list because our subscribers are going to be the first to know when the book drops and only the first 100 get to indestructible dose Marcos tequila shot glasses, which are super-duper fun. So thank you to nationwide and thank you to the members there that have contributed to this book. That is where this idea started. And we’re so excited that it’s going to come to life. And another thing that’s you’re gonna see if you’re a nationwide member, and you’re seeing many mattress retail stores these days is something called Podium. And the thing is Podium, you may not actually see Podium unless you’re Manning one of the stations or texting with customers. That’s because podium is the ultimate messaging platform. And we had a chance to talk with Dr. V. himself a miss Skelly furniture in central Mississippi about his experience and his team’s experience using podium and here’s the deal if you go to podium.com/dos, you can actually get 10% off and there’s even a free trial. So podium.com/dos, but you got to hear Dr. V’s experience.
Mark Quinn:
We were in a situation where the only reviews that we actually had were those that people put on Google when they were unhappy with us. So we started out with a 1.8 kind of review for Miskelly furniture because the only reviews we had were really mad. And so as we discovered that the online reputation was going to be so important. We decided that we needed to actually get more reviews. And the exciting thing is, since our partnership with Podium, we are currently if you’re going to Google right now we’re at 4.7 is our current rating, which is huge, with 1000s of reviews. And so that has made a tremendous impact, as people look to have reviews more and more and immediate aspect of working with customers on the reviews. And it’s great because we get a lot of five-star reviews. Here’s one, Gabby was so awesome. She went above and beyond her job to help me I will always remember her helped me to get my dream bed.
Mark Kinsley:
And the cool thing is Dr. Venus’s team actually posts those reviews internally on these communication boards to create culture because you either create culture or you tolerate it according to the folks and Miss Kelly and I totally agree with that. Now coming up here in the next couple of weeks, make sure you subscribe to the Podcast, go to your app, subscribe, go to mattress, podcast.com make sure you’re on our email newsletter because we’re going to hear from Dr. V. About one-star reviews, why those are important. And what the company does with those. They’ve turned those bad reviews into meaningful insights that have a huge impact on your business. And it’s really unexpected. And thanks to podium and that partnership, they have that perspective they have that insight and they can put it into action and fix problems as they pop up. Check it all out. Like I said podium.com/dos and you’re gonna get your 10% off
Mark Quinn:
So Kinsley big day today. We have the guys from Nectar on the show. But before we start, I have to tell you like my first experience of understanding anything about Nectar. And so Ben with the sleep Sherpa, right out of Minneapolis, I was doing some business there. And at the time, we had bed. And so I knew about Ben. And so I ended up going into a showroom there. And I go in and I talked to Ben and had a great conversation with Ben had a lot of fun. Excuse him, everyone. And then he launches into this whole discussion about Nectar. And nectar was so new at the time. I’m like, who’s Nectar? And so anyway, he hits me with these commercials. And I’m like, these guys are crazy. And so really good creative stuff. And they’re entering the market after you know, the big first wave of e-commerce guys had hit. And anyway, I’m like, well, you know what, their creative is strong. I really like it. But to barrel through this crowded space at the moment, it’s going to take something special. But Eric and Ron have clearly done that. And I’m fired up because today we get to the bottom of that story. And anyway, welcome guys to the Dos Marcos Podcast. We’re really excited to be here.
Mark Kinsley:
Well, guys, you’ve officially made it. I mean, you’ve been in the industry for a while now. And you’re on the galaxy’s greatest mattress industry podcast. So how do you feel? I mean, don’t and don’t go all at once.
Mark Quinn:
They’re probably nervous.
Mark Kinsley:
So just give them a minute.
Eric:
It’s a little nervous stage right. Now, we still in a really blast we do have an amazing team. And we’ve been doing this for about four years now. You know, and it’s great to see the receptivity we’ve had with our retail partners, but then I think the growth that we’ve been able to achieve, really articulate kind of, from the consumer perspective, a fundamental change with how consumers are shopping. And you know, what we set up to do is really engage consumers, have great products, and a great buying experience. I think, part of what we’ve been able to see as the proof points behind that.
Ron:
Yeah, I think that’s Eric, I think what they’re really referring to is being on their show, but we’re also proud of the growth as well. Yeah.
Mark Kinsley:
You know, when Quinn dodges a question, I usually hop in and answer it so you guys work in a very similar fashion. Yeah, I say this.
Mark Quinn:
Yeah, what have you guys what have you changed your name to Eric, he could be the air x. But that’s just thought there. Give me the wrong like it. Kinsley, go ahead.
Mark Kinsley:
You guys, we’re happy to have you here you have a great, you do have great growth. In this industry, we saw a really hot and heavy push into DTC e-commerce mattress sales. And whenever you look at early movers advantages, and just case study after case study on those dynamics in the marketplace, you saw some of those emerging brands really make a big push, and you think to yourself, if you’re kind of paying attention to business in different categories, how does anybody else really enter this marketplace and have success? So what takes us into that, like Quinn loves we both love how I built this podcast, we can turn this into an episode of how I built this because you guys have a really, you know, a great company and resident home and but people in the mattress industry, of course, I think to know the Nectar brand, you’re pushing the Nectar brand into retail, we speak to a lot of independent retailers out there. So we want to get into some of the nuts and bolts of what was your thought process. First of all, for attacking this market. How did you go about it? How did you put a moat around your business, make it defensible give us some of that texture from early on?
Eric:
Yeah, that’s I jumped the gun in our first segment. But go back four or five years, it was a really exciting time. And I think in this category, and this anchor of fundamentally the way consumers are shopping, it’s changing. And so we saw some of the changes that were happening in the DTC. And so what we set out to do was create a strategy that allows us to better engage consumers through that user journey. And there’s a couple of component of it. One is if we can quantify and really understand how the consumer was shopping, what information that they were looking for, and then engage consumers across those touch points, both on an online and offline, we can create a better relationship. And then we coupled that with an over-investment in products. So you know, whether it be the nectar mattress or the dream cloud mattress, that we wanted to deliver a phenomenal sleep experience associated with that. And we said if we can do those two things, we think there’s just a massive opportunity here.
Mark Quinn:
Right there. But on that point, you’re entering a market though, where arguably there were a lot of people doing that already. So what is it that you’ve felt like gave you such a strong hand coming into an already very competitive market?
Eric:
Yeah. So I think in the year we launched there were 105, other than the bots, competitors that launched. And so we kind of the foundation of technology and really understand that user journey was something that we didn’t see the other player’s role really addressing. And the other really assume thing about this category is its massive 16 and a half-billion dollars, the United States, there’s plenty of opportunity for everybody to be successful. And if you look at the other kind of key B to C players, they had distinct strategies. So you had purple that has no really kind of unique technology that they deployed. And on the other end, you had, you know, at the time Tufton needle that was really going after the kind of Amazon Marketplace, what we wanted to do is really have kind of a full breadth approach. And you’ll engage consumers through all the digital touch points, but also ultimately have a really strong Omni channel approach where we partner with retails and we’re able to have a national footprint very quickly through that partnership strategy.
Ron:
The other thing I’d also add here is that as an entrepreneur, you have to be somewhat naive, and ignorant for that matter. I think that I mean, to your point, Mark, like what made you guys think that you guys could go into space and actually do better it’s mean to be naive, Be courageous, and just say, Hey, you know what, I’m gonna go, I’m gonna go for it. I’m gonna go try it. And where’s Kosta? Worse is we’ll be successful. But I think in general, as an entrepreneur, you do have to kind of put all those fears aside of why are other people going to be better than me? I think you just have to say, hey, how am I going to be better than everybody else? And that’s essentially what we did. The other thing, I think, I’ll speak on behalf of Eric a little bit here. So Eric’s previous company to this was one of the pioneers of the whole DTC space, it wasn’t in the mattress spaces in the, I guess, hair care, hair color space, more in the beauty space. And the stuff that he was able to build, there was kind of one of the reasons why I got excited about this whole opportunity, where he was, I think Eric was one of the first people to really understand how to find users online. What the user journey is, I’m kind of speaking on his behalf. He should probably speak on this more, but I think we kind of use a lot of learnings there to for what we’re doing now.
Eric:
It’s always good to have a spokesperson.
Mark Quinn:
So Eric, go further on that though. Because I mean, can you tell us a little bit because that was a big brand? You’re with Madison.
Eric:
Madison Reed.
Mark Quinn:
For most people, you are watching this? You probably have heard of Madison Reed. But so what didn’t apply? So you kind of went into it going, oh well, you know, we did it there. We should be able to do it here. So what was if you can maybe like what was similar with that whole experience? And maybe what was what I didn’t see that coming? That was nothing like what expanded?
Eric:
Yeah. So your massing read was kind of first-generation, what became known as digitally native brands. And the idea there, really, and I think what is very transferable is the notion that your product experience and how the consumer shop needs to be intertwined. And historically, you have a product and you have a channel, and it’s just communicating a value proposition. So what we did there was, we completely reinvented the buying experience and how we engage consumers. And that’s very relevant here. I think the big differences, there, we are selling a $25 box of women’s hair coloring, and, and where we’re selling $1,000 purchase. This is one of the biggest purchases that a consumer may make consumers solving not only a comfort-related issue but also a health-related issue. And so it’s a very complex user journey, the user needs to build confidence needs. And also, it’s a private consumer only buys once every eight years. So the consumer doesn’t know what the consumer doesn’t know, as they’re going through this user journey to really understand what do they need, and ultimately, what products is going to work best for them. And this is where you’re one of the big learnings for us is I think we do a very good job at that online in terms of engaging the consumer helping to engage to educate the consumer. But I think the other the other kind of leg of that stool with this industry that’s just really powerful, is kind of the offline partnerships. And do you have a sleep professional and RSA is able to then take that last mile and really help the consumer feel confident with that ultimate decision and, and solve that problem? So that last piece where you know, at mastery, we had a really strong Omni channel execution here on the channel, I think takes on a whole new flavor where you’re really engaging that consumer at that last mile. In a way that ultimately helps them solve that that health conference-related issue that they have.
Mark Kinsley:
Give us some of your tickets into some of the creative execution over the years, you’ve had some campaigns that I think people would be aware of, or they might, it might trigger some memories. Talk about how those came out some of your favorites tell those stories.
Ron:
Yeah, so good run. So let’s talk a little bit about our make America sleep again, YouTube campaign, which a lot of people are familiar with, I lost count of how many views that thing has gotten lately, but I think we’re well over 10 or 15 million views. So that was an interesting campaign that we did with our partners at Google, where they mentioned that, hey, we have a couple of writers that are actually based in Israel, these guys are crazy. You guys are gonna love working with them. And so we started the conversation. And what we wanted to make sure is that, Hey, guys, we want it to be funny we want it to be. And I can say outrageous, but we wanted to be it to be memorable. But we also wanted to make sure that all the key points of our mattresses are going to be mentioned in the video. And so it proceeded with these guys pretty much coming up with ideas that I don’t think I’m pretty, I guarantee they would have put us in jail. The initial ideas were completely outrageous and out there. And so we had to definitely turn it back. One after the other after the other. The other interesting thing that we did, there was the character the actor, Jason, he, he’s just a regular actor based at based in New York, and we really liked his energy and his vibe and stuff like that. And so we sent you we hired him based off the just video. We hadn’t seen him in person. And I think most of the comments around on our YouTube video is who’s that actor? When can I meet him? Does he come with the mattress etc? And then in combination with the different brains that the writers and the creative team came up with, I think, we did a really good job there making doing something that was supposed to be silly, it is also supposed to get the message across. And what we’ve seen is those types of creative work extremely well.
Mark Kinsley:
Going back even in time, what were some of the earliest ideas you saw traction around. And maybe let’s start with a creative. And then you can even get into maybe some of the technical side, because I’m sure you were pulling a lot of levers, punching a lot of buttons, lots of testing, right, and trying to figure out what worked. But you know, and I know, it’s a combination of creative and distribution. And you have a very sophisticated marketing funnel, but talk about the creative piece first, and maybe take us into the tech side.
Eric:
Yeah, so the great creative starts with their with the clear value proposition. So one of the things that we’ve done in the company was with each of our brands is really understand what’s important to the consumer, and then articulate the value proposition in a way that the consumer can understand. So you’ve coupled that with digital execution, where the creative unit for Facebook, for example, is different than YouTube is different than Google. And so what we really try to do is, is work with experts in that channel to understand the creative execution so that we’re developing creative that really lends itself to that platform. You know, Ron has talked about YouTube and what we did there. And, you know, having something that’s engaging kind of funny, allows you to capture the consumers’ attention, so you can take them through an educational process. And you can contrast that to Facebook, for example, where Facebook is a very unique ad set where you have a written communication where you can talk about the value proposition and an offer, as well as a visual creative execution, whether that be a video, it’s just really understanding for each channel, and how you maximize creative to be effective in how you engage that consumer is something that we really try to spend a lot of time on early. So that as the consumer goes through and touches us, online, and even offline, they’re really getting the most out of that, that medium in that communication.
Mark Kinsley:
It’s such a great point, I think, to pause on. I mean, if, if you’re sitting there with a notebook, and maybe thinking about some takeaways and how they apply in your own business, I think the kind of older school example might be, if you’re going to put an ad on HGTV, maybe you should mention, hey, when you’re fixing up your home, make sure and pay attention to the mattress. So it’s contextualizing that creative and making sure it matches with the channel that you’re going to be on. What was what were some of those tweaks you made to the creative to make the match, like a Facebook video or retargeting ads on Google or maybe something like that?
Eric:
Yeah, so going back to the YouTube when we cut that video, I think in an over 100 different ways to really test and to understand and you know, that is in that medium, for example, you know, the first five seconds and then the first 30 seconds are really important. So how do you make sure you get the message engaged early on? And so the testing and the iterative process is really important. You know, I think another channel that we just talked about Facebook they are constantly coming up with new mediums and so you can add units and looking at competitors not necessarily within your category but within apple and other categories that and what are they doing really well and how do you transfer that in to your category and take some take those learnings we do we do a lot of that. So it’s very iterative. And it’s also really looking out at the landscape and who’s doing a great job with the medium.
Mark Kinsley:
What do you see out there that’s outside of our category that’s doing a good job that you tend to consistently pay attention to.
Ron:
I mean, the peloton is doing it, I think a great job of kind of educating the market and teaching everybody. Hey, you really need one of these in your house. I think the company’s done exceptionally well specifically lately where students have been closed, but I think they’re kind of making it but obviously, they don’t go in the kind of like the funny rep route that we do. But it’s more in the educational route of Hey, you need one of these for your house. It’s gonna make you a better person. I think it’s a great company.
Mark Kinsley:
And even now, Lululemon purchase mirror and mirror has right amplified its marketing and are they taking similar taxes, peloton, pay at-home fitness, it’s the world we live in.
Mark Quinn:
Yep, so you guys, on that note, something that peloton has done is they’ve kind of gone outside of just the bike thing for fitness, and cardio and all of that. And they’ve kind of expanded to where they have really good yoga classes. And there is a very robust experience for people that buy peloton products. And now you can take our dive a little bit deeper with their brand and go online and discover new things about a Traeger grill. I’ve noticed they’ve done that with recipes, and things like that. And so with you guys, I’ve noticed also expanding into other ecosystem opportunities. So it’s not just the mattress, right? But you’ve gotten into other things. So protectors and things like that, talk to us about kind of the evolution of your journey that way and the product way. So start with the mattress, and now you’ve gotten into some of their places. And it may be kind of give us a little hint on and on where you think it’s headed.
Eric:
Yeah, so we’ll start with mattresses and kind of work out concentric circles. So you’re one of the things that we learned very early on is that within the mattress industry, there are specific product categories. And so there we have a multi-brand approach where we have Nectar that focuses on memory foam, train cloud that focuses on kind of the hybrid space. And then we also learned that when a customer is making the purchase decision around a mattress, they’re also looking out at their whole bedroom. So they’ve got into the support products within the bedroom. And then one of the more unique things about, you know, Disney native company, you know, direct to consumer companies, we have that relationship. And so we do see a lot of opportunity outside the bedroom to engage consumers as they’re furnishing their home. Now one of the first things you buy when you move into a new home is a mattress. And so while we’re laser-focused right now on becoming an industry leader within this category, we do see ultimately a lot of opportunity outside the bedroom to continue to engage that consumer and develop a lifetime value relationship.
Mark Kinsley:
You know one of the things that we go ahead and run into.
Ron:
I think just to Mark’s point is that what peloton did is kind of going outside of just the bike itself is that they already have a relationship with the customer. What else can they sell? What else can they offer that customer to kind of get a full package?
Mark Kinsley:
Yep, that is something that in our category, I’ve seen some concern over, which is if you run a sleep shop, and you’re just selling mattresses, and even some of the essentials in that ecosystem, your opportunity to really continue to engage your customer is fairly limited compared to for example a furniture store or someone with a broader catalog of merchandise that they can reengage customers and even get some more lifetime value out of them if they have to operate at a loss to acquire that customer. You all know probably this game better than any people on the planet. Talk that talk about acquiring customers in the expense that goes along with acquiring those customers online and how you then start making money and thinking about that path to profitability and extending that relationship with the customer.
Eric :
Your data is strong.
Ron:
Yeah, I mean, our business I mean unit economics is the most important thing so customer you are right customer acquisition costs are expensive. But we want to make sure that we’re profitable on first purchase, with all our purchases, because I mean, what my dad told me that if your business is not profitable that it probably shouldn’t exist. Because if you’re losing money on every purchase you make, then what do you what are you really doing here? So unit economics is something very, very important for us. So in that sense, yeah, the customer acquisition cost is expensive. But we figured out unit economics to make sure we are profitable on every purchase that we make. But as you want to grow the business as we want to expand, there’s a big, big opportunity in the lifetime value of the customer. And that’s where things get interesting, where you can sell them, can we sell them more sheets? Can we sell them? Another pillow? Can we sell them another mattress? Then if you start expanding outside the bedroom? Can we start selling them a couch? Can we start selling them outdoor furniture? That’s where things get really exciting and, and potentially make this say, a ginormous business?
Mark Quinn:
Economics? I’ll go ahead.
Eric:
So as I say, building on your question around your especially sleep shots, and how do they think about it? No, I feel like this is a purchase. That’s really, you know, it’s complex. And I think it’s fraught with doubt from the consumer perspective if you’re executing a really strong consumer experience in a retail setting when that consumer goes back to buy another mattress that is going to come back to you. So I totally agree there. There’s massive lifetime value for how do you take that real customer relationship, whether that be online or offline, and extend it to another purchase. But I still think the special sleep shots that execute just a really strong, that kind of consumer-focused engagement model, there’s just there’s still a tremendous amount of opportunity to take that relationship. And whether you’re extending it to another purchase, or extending it through word of mouth to another purchaser, still a great business.
Mark Quinn:
I think that’s the opportunity for a lot of people in this mattress industry is they understand the acquisition side. So they swing the door they give people then, but what do you do with the relationship? Right? So how do you nurture that? So expanding the CP ecosystem helps, because it’s like, okay, you need a new pillow or Okay, you need a new, right, whatever that is. So it keeps you connected to that consumer. But how are you guys able to help? We talked about brick and mortar? How are you able to help your brick and mortar guy is understand that differently, or maybe help them nurture that brick and mortar relationship differently than what they’re doing now?
Eric:
Yeah, a couple of things that we’re doing so are kind of first and foremost promised with our retail partners is that we’re going to deliver traffic, there’s a couple of great examples of where we signed up a new retailer, we put them on our store locator, and they have people coming in asking for the next year before we even enable even get the product. So part of what we’re going to be is a great partner to drive that traffic into the store for those consumers that want to touch and feel the product before they make a purchase. And then what we’ve done is we can overlay additional technology to help the consumer under to help our retail partners understand that journey. So we’re doing some interesting things in terms of traffic attribution so that we can tell the retailer how many people are we sending in what is that purchase journey look like? We’ve opened up our digital kind of playbook and we have a co-op program that uses our digital capabilities. So we’re can be almost like a digital agency for our retail partners. And then ultimately trying to also to make sure that we have great products, and that in the store so that we’re eight we’re assisting through this great product experiences are essays, but it’s kind of a whole try to try to be a holistic partner for that consumer, starting with traffic but then ending with a great product.
Mark Kinsley:
Oh, yeah, there’s no doubt in my mind action folk music is the official soundtrack of door counts. Because door counts is all about taking action to get out of that funk. The funk of not knowing door counts is the smartest way to count retail traffic, and then do something with that traffic and have proof and tie it to sales results. Our friend Luis Lopez actually won the door count system, installed in one of the stores saw how well it worked. He went out and purchased the system for all of his other stores. And he said as soon as that camera went in the difference-maker.
Eric:
I knew that the minute I would install that camera in my store, I was gonna be able to see why people were coming in where were they coming from, I was gonna make better decisions on my marketing tools. I was going to make that person accountable to show the importance of to our salesman or every person that comes through the door and how much it cost us to bring that person and all of that stuff together and then you know the CRM to follow up with the customers then after they come in the store has elevated ourselves. Incredibly. It’s been a couple of months that we’ve had it and I can already see the results. I’ve seen a 60% growth in our sales for the entire year. Right now on your phone or computer go to door counts. COMM book a demo, Tom does Marco such yeah.
Mark Kinsley:
So if you’re just joining us on the live broadcast, or if you’re listening on mattress.podcast.com or your podcast app, we’re talking with Ron Gretzky, Eric Hutchinson, the founders of Resident home Nectar, we’re talking mainly about the Nectar brand because this is a Mattress Podcast stacks. And one of the promises we made was we were going to talk about some of those secrets for driving foot traffic to these retail stores. Now, we got a guy that was on the show, several episodes back named Doug Stevens. And Doug is a retail futurist. And it was one of the hardest-hitting podcasts we’ve done because he looked into his crystal ball and laid out a very dire situation for many people that don’t know how to change. But he also gave us kind of a forecast on really treating stores almost like media outlets. And he gave us some great kind of forward-looking thoughts. So he’s not part of a public company. So he’s good to do that. So with that said, one of the things he noted was whenever DTC brands in different categories, but physical stores, in some of the major markets that they served, they were seeing a lift in online sales of about 32 to 35%. Talk about what’s happening as a combination of your sales whenever you go into a new market, and maybe what’s happening with retailers, like give us some perspective, because it’s a messy purchase journey. And people end up doing it in really weird ways that maybe none of us would have predicted. But what are you saying?
Eric:
I get that I’m sure Ron has some thoughts. So now when we went into retail, we saw an overall lift in our business, I think there are a couple stats that really can articulate this. So kind of through COVID, your June, and July, we have roughly 60% of our doors open. And those were the best two months we’ve ever had in retail. Now, I think there’s a lot going on in terms of consumers investing in sleep and investing in their home. But part of what we saw was that the dollars that we spend online, educating the consumers turns into foot traffic. And so there’s a really strong relationship there. And you get a lot of quotes around how much what percentage is online versus offline. What’s really happening kind of going back to the consumer is doing a lot of research online, but that there’s this a massive opportunity to have great partnerships between us. And the reason the retailer to complete that overall journey. And retail is not just a place where people are going to buy for people going to read research as well. And some of those people go online to complete that journey. So it is an entire ecosystem. You know, this term Omni channel really does underpin and how the consumer is shopping for the product.
Ron:
Yeah, I mean, the one thing I’d add here is that just to add to that, I mean, people really are doing all the research online. I know I’ve spoken to quite a few retailers saying people are coming in with a lot of notes and spreadsheets and talking about IO DS, and I’m really, really sophisticated. And they just did a lot of research online. And when they come into the store there, they really want to put that theory to practice and say, I’d like to try this mattress with this ILD and I’d like to try that mattress. And I think I think that’s slightly an exaggeration of what most people do. But I think people are really researching and the reality is, is that no matter how much we tell them, hey, you should just buy a mattress online people do want to try mattresses in stores and I just don’t see that going away ever because that’s something that people are just going to want to do. And so our role in the ecosystem is to go and educate people online because we’re really good online marketers and we know how to find the people in the market and then it’s really we don’t really care I mean if you feel comfortable buying online buy online if you want to go to the store let’s send you to the store
Mark Quinn:
Brought on that note. How big does this get? So speculate first in terms of how much of the volume being done in the mattress category is being done online? And then where do you think that tops out at to your point people are still gonna at some point want to feel beds are the certain types of shoppers, right. So how big does the online category get? Do you think?
Ron:
That’s a tough question. I mean, so I think according to different analysts, as they were saying that pre-COVID is roughly 20%. Maybe during COVID is probably higher, but I think the total mattress sales decrease significantly because I think less people were buying mattresses, but those that were buying mattresses, most of them were buying it online because stores were physically close. So does it is it set? 30% 35 40%? Honestly, I don’t know. But regardless, I think an industry of 15 16 billion, it’s a massive industry, both anyway, we want to look at it really.
Eric:
Part of what we’ve tried to do is set up our business to be agnostic to where the consumer ultimately buys so that we can, we can be dynamic, one of the things that we’ve also done is created an algorithm that scores a consumer when they come to the website to understand whether they’re more likely to buy online or offline and that they’re more likely to buy offline, get them in front of the store, locator, get them into stores as quickly as possible. So that, you know, we’re kind of aligning the consumer journey with how they’re ultimately going to want to buy. But yeah, we wouldn’t we want to be agnostic, as to Ron’s point is, it is really difficult to know where the numbers net out. Instead of trying to predict that let’s just create a great experience online and offline. So that we can, our business can grow with kind of a changing consumer dynamic.
Mark Kinsley:
Let’s hit the pause button for a moment. And let’s get real. So, Ron, you were born in Israel and grew up in Kenya. And my man, Eric Hutchinson, Chattanooga, Tennessee. So Ron, talk about you growing up in being born in Israel, growing up in Kenya, and then playing professional basketball in Israel. And then now you guys cross paths?
Ron:
Yeah. So, yeah, as Craig. So I was born in Israel, and I wouldn’t we were when I was four and a half. My parents and my brothers now moved to Kenya in Africa. My dad built infrastructure projects, their roads, the basic stuff, roads, our plants, sugar factories. And so I was there all through school, I went to the American International School there. And I definitely grew up in a bubble. And I was very naive to how the world actually works. Because I just didn’t know any better. I mean, I didn’t know anything about politics, because coming from Israel, the Middle East was a concept to me, I didn’t even understand that there is battles going on there. I mean, I understood, the concept I just, I had good friends who were from different countries, and I understand didn’t really care. I then went to Lafayette College in Pennsylvania. So I studied mechanical engineering there. In addition, I played basketball for a few years before I got injured. And there I started learning a little bit more about what life was like. And that actually did grow up in a bubble. And I was naive for a long time in my life. And this is, and this to me, why diversity and having people from all over the world is important for us at resident and with Nectar. I mean, we have people in the company, I think, I’m trying to think how many countries we have represented a lot. But how many people are in or physically different countries? I don’t know. It’s like, we have four or five different countries, with people physically there. So for me, that was really important. In 2001, to the year 2001, I graduated up yet, and then I decided to move back to Israel. My family was there. And one of the things that you have to do if you want to live in Israel is you actually have to serve in the army. And because I was over, I was over 22 at the time, I only had to do six months. And I was in touch with a couple of basketball teams. And they said, well, during your service, do you want to play? So playing professionally is suggests that you actually got paid, which I did not play professionally I played for as a volunteer, I guess if you want to call that. I guess when you do something for no money. It’s called volunteering. So I played volunteer, volunteer basketball. And I did that for a year. I didn’t I wasn’t like a star or anything like that. And then after that, I figured I should actually move on in my career. I gone.
Mark Quinn:
Yeah, it looks like Eric’s a pretty good athlete. Can you take him on the basketball court? I’m just curious.
Ron:
Yes, I can on the basketball court, there’s no doubt.
Mark Quinn:
There’s Eric’s like hell no, you can.
Eric:
If you saw me standing next to Ron, do understand that that’s not going to be a challenge for me on the basketball court.
Ron:
I think Eric could be running right. While he’s walking, but I think in basketball, I will be.
Eric:
Okay, we’re on the basketball court.
Mark Kinsley:
How did you guys? Actually well, and let’s go to Eric. So, Eric, you grew up in Chattanooga? You’re a mountain biker at which yeah. Well, we’ll talk more about that. Because of surfer. Yeah. So what was your journey like? And then you put a bow on it for us and tell us how you ended up meeting Ron.
Eric:
Ron. I didn’t click on my background. So yeah, I grew up in just outside of Chattanooga, Tennessee, and the mountains that surround it’s a great place to grow up, you know, outdoors, I had virtually unlimited trails, five minutes from my house five-minute bike ride from my house. So I grew up in the outdoors, with the school in Colorado to kind of continue my outdoor pursuits, race bikes, their speed, ski, probably too much. And then I lived abroad in Spain for a while, actually did my master’s degree in Australia, and moved out to the Bay Area, almost 17 years ago now. Worked in finance, and then started my first company in the insurance space. And then we talked a little bit earlier. So I co-founded Madison Reed and the women’s hair-care hair color space. And Rhonda nice got to know each other when he invested in the series B at my last company, so we got to know each other. After I left Madison Reed. We decided we wanted to get together and see if we could find another category that would be exciting for us. And here we are four years later.
Mark Kinsley:
So the investment was in Madison Reed. That’s how you guys met.
Eric:
Yeah, I work for a venture capital fund called Norwest venture partners. And we invested in Madison.
Mark Kinsley:
Cool. So first of all, if unless somebody hops in and makes an objection, I think we’ll be able to open up to some questions from everyone on this call. But we’ll get to that in a minute. I just want to make sure if we’re not correcting that, let us know. But we’ll get to that here in a minute. Bitcoin, you’re gonna say something?
Mark Quinn:
Yeah. Before we jump into that, just a question, guys, because I know this is a big part of your model. Maybe we can get my good buddy, old friend McCarthy and on this one. But as you talk about the Omni channel approach, and you’ve now launched into retail, tell us about some of the challenges with that. I know you’re promising traffic to retailers. So that’s good. How are you doing on margin requirements for them? And the balance of Hey, but maybe you’re not making as much money on us in terms of margin. But we’re definitely gonna bring more traffic to your store? Or are you hitting the margin requirements? Perfectly in stride with other guys who may not be doing what you’re doing online? Can you talk about the tension of that? Or how things are progressing for you a brick and mortar?
Bob:
Sure. Yeah. So it’s been a journey. Right. So when we started, I think Ron talked earlier about unit economics. And, you know, we’ve always wanted to be channel agnostic as to where the consumer was going to buy. And when we started, you know, the margins weren’t, they weren’t strong. And I know there’s retailers probably watching now that are, you know, nodding their head and agreement with me. When we started, our margins were around 30 points. And one of the promises I made to the retail community was, you know, let’s see if we can drive some traffic, I believe we can. If somebody comes in looking for our product, please give them a great presentation on it. And we’ll see what happens. And turns out we did drive traffic. We did sell some mattresses, but we really only sold them when somebody came in and asked for it. And as we’ve evolved over the last year, you know, 12 to 15 months, we’ve improved margins, but really moving into our new strategy with a good better best for nectar. And for dream cloud. We’ve really created products that are going to be much closer to what retailers are expecting for margins, you know, 50 points or better. And programs that will make the retail sales associates excited about selling our product. So before we delivered on I look at a successful retail program is something that delivers on traffic, average ticket, and conversion. And we were delivering on traffic without a doubt. We were not delivered on the ticket with just the base nectar product and conversion certainly could have been better. I believe with these new products as well as our new nectar move adjustable base we’re going to be able to develop a program for retailers that really delivers on all three of those legs of the stool and will be would make us much stronger in the retail space.
Mark Kinsley:
So talk about just a little bit more about driving traffic to retailers independent retailers regional footprint retailers, what are the dynamics that are happening there, people are going online during the search phase, like you talked about earlier, they do research, they end up on nectar site, there’s a dealer locator, somebody finds the address and they come into the store is that the 10 cent version of it? Correct and put some numbers against that. So we have roughly 150,000 users that come to our, our website every day, 2% of them convert. And so there’s a significant number of those consumers are coming to our website that wants to engage through a retail experience. And so we have a store locator. But then what we also do is what I mentioned earlier, we kind of understand which users are more likely to buy online versus our users looking to buy offline and get them into a purchase journey, that’s going to get them into that retailer. So sending an email based on IP address, so that say, hey, here’s a store near you, where you can go shop for a better mattress, and really try to lean into that. And, you know, kind of the one other thing I want to make is, you know, we spend, give this year we’ll spend well over $100 million in marketing, I get driving people into that that user journey. And again, coupled with the number of people who want to shop offline with a massive amount of traffic that’s engaged in the mattress purchase journey that ultimately wants to touch the product.
Bob:
It’s like money, I would add to that, too, I think one of the big differences of what we provide is, you know, we target consumers that are in the market for a mattress, so we’re sending really qualified traffic into our retail store. So you know, if we convert 2% Now, there’s 148,000 people a day in our funnel, that, you know, there’s a good percentage of those that saying, geez, I’d really like to try it in a store before I decide to make that purchase. And as Eric mentioned earlier, we score those consumers and the ones that are more have a higher propensity to buy retail, are going to get really the hard portion to into a retail store. So when they come in, they are ready to buy. And we see from we don’t wait and talking to retail sales associates, we hear that when people come in, they are ready to make a purchase, which is a great feeling for us. But also, you know, it’s really exciting for the retail sales associate when they see that qualified customer coming in it really the next generation is we’re going to be allowing them to set appointments for our retail partners on our website. So they’ll be getting a notification ahead of time saying that, you know, consumers coming in to try a nectar or dream cloud mattress at this particular day at this particular time.
Ron:
The one more thing I’d add here is that I think Bob, Bob, and his team have done an exceptional job of kind of creating a great relationship with the retailers. And that’s and that’s what we want to stress here is that we want to be a partner. So there are things that we could do better than I think this is where we’d like to hear from the retailer and say, Hey, we’d really love for you guys to do X, Y, Z. And the good part is is that we’re very technologically savvy so we can add technology to different things and be good technology partners for the retailers.
Mark Quinn:
That’s great. And guys say some impressive numbers 2% conversion rate that’s big, 150,000 people to your site that’s big. So you’re doing something right, there’s no doubt. Well, we’re here with Eric Hutchinson in rat, Ron red sky. And we want to open it up for questions. So if you’re listening to the park, right now live, feel free to jump in the queue, we’d love to talk to you and post up some questions for the founders here of nectar mattress as what oh.
Mark Kinsley:
As we wait on maybe some questions. What are some things that you want to say, to people listening to the industry to retailers? Maybe that we haven’t asked about? What’s the message that you want to say?
Bob:
I would say, I was gonna say I would jump in and just say, you know, that business is different, I think why, you know, whereas we meet retailers that talk when we talk to them for the first time. They, you know, they look at us as a, you know, kind of one of those traditional brands, and it’s really, it’s really very different from the traffic that we’re able to generate. So, you know, while our margins are, you know, closer to where their expectations would be, you know, the programs are still a little bit different. We do things a little bit different. Our you know, our team is very, very efficient. We’re able to, you know, we train differently. We suggest, you know, supply chain a little bit differently. So I think would just be open and the retailers have been really successful with us with concur with that, you know if you kind of follow the playbook that you’re going to see some great results and improve your conversion.
Ron:
Yeah, the other thing that I also add is just kind of repeating this partnership approach in that we do not view this as an online versus online. If you’re not buying here, you’re not buying there. As we mentioned 2% is impressive, but that means that 98% of the audience didn’t buy our goal. To really partner with the retailers and send those people over there, let’s be very clear, this is a very, very high intent purchase, nobody’s going into our site and say, what’s the latest nectar mattress? This isn’t like, with all due respect to nectar, we’re not Porsche, right. We’re not saying what’s the latest model of, of nectar versus I mean, some car enthusiasts they go into like cars, and they tried looking at different models and stuff like that. The intent is extremely high here. And so our goal really is how can we have we push more people to the stores? What more can we do?
Mark Kinsley:
Guys, I’m going to put us in the hot seat all of us at one time. Because nobody’s posted a single question yet. Maybe that functions turned off, I’m not sure. But let’s, let’s put our heads around something that’s happening in our industry that I see is becoming a major problem. There are a litany of scammy spammy mattress review sites that have been owning and have owned real estate on Google, to a very deep degree. And whenever consumer goes into the buying phase, they want so badly to be told what to do, they’re just going to listen to almost anybody, especially if you end up on the first page or even the second page of Google. These mattress review sites are a lot of times run by SEO experts, maybe just some dude. Influencers who know how to put up a review, and they know how to drive traffic, I understand that leads to business for online brands. What it’s also doing is almost single-handedly ruining any chance we have as an industry of regaining trust and integrity and connecting the products we sell to the life-changing benefits of better sleep. Tight tickets to it because clearly, you’ve used these types of platforms. And it’s probably made you millions of dollars. I understand that. But it wasn’t always evil. And it’s turned evil.
Eric :
Yeah, couple a couple of things on that the digital ecosystem is the promise was the democratization of information. And masses review sites, I think of some of them, as he said, through SEO, kind of own that real estate and kind of carve, carve that out. And we like most of the mattress brands. So you can find our products reviewed on that trust review sites. This is where you, I think that’s one component, that user journey, but getting that consumer offline, and we’re great retail sales associates can engage that consumer. The other thing I’ll say about consumers that they’re really smart, you know, consumers, I think to know when they’re being sold, and when they’re when there’s false information in our industry shock, costs. No retirement, yes, while they own kind of a quarter of the ecosystem rather well. And I think this is very well, I would put your Google does a really good job of constantly updating their algorithms to reward those that are posting really good information that’s aiding the consumer through their journey, and having negative scores for those that don’t. But you’re absolutely right, there is kind of a corner of the internet. That is bad information that we that we’re all kind of fighting against.
Mark Quinn:
But you know, Kinsey’s got a great point. I mean, there’s a lot of bad actors out there. And the reality is when it’s clickbait and they say, Hey, we know the right bed for everybody. If you’re a back sleeper, it’s crap. It’s complete bullshit. And it’s not a fair representation. I mean, unless you know the person’s body type, and their way, in any medical history, you can’t really make those claims. So I think there’s some of that stuff going on. And I hear your take on it.
Ron:
But yeah, so at the end of the day, I mean, everything clears out. So you can lie to somebody and say, hey, this mattress is really gonna change your life. But the reality is, is that it’s not because all the claims that they made were not true. And every mattress, definitely every online mattress brand has some kind of return policy. So if the claims were false, the person is going to return that mattress. And guess what, that reviewer is actually not going to get the speed because they don’t get fees for any match, or return and stuff like that. So you can only lie to somebody for a certain point of time before things get called out. And then brands that actually support this type of behavior. They get called out on different social channels as well. So I think at the end of the day, these things do get flushed out, unfortunately. But what’s about social voice and to speak, and speak out loud? And so if somebody is doing shady work are not doing what they said that they were gonna do, it gets called out.
Mark Quinn:
Mark Kinsey did something because the question queue has lit up. So let’s start with one from Fred Hill. Guys, can you answer this one for us? Do you plan on limiting the retail locations in an area? So if you’ve got a good nectar retailer that’s doing well for you? Will, you put other nectar retailers in that same trade area? Or do you have a policy on that? I wouldn’t say that one. Yeah, I wouldn’t say we have a policy, I think we have to do it, we look at population, we look at how many visits are we getting in that particular area? And we also look at our current, you know, retail partners, and what are we seeing for, you know, sell-through and conversion? And how does it compare to the, you know, to the rest of our doors nationwide? So and we also have a scoring system through a shopping service that we use to see, you know, how the brand experiences so there’s a number of, there’s a number of things we use to determine distribution? I can tell you, we’ve said no to a lot of retailers that have asked us because it wasn’t, they didn’t want to make the right commitment, or wasn’t the right experience, or from you know, from a price standpoint, you know, they were looking to, you know, really kind of undercut or just not really try to uphold the map policy that we have. So we’ve tried to be, we’ve tried to put in ourselves in a position where we can send quality traffic to our retailers, and the consumers get a quality experience at that same time.
Mark Kinsley:
Appreciate that Bob, Matt wolf says, what is the advice you would give to a smaller retailer that will be competing with the eyes of the world that will likely get the store locator traffic over the smaller guy?
Eric:
I mean, the advice I would give them is to deliver phenomenal customers. And that customer is going to tell their friends about it a minute opportunity.
Mark Quinn:
Oh, that’s fine. I was gonna say similar. And I also would say, you know, we have, we also have multiple brands that are on, you know, different levels of the growth trajectory, Dream cloud, being one of those brands, where I kind of talk about dream cloud, today is where the nectar was a year ago, and it’s still on that really that big hockey stick of growth and it’s a fun little bra I think is the view that go through the virtual market this week, you’ll see that you know, we’ve really created some beds there in the hybrid space, are going to do just phenomenal on a retail floor. So there’s a lot of opportunities to different, yourself still be able to get trapped back. And you know, just because there’s another may be bigger and volume doesn’t mean that consumers not going to choose to where they want to shop.
Eric:
But simply we are the sales data that back and so we’re able to look at that for loop and see who’s ultimately buying online versus offline. With the idea of constantly be analyzing the data center, Microsoft would like to see who did a good job with them.
Mark Quinn:
And then are you pushing customers to them based on that data like this? Do the good actors get more opportunities?
Bob:
Yeah, we are moving to that we when we started, you know, we really didn’t have enough distribution to be able to really calculate it out that way. That is the intent. We’re also working on a lot of new data where if we, as we start to get sell-through data from our retail partners, it allows us to direct our spend more in a particular area. So it’s kind of like I use it as an example is like when you go fishing and you’re using your fish finder. When you see fish in the water, you put more bait in the water so you have a higher propensity to catch a fish we kind of do the same thing. So as retailers start to see better sell-through and providing a great experience. We’re going to tend to spend more marketing dollars in those areas. Is to drive more consumers in that marketplace to our website, which will ultimately drive more to their store. So yeah, so and then we do use a shopping service to make sure that that it is a good consumer experience when they come in the store. So the answer to the next question would be yes.
Ron:
Anything else to add here said, I mean, we’re learning, right? And so it’s not that we have everything figured out. And this is what I get, I think I’ve said it like two or three times already is that we are looking for partnerships. So what Where can we improve? What are we doing on our side that could be that we could be doing better?
Mark Kinsley:
How do you balance expenditures for driving lower funnel shoppers, such as people searching for stores near me, things of that nature versus higher funnel shoppers that might be typing in something like best king size mattress? Or mattress reviews? How do you weigh the values of each?
Eric:
Yeah, that’s a great question. So searches, you’re in a hot, high intent arena, where you engage the consumers. And we work across both kinds of lower funnel shoppers as well as the higher funner shoppers. And what we have is we have a scoring algorithm. So it’s gonna be called lead scoring algorithm where we’re looking across all these different search terms, to understand the relative value so that we know where to deploy those dollars. And so this is the part of the engine that we’ve built. But you know, the great thing about search around these categories is really high intent. And so, you know, there’s opportunity to engage, I can have those generic terms, your best team mattress, as well as engage consumers kind of store near me to know, for example, when someone comes in from that search, they’re probably more likely to want to go to the store. So let’s land them on the store locator. So using some of those search terms, to kind of preemptively dictate the user journey that we’re gonna take a consumer through. Then next year.
Mark Kinsley:
I go first, and then I’d like to hear a pop in Eric as well. Maybe you guys as well. For me, it’s excitement. I’m really excited about kind of where the company’s heading. And I’m just wake up excited about the day and where we’re going.
Eric:
I say growth, that was one word like we’re where we were. So we feel like we’ve basically gotten to the start line over the last three or four years, and the next couple of years are going to be credit growth for years for us.
Mark Quinn:
Bob, I would say acceleration. I mean, that’s the theme of our virtual market. And, you know, we’ve really, we’ve done a lot of testing over the last 18 months to kind of get to where we are to, you know, we’re saying, you know, hey, we’re real magic, we’re real retail mattress company. Now, where, you know, for the last 18 months, we’ve kind of been putting a round peg in a square hole, where we’ve developed products, we’ve developed programs, that in conjunction with our traffic generation techniques on the digital side, is really going to create a really unique way for us to accelerate our business, but also accelerate our retailers businesses.
Mark Kinsley:
Ginger says, Ron, Eric, what is one thing you would change about your company? And what are you most proud of? Let’s start with Eric.
Eric:
So a DOD is the first one, there we go. There are constantly things that you’d like to change, but we have kind of a relentless focus on improving our business. And it’s going to leverage that as a journey without a destination. I think what I’m most proud of is the team has been able to build, you know, I am inspired every day by the team. And Ron mentioned this earlier, we have a very diverse team, diverse in terms of geographic location, diverse in terms of background, and it’s just great every day to see that team come together and constantly look at the rise and say, What can we do better? So I what I’m most proud of as a team is an improvement to build.
Ron:
Yeah, I mean, as I wish I was answering that question first. Because I mean, they asked me about what do you really most proud of? I think it’s, it’s about the team. It’s about getting to know the team, for me, personally, getting to know who all the team members are, what their backgrounds are, what their stories are, what motivates them. What can we be doing a better job of motivating them are doing a better job of? I mean, the one thing what would we change about our company is, I guess, I don’t know, figuring all these things out. I mean, we do things all the time. We make mistakes all the time. It is and I think I think what we try to tell everybody is that it’s okay to make mistakes, actually, we have to make mistakes, but if we’re not making mistakes, we’re not moving forward. So one thing changed. I don’t know, it’s a tough question, but I don’t really have an answer to it, unfortunately. Well, you’ve had some really good answers. So you’re off the hook.
Mark Quinn:
So I just want to say again, because it’s that time for us to wrap this up, Eric and Ron, thank you so much for taking time with this. Marcos. I hope you enjoyed it. It wasn’t as painful as what you expected a mattress podcast to be right. I thought it was great. Really great. Good. Well, we always say as far as mattress podcasts go, we don’t sock. So we feel like we can live up to that whole con comment. But you guys are doing a lot of good stuff, you are growing at a very fast rate. We know you’re pushing to brick and mortar and you’re developing some of those relationships. So the fact that you took time out to talk to us, I appreciate it kiss. Before we bounce out here my question for you. What’s the word before you as we move into 20, the rest of 2020. And in the very near future? What’s that one word that describes where your head is right now?
Bob:
Relationships, and it goes back to what Ron said, that’s the most important thing to me. It’s the most important thing in my personal life, and your days become your life. They add up and I love spending my days, investing in relationships that are you know, filled with deep trust and have the potential for depth. And I love meeting new people. And I love meeting people in this industry. It’s I think we have a great mission behind what we do to truly help people get a better night’s sleep, which impacts every moment of your night and your day. And it improves your health and your mood and your looks and your life. And so I think the more connected we are in this industry, we can do a better job of really getting rid of the dotted line between our products and better health and better sleep and make it a firm connection. So that’s why I like spending time doing things like this.
Eric:
Thank you so much for having us on.
Mark Kinsley:
Thanks, guys. And hey, to everyone listening. If you want to hear this episode, replay, go to mattress, podcast calm. We’ll have it up there in a couple of weeks. So you can re-listen to it and then you can share it out. And Ron Eric, thank you guys for all your time today. And thank you, Bob, appreciate you being here. Thank you to everybody behind the scenes that help make this happen. We truly appreciate you and hope you all have a great rest of your week. All right, thanks a lot guys.
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