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Perhaps the biggest industry news hitting mattress newsstands this past week was Casper being acquired by a private company for a fraction of their IPO price.
Weighing this move against other shifts in companies such as Purple and Nectar, it got us to thinking—are these digital disruptors of the industry missing the mark?
The value of a fresh set of eyes and diversity in any industry cannot be underscored enough. Companies will always be better off having new ideas at the table, and often those new perspectives come from individuals with varied backgrounds. Yet, even as valuable as a diversity of thought is, insider wisdom cannot and should not be dismissed—especially within the mattress industry.
In today’s episode, we discuss these “digital disruptors,” what are they doing well to shake up the norm, who is succeeding, and which traditional brick-and-mortar brands are taking a hybrid approach between physical and digital. Plus, we consider what the secret ingredient may be that many companies are missing.
Full Transcription
Mark Kinsley
Casper taken private and Philip Krim is out as the CEO we have analysis today on the Dos Marco show. And how does Purple, Neectar, Temper-Pedic and others fit into this narrative? The Dos Marco show begins in 60 seconds.
Mark Kinsley
Got a couple of great headlines up on fam.news right now. We’re gonna talk about Casper taking private Philip Krim is out as CEO. What does this mean for the industry also, you’re going to find out about diamond mattresses new patent for cool stream ventilated comfort layers. And man I don’t want you to miss the chance to check out retail pride with author Ron Thurston on the just stories with BT podcast exclusively on fam dot news. And hey, don’t forget, we just have a few days left if you haven’t listened to this last podcast, with Chris Marlowe of help one now. We thought it was such a great lesson for business leaders. This was an all about help one now as a charity. It was about Chris giving really sound actionable advice about how you can weave giving into part of your organization and part of your culture. And so as part of him in his organization, celebrating helping families by giving them loans, getting them out of poverty and keeping kids out of orphanages by giving their families businesses, we knew lots of people in this industry started as family businesses. So we’re giving we’re matching your donation up to $2,000. Now through December 2, so go to help one now.org/the fam, and you spell it out help one Oh, Eddie, help one now.org forward slash the fam and definitely check out that episode with Chris Marlowe. And, hey, I’m ready to check out Mark Quinn’s commentary on Casper being taken private. After a fumble of an IPO. Philip Krim is now going to be out as CEO of Casper Quinn, as you were absorbing this this news and thinking about it in context of the industry. What came to mind for you? Where’s your head?
Mark Quinn
Well, you know, I think Casper shot out of a cannon really. I mean, their start was incredible. And they were really seen as one of the first disruptors. Kinsley I think there were others before them bed in the box. The original brand was actually out there, but no one is really going out of the market with the kind of ad budget that Casper did. And so there, they were doing some really cool stuff that if you remember back, remember, they were like, Oh, there’s one mattress for everybody, you know, and everyone was like, Well, wait a minute. That’s not true. You can’t say that. But Casper leaned in really hard to that whole idea. And then when they started expanding their assortments, they backed off of that language, obviously, right. And so they diversify their product assortment. But, you know, they didn’t start out in the beginning as a product company. They started out really more as a marketing company like so many of the DTC guys have. And so I think you have to give them a lot of respect for what they did and how they got where they are. I mean, it’s pretty amazing what They accomplished. However, you know, now that they’re in the market and they spent so much money. I mean, that’s the whole thing the entire industry sat back and watched all these DTC guys come to market. And then the conversation shifted quickly into well, they’re not really making any money, like a lot of them weren’t right. So the acquisition costs were really high, the return rates were really high. And then as more people got into the category, the acquisition costs started to elevate. And then what you saw was the DDC guys were really like marketing ninjas great at conversion, they started to get some separation Kaspar, because they still weren’t making a lot of money, they were diversifying their product lines. And they needed to push out into brick and mortar. So it seems like what a lot of these guys have done is go to market, go online, build your brand. And then kind of like TempurPedic inside, comforted, we’ve talked about it on this show before, push hard into the consumer space with long form media. So they did infomercials back in the day, they went on all the shopping shows back in the day, and created interest and demand at point of sale for the retailer brick and mortar guys, which is what Casper did. But when they pushed in, the product wasn’t strong enough. So they went into guys like Target, where they had an isolated experience for the consumer is like one bed, it was just the CASPER bed, if you had multiple beds inside of an environment where they could actually lay down on the product, chances are you weren’t gonna you know, get the vote from the consumer because Casper product didn’t really measure up. Having said all of that, you know, there’s this theme, I want to get you to respond to this. There’s this theme in my mind, where companies like Casper, and you know, we have a lot of investor, analyst, Kinsley, that listen to this show. And when we talk to these guys, this is something that comes up frequently with them. But when you have a private equity company involved in our industry, a lot of times they get involved and they don’t value industry insider information, right. And so if you’re a direct to consumer brand, that’s totally fine. But if you’re going to push into brick and mortar, you kind of need to have some people on your team that understand the dynamics of that, there’s a lot of ways to screw up. If you’re going into brick and mortar inside of this category. And a lot of these private equity guys, they don’t care. They don’t value the inside, expertise. So people are already in the category. I understand they want to disrupt and they want to bring new people in and bring their people in. But you know, what, if it fails, and if you’re not at least connected to relationships, and to information that will help you succeed? Why would you ever expect to win, right?
Mark Kinsley
It’s really big coming. This split narrative, I think, in our industry. But what I mean by that is, is you have several different storylines that are unfolded. And one of those stories, I don’t want to say it’s wrapped up. But it kind of had its last chapter written. And it was a very good ending. And that was the chapter and the story that was written by tufton needle tufton needle really was the original disrupter in this category, in the biggest way, the most visible way. Casper came along very shortly thereafter. tufton needle, really, I think saw the writing on the wall about the cost of acquisition rising about the dirty, underhanded nature of many of these review sites about what it was going to take to really continue to be profitable in this ever changing, shape shifting, expensive landscape. And so they sold or in the terms of the agreement, they merged with SSB. And I think I look back at JT and day he and I know those guys, and it’s a it’s a long distance high five to them, because I think they made the right move at the right time, considering what it was going to take to grow and expand, then you have purple. So purple has a proprietary technology. It’s differentiated. It’s demonstrably in the marketplace. And they weren’t averse to going into retail. And so yeah, their stock has taken a little bit of a hit recently. And you can find that headline up at fam dot news. But look, these things happen. We’re in a supply chain. Mess still in many ways. You’ve got labor shortages, you have transportation issues, you have all of these things affecting all the companies. So you know, for for purple to be maybe back on its heels from a stock perspective isn’t as concerning because I think that they understood what it was going to take to continue growing their business. And they didn’t take a platform of disruption. They took a platform of business building, and I think Joe’s done a great job with that company and then you have nectar. This is another storyline that’s unfolding with what we call the the DTC companies Digital disruptors. And whenever you look at nectar, these guys, from what I can see, and from what people tell me, are highly effective at spending their money. They’re acquiring customers at a higher rate. They’re willing to spend more. It seems they’ve got deeper pockets. Their conversion rates are incredible. I’ve heard Bob Merkle say that they they mined the abandoned carts, and there is gold. And then there hills. That’s Bob’s quote, and look, really, they brought in a ton of industry people, because I think they’re agnostic to we want to be the disruptors and overturn a category and right this hero’s journey, they want to build a business and they want to win. And that’s why they have Doug Stewart on board. Now. They’ve got Bob mongkol. They’ve got Bob McCarthy and a bunch of other people behind the scenes that are doing really making really strong moves in that business on the brick and mortar front. And then meanwhile, you have Casper, that was the absolute rocket ship out of all of the DTC brands originally, they were then overtaken by purple, if you look back at some of the good bed data, they were overtaken, at least from an organic search volume by purple. And you know, I think now nectar is probably rising as the cream of the crop in terms of interest around that brand organically because they’re probably spending so much money to get in front of the consumers. So here you are with Casper bringing in a new CEO with an incredible background Emily Errol, she’s the president and Chief Commercial Officer now. But where do you go now that you have private equity involved in your business to this degree you’ve been taken out of the public markets it’s it’s time for a really big haircut and I think you do get further agnostic toward how you achieve those sales. You go after the business.
Mark Quinn
So you’re right all of like I’m sitting there listening to your like kind of talk through the different companies and you know, you said let’s go back to purple for a second. So you talked about purple but you know, for everyone in the audience the thing that purple had going for with the CASPER did not Kinsley was the fact that they had intellectual property. Right. And I don’t want to this is a whole nother show. But that intellectual property to remind everybody that’s that was in the market for 10 years and the entire industry, whiffed on that, and try including us, right? So we even brought it into leg it and trying to bring it into the manufacturers, right and trying to help the industry figure out a good way to tell the story on that on that technology. And you even used freakin elephants, which was brilliant. By the way, all of that story is in the book, come back to bed that you can get on the fam dot news website. So well done. Kinsley, I loved how you did that. And I had done some stuff even before that, and it just never really got the traction. And these guys came in with purple. And they put some really heavy duty marketing behind it. It was fun and interesting and different, right. But they had intellectual property, but then they started bringing in some industry insiders, so they had that too. And then something really unique and different to help them really gain favor by the consumer. Then, to your point about nectar, you got, you know, Bob McCarthy who brought in a bunch of industry people, so they had that as people to rally around them. And so I think with someone like NEC, right, I mean, Casper, I went on to LinkedIn and I looked up some of the people inside their company and I didn’t recognize many of them at all and we’re not here saying to people listening to this that you have to have industry insiders in order to be successful, but it sure as hell helps. Right? A while ago, Kinsey, do you remember that blog post, they wrote five signs and outsider won’t make it in the mattress industry. And it was really when Michael trab came on board. And it wasn’t saying that Michael trough isn’t gonna be successful. I was saying in so he actually confronted me on that at one point, it was kind of funny. He was like, Yeah, I remember that. That blog, I introduced myself and he’s like, I know you are, you’re at a blog post saying I was going to fail. I said, No, I did not write a blog post saying you’re going to fail. I wrote a blog post saying if you do the five things in this blog, you will fail. So those things were things like and I’m going to toss it to you for your your your feedback, but do you underestimate the complexity of the industry? Right a lot of people do they can oh well I’m from this industry or this industry and they try to apply the logic to the matches category. There’s very little appreciation for the long standing relationships and I think you know, let’s not just focus on Casper look at you know, art van and what happened to them look at Levites and in different furniture companies Heilig Meyers, when they brought in all these private equity guys, what could happen to these businesses, they didn’t value the trade knowledge of the industry. Number three, they didn’t really learn their way in so you know, it’s not just when you enter a new category, like the first night 80 days, aren’t you just keeping your mouth shut and in meetings and trying to gather information, and I think a lot of them do that. Number four, you can assume what worked in the past is going to work here. Right? So we kind of just talked about and the other one is respect, you know, respect for the retailers out there, you know, and it’s earned, it’s not given. Right. And so you can’t go into I’ve had people in private equity inside this category of, I’ve heard them telling retailers, new principles in in beliefs they have after coming into the category. And then they, they go hard with that explanation. And the people sitting there listening are like, you’re a freakin moron. And they’re like, Yeah, that’s fine. But it doesn’t work here. And here’s why. So what are your thoughts about that? Do you think I covered the the slippery slope that many of these guys coming in, that bring the outsiders inside? You think that’s a fair way to assess that problem?
Mark Kinsley
Well, I think you have two very noticeable camps of of outsiders. The becoming says I was an outsider at one point, and you brought me on to the inside, and took me through mattress boot camp, I went to ESPA. I went to the market, I went to the betting conference all within the first year. And I remember I was sitting there listening, asking questions, trying to pick up as much as I possibly could. And it was overwhelming at times. And it made me realize how little I knew about this category. And how, no matter what industry you’re going into, there are people who know so much more, and have spent their entire lives have family businesses involved. So you have the people that are that are willing to come in and listen and learn. And I think that, you know, a few of them that that have done a really good job. You look back at Rick Anderson with TempurPedic, you know, he came from Duracell. And from the outside even Tom Murray, the CMO, the current CMO of TempurPedic. Tom was on our podcast recently, you should definitely look up the episode with Tom
Mark Quinn
Thompson. Right? He was with car rental companies.
Mark Kinsley
Yeah, Scott Thompson, the CEO of temper, I think that entire crew has done a really good job of acknowledge acknowledging the people in the industry, who have the relationships, who understand downstream what’s happening all the way to the retail sales, associate level, what’s happening with manufacturers and suppliers, and transportation and business services, the entire swirling ecosystem, have the industry of learning your way in and surrounding yourself with people who know how to navigate those worlds. And then I think you have people that are hell bent on disruption, or I know that this way can work because I’m an internet ninja, which is great. But then the you have a hard time kind of acknowledging, Okay, what else is happening out there that I can learn? What do I need to know? And am I willing to be a student and get rid of my own curse of knowledge?
Mark Quinn
Well, curse of knowledge is exactly right. And in when you have it, and people carry that curse of knowledge, or what they think as a curse of knowledge into a category they haven’t been in, it’s a real problem. And there’s some arrogance in that, right. There’s a lot of arrogance, people think they have the answer. You know, Mark, you need to think too. I mean, here we have Shelly Huff. Let’s talk about SSB for a second. Right? So they just announced so they had Michael trab in place for a while. So let’s get back to that conversation. Right. So Michael came in, and I think he did some good stuff. I liked Michael, I really did. He was a nice guy. But his performance wasn’t good. And then so as soon as Michael left David Swift, who is the chairman of the board came in and he acted as CEO, who, by the way, is the guy that was overseeing Michael’s effort. So he came in and he was the CEO. Well, over the past five or six years, right, didn’t we right? It was like a loss of a billion dollars in top line. So now you got Shelly huff and they buy a tough the needle, I don’t think they ever really max that out. Right. So what they do to really pile on into that technology. And you know, at the time, it was a direct to consumer play. And I thought wow, there’s really good stuff in that and they could really culture class for sure you and I both had some time with day he and JT and so definitely big company meets, you know, startup and that’s, you know, you got to really be careful with culture. And but then Shelly Huff now is in is in place with SSB. And she’s got a lot of work to do. And she’s got like all these direct to consumer brands that are crushing it, and you’ve got TSI, who’s probably doing as well as they ever have tons of momentum going into 2022. And so she’s got her work cut out for and she’s an outsider and so she’s got a lot of people inside for sure, but that I you know, there’s a challenge in that I think, don’t you or no.
Mark Kinsley
I think it’s a clear signal about where SSB is heading. If history is a prediction of future and history for Shelley Hough, who we’re going to have on the show we’re very excited about it some point soon. So we’ve been in contact with Shelly, we’re trying to get schedules. So she could come be on the show. Definitely excited about talking to her. But if history is any prediction of future, then she was the president and CEO of Hayneedle. So if you’re familiar with hayneedle.com, it’s a Walmart owned, online furnishings company referred. Melanie Hewitt talked about being a consumer centric company. And my takeaway from that many times has been we’re focused on on being direct to consumer in more ways. So I think that has definitely been the direction the company’s been pushing. And to your point, you know, at potentially at the expense of a billion dollars in top line revenue over the past several years. So it’s, it’s no question that, you know, this company is needing to reorient itself and re re envision itself. And so we’re excited to see what Shelley’s vision is for that, but but to bring it all back full circle, I mean, we kind of got into that conversation about SSB because of tufton needle and the storyline they wrote because of outsiders versus insiders and what it takes to potentially be successful if you want to navigate the industry with you know, with wisdom and some of that insiders knowledge. And there’s no one clear path but I think it does come back to kind of an operating system, you know, a set of principles of am I willing to see when things aren’t as I wish them to be? Am I willing to shed the dead skin of my previous industry, my previous role, and look at it with fresh eyes and surround myself with people and potentially change my opinion and yell for strong leaders many times, that’s not what they want to do. They don’t want to look like they’re waffling. But gosh, we’ve probably never seen a time of more dynamic change in the world. And even now, you know, you look back at from 2012 Until now you think oh my gosh, Can it get any crazier in our industry with DTC companies and that swelling 275 Plus and you know, the shift away you know, potentially a little bit from brick and mortar the research we did that if you become a member at fam dot news, you can get that research. But yet it continues when
Mark Quinn
it does, you know, to give you know, Shelly could be a huge success for them. She’s been in the category for a couple years. She’s been a tough to needle but the you know, the digital to consumer space is much different than the brick and mortar space. They’re like TierPoint you got Scott Thompson Tom, or you got the guys at TSI back in the day Rick who who navigated it so clearly it can be done. But you know it. You can’t just I mean, it takes some work, man, it definitely does. You know, you mentioned research, Kinsley switching gears a little bit. And by the way, I can’t wait to talk to Shelly, I’m really interested to hear she’s got a great she’s got some great people at SSB people we both know. So there’s a lot of really good stuff there. So, you know, there’s a lot of potential for her for sure. But we did a poll, Mr. Kinsley recently. So let’s talk about the rest of the industry. And we asked the question, how are you finding things in the furniture mattress business these days? And from our poll 42% of the people that answered said yep, still on fire love in life. 42% also said, Nope, slowing down some 6% said they flatlined and 10% or said at 10% said they’re starting to see some negative numbers. So is that kind of consistent with what you’ve been hearing out there?
Mark Kinsley
I think for me, what’s consistent is, it seems like there continues we just talked about it with the people in the industry. But there seems to continue being two separate worlds. That, to me seem to get further and further apart. And as you said, it’s pretty pretty much an even split between the people who are on fire that sounded like and the people who aren’t doing as well. And so if you haven’t evolved, if you haven’t changed, it goes back to what you’ve said in the past. Survival is not mandatory. You don’t have to change because survival is not mandatory. And I think we’re seeing that start to play out.
Mark Quinn
Well, there’s a lot that’s playing out. I think, as we push into 2020, we’re getting closer to that we’ll start having some some thoughts around that. But still a ton of opportunity out there isn’t there. I mean, there’s just so many, so many ways to get to consumer and we’ve been talking about a lot of those. So I’m very, very optimistic. But for those of you listening, if you’re new to the industry, definitely get connected to the fam. Read some of those articles, share them if you’re listening to this. Share those things. You know we’ve got that that podcast, Kinsley the fam audio stories so you can literally download that app and listen to the website because right now everything is voiced. So it’s kind of a cool way to engage and so share some of that let’s keep growing the audience and growing the fan we want to have great conversation and it seems that that’s exactly what’s happening. It’s pretty cool the emails we get weekly from people kind of talking about their participation and what they’re getting from it. So for all of you out there, listening to that, that has sent us notes we appreciate you guys always
Mark Kinsley
Yeah, a quick reminder it is now the fam Furniture and Mattress we have Ray Alec Grayza that is at the helm leading our charge into the furniture category raise amazing definitely subscribe to the fam go to fam dot news get signed up become a member you get all kinds of research the free audiobook fam dot news and then like you said subscribe to audio stories because and the podcast because Adrian is going to have her own mattress show that gives you in under five minutes. Everything you need to know about the industry that’s going to be coming up on that that channel so you can subscribe on Apple on Spotify. And we just love being connected to you and we hope everybody had a had a great Thanksgiving this past week and we hope you have a great holiday season. Holler at us if we can help. We are here for you because you are part of The FAM.
