BY JULIE A. PALM
Leaders in the mattress industry share their perspectives on the state of the sleep products business and discuss ways to address changing market forces
With 2017 speeding to a close and a new year upon us, BedTimes talked to a half-dozen leaders in the mattress industry to get their assessment of the state of the bedding business, nationwide economic conditions and key trends that will shape how their companies operate in 2018.
There is broad agreement that the industry is in a period of transformation, driven largely by changing consumer shopping habits and new online players that blur the line between manufacturer and retailer. But other factors, including the growing spending power of millennials, are driving change, too. It is, many say, a challenging but exciting time.
We’re sharing some of their answers, in their own words. (Some comments have been lightly edited for clarity and length.)
1. As we wrap up 2017, how would you complete this sentence: “The current state of the mattress industry is_______.”
“In flux. Change is the new norm.”
—Bryan Smith, president of Nashville, Tennessee-based mattress producer Southerland Inc. and chair of the International Sleep Products Association’s Board of Trustees
“The bedding industry is stable and expected to grow slightly this year.”
—Michael Traub, chief executive officer of Atlanta-based mattress major Serta Simmons Bedding LLC
“We are in the midst of very exciting times. The industry is going through many changes. Consumers are becoming increasingly aware of alternate channels to purchase and the distinction between mattress retailer and manufacturer is becoming less defined.”
—Eric Rhea, vice president of the bedding group at Leggett & Platt Inc., an industry supplier based in Carthage, Missouri, and vice chair of the ISPA Board of Trustees
“Evolving and changing to meet the needs of consumers from multiple generations who are shopping for a great night’s sleep both online and in a retail store environment.”
—Kim Grubb, vice president of sales for industry supplier Wright Global Graphics, which has headquarters in Thomasville, North Carolina
2. As we head into 2018, what are the biggest strengths and weaknesses of the U.S. economy?
“The strength will be the millennial consumer segment. As the millennials get older, they will continue to progress in their careers, increasing their disposable income to spend on purchases like mattresses, furniture, refrigerators and other appliances. That consumer group is going to be a big factor in the growth of the economy. However, even as they are one of our focuses, we do have to pay attention to other emerging age groups, as well as the over-40 crowd. The weakness is that there remain rumors that the U.S. economy is still in a recession. Whether true or not, all of the chatter about a recession tends to make people pull back on spending.”
— Nick Bates, president of Boston-based licensing group Spring Air International
“(Though tragic for those affected,) the mattress industry will be favorably impacted by the recent natural disasters. Hurricane damage in Florida and Texas and fires in California have created more demand as communities rebuild.”
— Mark Jones, president and chief executive officer of industry supplier HSM in Hickory, North Carolina
“Most economic indicators remain strong. Consumer confidence is good, housing sales/moves are strong and gas remains reasonably priced. While we have not experienced strong sales in 2017, we expect the industry to pick up steam in the late fourth quarter and carry into 2018. The biggest weakness appears to be the political disruption. Unfortunately, this is a wild card.”
“We’ll continue to see the reverberations of economic and geopolitical factors, global trade uncertainties, and strong consumer demand from 2017 carry over into 2018.”
3. What is the biggest challenge facing the mattress industry as a whole? How can the industry best respond?
“Ultimately, we are competing for consumer dollars. The amount of money people spend on portable electronics is growing significantly faster than their investment in sleep products. Retailers, manufacturers and suppliers must join together to remind consumers that better quality sleep equates to a higher quality of life.”
“Creating door swings at retail. Getting consumers into retail stores instead of buying online is the greatest challenge. At the end of the day, we need folks who preshop online to come visit the store to ensure our retailers are successful. To get them there, retailers and wholesalers need to partner together to run in-store programs, whether it’s a special purchase, promotion or something else that has a social benefit. In-store events and charitable events give retailers a presence within their local communities and tend to pull consumers into the store. Once they’re inside, they tend to be more likely to return and buy.”
—Bates, Spring Air
“Employment. Whether it is factory employees or retail sales associates, all remain difficult to find and retain. I wish I knew the best response. We continue to try to find ways to attract employees for our factory and ways to make our products simple to sell at retail.”
“The compressible bed business is seeing its own internal explosion of competition with more than 150-plus companies now offering compressible beds online. With all the options, both online and in-store, retailers are making a clear choice to bring compressible mattresses into their stores in hopes that they will drive foot traffic and give the consumer an option to ‘try before you buy’ in-store and still walk away with a mattress in a box or have a mattress delivered to the home. The mix of online mattresses and traditional mattresses on the retail floor will certainly change the landscape of product offerings by the retailer.”
4. Recently, there has been much talk about disruption in the mattress industry. What do you think are the most disruptive factors the industry will face in 2018? How can the industry best respond?
“We believe that the segment of consumers who prefer to purchase online will continue to grow. Direct-to-consumer startups have established themselves as a convenient alternative to shopping in a mattress store, providing a seamless, one-stop-shopping experience for consumers. With constantly evolving consumer needs and buying preferences, large brands need to offer solutions that meet a range of price points and buying preferences. Our new direct-to-consumer brand, Tomorrow, is principally aimed at this segment of the population. Also, we are working with our retail partners to build out an omnichannel experience. Our Serta and Beautyrest product lineup includes traditional mattresses, as well as mattress-in-a-box offerings that can be sold in retailers’ brick-and-mortar stores or through their online channels.”
“Imports, consolidation (vertical integration) and private equity will impact the mattress industry in 2018.”
“We’ve been talking about boxed beds for years. I think this year will be the tell-tale year for the disruptors. The online bedding retailers are already shifting their model, and we’ll see more of them opening brick-and-mortar stores. Those boxed-bed companies are going to come to our playing field to compete. Our role will be to continue to educate the consumer on what they’re purchasing and being able to qualify the customer on why the bed they are buying will deliver the most personalized sleep experience possible. Consumers can’t find that from a pure online-only bedding retailer.”
—Bates, Spring Air
“At the moment, I think there is a tendency to say the most significant disruption is a shift toward buying mattresses and sleep products online. I see this dynamic less as disruption and more as a change in purchase channel. I think the industry will respond by going to where consumers are spending their time and money.”
5. What factor (consumer trend, economic shift, new technology, etc.) do you think will most impact the mattress industry in 2018? Why?
“Internet sales continue to grow. I believe this will continue to impact our industry into 2018. There will continue to be more entrants into the channel and costs to advertise online continue to rise. This channel may not stabilize for a while longer.”
“Continued ramp-up in e-commerce with storefront presence will drive sales in 2018, along with an ability for smaller manufacturers to compete in direct selling to consumers. Next-generation mattress buyers will require smart technology and health science as a standard offering.”
“The millennial consumer will remain a factor next year and many years to come because of the size of the segment and the spending power the group will yield. As for the economy, the housing market continues to climb. We always pay attention to housing, and 2018 looks like it will continue to grow. When people are buying houses, they also buy mattresses and furniture.”
—Bates, Spring Air
6. These days, what keeps you up at night?
“Positioning our company to take advantage of the evolving market and understanding what the next generation of consumer wants as we drive innovation and investment.”
“With more and more mattresses sold online at very low price points, there is the potential for people to buy on price alone and not invest in products that deliver the best quality of sleep.”
“Nothing. With so many options for a great night’s sleep, I’m sleeping better than ever!”
7. Knowing what (fill in the blank) about the current state of the mattress industry helps you rest easier?
“Knowing that manufacturers are responding to consumer needs, whether it’s price points, better warranties, options in comfort levels or new technologies for better sleep. They are listening and bringing products and services to market.”
“Knowing the market is evolving and thus has growth potential rather than being at maturity provides optimistic views on the mattress industry.”
“As the leader in sleep innovation for nearly 150 years, knowing that innovation is moving at a rapid pace helps me rest easier. Experts and sleep scientists across the mattress industry are focused on creating exciting new technologies and products for our customers. Innovation and competition in the mattress industry make all of us better and provide a better sleep experience for consumers.”
“Knowing that we’re in an industry that will always be a necessity is very reassuring. Consumers will always need a good night’s sleep, and we’ll always be here to provide that for them.”
—Bates, Spring Air
ISPA forecasts stronger mattress sales in 2018, 2019
After a year of relatively anemic growth in 2017, the U.S. mattress industry is expected to post stronger gains in both 2018 and 2019, according to a new forecast from the International Sleep Products Association.
The forecast, released in late October, projects that at the end of 2017, mattress unit shipments (mattress and foundations) will have grown 0.5% over 2016 levels and the dollar value of those shipments will have increased 1%.
But for 2018, ISPA projects a 3% gain in unit shipments and a 4.5% increase in dollar values. For 2019, the forecast shows a 3.5% increase in shipments and a 5% jump in dollar values.
The average unit price is projected to increase 0.5% in 2017 and 1.5% in both 2018 and 2019.
ISPA’s Statistics Committee updates and publishes the Mattress Industry Forecast for the U.S. mattress market two or three times a year, depending on market conditions. It is based in part on an economic analysis prepared by the University of Michigan and input from the committee to create a consensus view.
Changes in consumer behavior and market conditions made the most recent forecast challenging, the Statistics Committee writes in a special note at the start of the report.
“In most years, consumer behavior generally—and activity in the bedding sector, in particular—follow the ups and downs of the economy. If the economy is growing, so too are most consumer segments, including bedding. And if the economy contracts, general consumer spending falls and so do mattress sales,” the report says. “This year is the exception. Although economic indicators—including employment, housing, GDP (gross domestic product) and inflation—suggest the economy is steady or even growing, consumers’ purchases in many sectors, from autos to appliances to apparel and fashion—and, yes, bedding—are underperforming the general economy. This disconnect has made forecasting more difficult across the board.”
Other factors that are introducing uncertainty into forecasting include a slow transition at the Federal Reserve from “an extremely low-interest rate environment” since the Great Recession to higher rates; recent natural disasters in California, Florida and Texas; a volatile political environment in Washington, D.C.; and, of course, significant changes within the bedding industry itself.
“Corporate mergers and consolidations at the retail level have altered the number and placement of retail locations, product mix and competition. Long-term manufacturer-retailer relationships have changed,” the report says. “New players have emerged as traditional lines between materials suppliers, mattress manufacturers and retailers have blurred, and sales of motion foundations, boxed bedding and internet commerce, in general, have grown.”
In addition to the bedding forecast, the report provides a national economic outlook and timely analyses by Wallace C. “Jerry” Epperson, a founder of Mann, Armistead & Epperson Ltd., an investment banking and research firm based in Richmond, Virginia; and Ashraf Abdul Mohsen, vice president of economic research for Association Research Inc. in Gaithersburg, Maryland.
The full forecast is available free to ISPA members and, like all of ISPA’s statistical products, is available online. If you have questions about accessing reports, contact Jane Oseth, ISPA member services manager, at 703-683-8371 or firstname.lastname@example.org.