Given these, Bed In A Box (http://www.bedinabox.com/) started with what seemed like it could be a potentially disruptive business model. They make-to-order mattresses (will even make custom sizes) and ship Tempurpedic-like memory foam mattresses directly to you via UPS. They suck all the air out of the mattresses so the boxes they come in are reasonably sized. Inside the box, there's a backpack-style sack which makes the mattress easier to carry. I hauled a Queen-sized mattress up four flights of stairs easily.
I've purchased two mattresses through them and they are high quality and extremely comfortable. The first purchase they were easily 50% the cost of any quality mattress I could find elsewhere (including Costco, Sams Club, etc.), especially if you factored in the cost of delivery. I was surprised that when I went to buy another mattress from them their prices were markedly higher.
I wonder if consumers were concerned that the low prices indicated low quality (not the case in my experience) or if they were unable to get the volume to sustain a low margin, high velocity business.
As an extra bonus, this would make putting sheets on easier as there's no wrong way (short of inside-out, I guess).
But a flippable + rotatable mattress means it could last decades, so of course it won't happen.
The mattress I own now is non-flippable, and came with a 20 year warranty.
Edit: I'm joking...
The problem with mattresses is that it's a product where you need a salesman. There's a bunch of different products that look similar, but have significant differences. You want to match the customer with what they want (or tell them what they want) so that they don't return the thing.
Plus, there are some inherent logistical differences between a pair of eyeglasses that can be dropped in an envelope and shipped to anywhere in a day or two. Distribution and warehousing is expensive, the product needs to be delivered quickly (and picked up if the customer is displeased).
There is a market for discount mattress sales outlets on the internet -- but just as online furniture and appliance outlets haven't "disrupted" the market, mattresses online are unlikely to either.
I hear you, but who says that $500 is a reasonable price for a mattress? I'm sorry, but looking at the raw materials involved (don't even get me started on the frickin foam ones that don't even have springs: I'm looking at you Tempurpedic) it's clearly still a racket at the Sam's Club prices.
If it is the raw materials, and not a rip off, then why do solid foam rubber mattresses cost more than mattresses containing moving parts and metal springs?
For example: http://www.overstock.com/Home-Garden/Comfort-Dreams-Select-A...
Something really shady is going on with their rating averaging.
Anything less is either refurbished (ick) or one of the foam ones from Amazon/Overstock. The online foam mattresses are as low as $350, because they can compress the foam and make it light enough for UPS Ground.
Personally, I don't like foam mattresses. If i didn't know that, dropped $350 on a mattress from Amazon, I'm stuck with some bizarro return process, since it's no longer compressed foam that can be readily shipped!
The market consists of buyers and sellers. Since a bed typically lasts over 10 years, a typical buyer buys fewer than 7 beds in a lifetime. That's not enough to get educated or even keep up with change.
So in fact the market consists of sellers and what they can get away with. Nothing to do with being reasonable.
I found the articles at http://www.us-mattress.com to be helpful enough that I could make an informed decision.
Not to mention the ease of returning those eyeglasses should they not be to the customers liking.
I was a little disappointed when I stayed in a Westin a few years ago, the bed was nice, but didn't live up to the high expectations.
I prefer the Westin bed to the W bed; I've probably spent >100 nights in each.
The damn thing was ~100lbs in a giant box, and I got it shipped to me free. It's super comfortable and well worth the money - remember you sleep for like 25% of your life.
Mattresses seem like less of a specialty-item than eye glasses, so I wonder if big online retailers like Amazon can just cut out the middle man and service 80-90% of customers?
Warby Parker can get away with the similar consumer requirement for glasses because glasses are small, light and easy to ship. They can send you half a dozen samples and let you pick the one you want. Not so easy with mattresses!
The car market has this problem as well (in addition to others, like the protectionist rackets that the dealerships have set up).
One can get all of the benefit of this by selling a single mattress, but also sending 3 or 4 foam mattress toppers to choose from. Correctly designed packaging would let the customer re-roll the topper, then use a vacuum pump to collapse the rolled topper back into a compact form for return mailing. (The pumps would be cheap and disposable, so wouldn't be returned.)
Using a system like this, one could become the Zappos of mattresses. There would still be a restocking and return fee for the mattress, but one could let the customers exchange and try toppers to their heart's content, so long as they took good care of the merchandise.
Is two-way shipping with easy returns possible for mattresses? I would be willing to try it if I never had to deal with a mattress salesman again.
I won't claim to be an expert on TVs or their delivery, but that was nicer than buying it at Fry's and manhandling it up the stairs myself.
This was in San Jose area, but I think it was provided anywhere.
Anyway... What I'm trying to say is that a mattress pickup service isn't necessarily out of the question.
While it's true that lying on a mattress for a few minutes won't tell you whether it's the best one or not, it sure did help us rule out many mattresses. We ended up getting an Ikea mattress, which turned out to be quite nice.
That's slave labor.
wsj article on prison industries in nevada: http://online.wsj.com/article/SB1000142405297020391180457665...
High Desert Prison with current work being done and wages (most facilities don't list wages): http://www.doc.nv.gov/?q=node/25
A now very outdated paper on the economic impact of SSI on Nevadas economy which includes a small section on wages: http://www.cabnr.unr.edu/uced/Reports/Technical/fy1998_1999/...
The pricing structure, where they hide the models by using different names across retailers, is 100% true. They absolutely do that to prevent price shopping.
The markup math is off. Mattresses are a high margin business, but most of those mattresses you see in specialty retailers are not built until someone buys one. You see, those mattresses are custom to the customer - from the tick (stitching pattern, which creates a firmer or softer surface) to the foam density, to EVERYTHING. It's like ordering a car where the car is measured to a specific person's height, weight and engine preference. You can imagine what a returned mattress is worth. Pretty much nothing. The margins have to cover all of that. Are the margins good? Yes. Would a small company be able to cut their margins to make one-off custom mattresses and compete? ...maybe.
Finally, there are retail outlets - Costco, Ikea, that buy from those mattress companies in bulk and sell generic mattresses much cheaper.
So, yeah, there's some market there but not as rich as some might think.
What you're absolutely correct on, however, is that the cost of building a mattress doesn't represent the cost of running a mattress business.
However, that's exactly what makes it ripe for disruption: streamline the rest of the business model and loot the manufacturing margins.
I'm not arguing that the mattress industry isn't ripe for disruption, but very rarely is value delivered directly related to the cost of production.
COGS is often difficult to accurately estimate (how much do you allocate R&D and other overhead?).
An iPhone 5 may only contain $110 worth of silicon, but the value delivered is a lot more than the raw material cost. Jony Ive's salary represents a tiny fraction of each iPhone, but his design and influence represents a significant chunk of the profit.
First you mark up 50%. Okay, a $100 cost mattress gets sold at $150 wholesale. Then the retailer marks it up 100%, to $300 total. That's 200% of the production cost, not 74%.
What they meant to say is "production cost represents only 26% of the final cost of a mattress" but totally flubbed it.
1. Oligopoly market structure CHECK
2. Insane gross margins CHECK
3. Opaque and misleading product naming CHECK
4. Expensive distribution through unpleasant channels CHECK CHECK CHECK
I used to think of diamonds as basically worthless rocks, until I went shopping for an engagement ring stone and looked at them under the jeweler's microscope, and thought "I want to be dressed from head to toe in these things". With mass-produced diamonds, that may become a reality.
I do question your judgment in wanting to cover yourself head to toe in diamonds :) Do you also want to drive this car? http://www.diamondvues.com/2007/04/check_out_this_diamond_st...
Sure there are services like BlueNile etc but they're nothing like a Warby Parker for Diamonds.
Diamonds are bought, not because of what they are but what they represent.
The whole point of diamonds is to capitalise on what they're representing rather than their actual worth.
Their value is created through the likes of "diamonds are a girl's best friend" which is why the price is high for them.
Hence the advertisements have been developed around the whole perceived value of diamonds ala. "diamond's are a girls best friend" because when you present a woman with a diamond you're presenting her with a promise - a promise that you will look after & take care of her. Which is something that most women want.
a) the girl is a "nice girl" and is more than happy that the finacee got a ring that was even better valuable (I've one singaporian friend that actually had her fiancee take his ring back and buy another one from singapore - not because she wanted a bigger one but she wanted him to get a better deal (I think it ended up being a bigger diamond but that's not what she was angling for))
b) the girl wants to have a bigger ring than her friends in which case it's also a win.
The actual value of the ring is more of a "hygiene condition". Once it costs "enough" then to someone who actually cares (most girls are just happy with getting a hubby) what actually matters is what it's perceived to cost and a fiancee who can deliver bigger, delivers bigger!
It actually reminds me of a Warren Buffet Quote “If you gave me $100 Billion and said, ‘Take away the soft-drink leadership of Coca-Cola in the world’, I’d give it back to you and say it can’t be done”
Expensive, scalable (huge diamonds for celebrities, small ones for poor people, and everything in between), durable, small enough to slip in your pocket (to surprise them), and backed by a monopoly supplier.
You could try it with another rare gem (rubies, emeralds, opals) but you won't have a monopoly supply, so you can't compete with the advertising dollars of the diamond miners.
You could try to switch the marriage tradition to something completely different (look at China, where are house and car are generally a pre-requisite for marriage), and hope that the practicality of the tradition wins over big advertising dollars. The problem is, celebs don't care about a new car the same way a newly married couple do.
Or you could try to encourage an "experience" gift. Paris could set itself up as the city to propose in, and smaller cities could also compete.
It's just hard to think of everything with all the advantages of diamonds. The disadvantage is their lack of practicality, and their slightly unethical origins, but nothing seems to have displaced them so far.
I like the Warren Buffet quote, though. Thanks for sharing it.
Of course, he's probably talking about using the $100 billion to build up a competitor, and make some money.
They might be surmountable, but that doesn't make this a better opportunity than a lot of the other opportunities out there, especially for a startup. The costs involved with disrupting the mattress industry as a manufacturer AND retailer are better left to a larger company. Like IKEA, as the article itself pointed out.
This is a cultural artifact. We've reached a point in manufacturing technology where this should no longer be true.
> disrupting the mattress industry as a manufacturer AND retailer...Like IKEA,...
The most comfortable mattress I've ever slept on: A Sultan Fonnes mattress, with an egg crate foam topper from http://www.foambymail.com/ on a platform bed, no box springs. You can leave off the topper and save about $60, if you like, and you wind up with the equivalent of a great firm futon that never bunches up. The combination for Queen is well under $400, including taxes and shipping.
My plan for instant "satisficed" sleep furniture: Buy a cheap platform bed, a Sultan Fonnes mattress, and 3 eggcrate foam toppers. Keep the combination with the topper you like best and sell the other two. No going to the store needed at all. It could all be done through the mail and by delivery in most of the US.
I am not associated in any way with IKEA or foambymail.com except as a customer.
I hope you are not implying what I think you are.
If you are: rabid consumption is fucking this world into oblivion. Just because we can produce/buy more easier/faster, does not mean we should.
"There is no such thing as sustainable growth"
No, but I know people who really like slats and none who dislike them. (I wanted to write that I know people who swear by slats and none who swear at them, but that would be an exaggeration.)
I can't have my bed on the floor, because I have my platform bed on risers and 10 big plastic bins underneath so I have a storage bed.
Unfortunately, their range of styles is still very narrow, which is presumably dependent on their manufacturing capabilities.
I have heard of ClearlyContacts.ca (I am Canadian), is Warby Parker comparable?
They basically started a very customer friendly model that other online glasses retailers didn't offer at the time of founding.
EDIT: Basically, customer experience.
My Luxotica/Ray Bans were made in Italy and (on sale) aren't any more expensive than the Chinese made Warby Parker sunglasses.
I believe it's still the case that prescription eyeglasses can be bought with pre-tax dollars under a "use it or lose it" flex savings plan. I assume vision plans, which often include large purchase credits for eyeglasses at least biennially, are also tax deductible benefits.
The result is often relatively price-insensitive consumers who "have" to spend $200+ on glasses lest they not be taking full advantage of their benefit.
Take note of the margins, this isn't Microsoft sized here.
They have almost 900 stores in 27 states.
The article therefore is based on the idea of manufacturing your own mattress and selling web based. Unfortunately this would require warehouses around the country and a manufacturing facility in this country to make the mattresses. Although I'm not sure, I would imagine it would not be cost effective to ship a mattress from China (although I guess Mexico is possible) because of the size and weight. So this is not selling sunglasses or fashion eyewear which can easily be manufactured overseas as well as easily shipped (and returned).
These days it doesn't seem like outbound distribution is too big of a deal (many mattresses are shippable in rolled or compressed-box form), it's the reverse logistics that are tricky. Once the genie is out of the bottle, good luck getting it back in. I'd love to be able to try out a mattress, like Zappos shoes or Bonobos pants, and return them for free if I'm not 100% happy. Maybe someone needs to invent an easily-compressable mattress so I can purchase online with total confidence.
Unfortunately they don't have a presence on the West Coast.
What kind of mattresses are people buying, and what sort of retailers are they going to, where this seems like an immensely extortionist industry?
I'm sure the need for the entire thing to respond to your body the way it does probably prevents such a thing, but that sure would make it easier to own one.
This practice predates looking online for cheaper. They all obfuscate model numbers so you can't do comparison shopping or "price matching" in the real world. It's shameful.
More seriously, there are tons of niches that are underserved by the HN crowd and that need some disruption.
Patio11's talk has inspired me a lot:
If an industry is overweight PE, you can bet that the market analysis looks fantastically attractive (competition isn't too fierce, suppliers have little power, buyers have little power, not many substitutes, and little perceived threat from new entrants). If a clever entrepreneur can render that last condition false and enter that market, that entrepreneur has the opportunity to shrink and consolidate a $huge market that's owned by PE players into a $smaller market that is owned by the entrepreneur.
PE controlled competitors will, generally, not be particularly agile, because PE tends to capture value by leveraging the heck out of a currently viable business model. It's a model that works really well as long as base assumptions hold true, but startups can ruin that for them.
Private Equity firms typically want to run their portfolio companies as profitably as possible. This means cutting down service, R&D, technology, etc as lean as possible without damaging the existing product or brand.
It also rules out lots of room for innovation as the companies chief reason for existing becomes generating enough profits to pay off the individual company's outstanding debt.
Why is there debt? Private Equity firms will buy a company, streamline its operations, increase its profits, and demonstrate to banks/investors that it is financially stable. Once they've done that they raise lots of debt against the promise to pay off that debt with the future, dramatically increased, profits. They use the debt to pay themselves a bonus for taking over the company and fixing it.
Why not wait and just pocket the company's profits over time? Well, that's how Warren Buffet does it (sort of), but by loading the company with debt they get their bonus sooner increasing the IRR for their own investors.
Who originally formulated this idea? Was it you? This sentence is fantastic.
It's fairly easy, in theory, to take a bloated and inefficient company, cut it to the bone to reduce overhead, then position it as more profitable for resale. On paper, sure, it's more profitable. In reality, it's just a similarly bad company that's been trimmed up and given a new paint job. It's very similar to the real estate playbook: buy a delapidated property, touch up the exterior, then flip it as if it's shiny and new. (The beauty of PE, over real estate, is that PE firms can rig the game to benefit one way or the other, due to debt structuring. If they can flip the company for a profit, they win; if the company goes bust, they're insulated from the damage.)
I would say that an overpresence of PE in an industry is a decent indicator that the industry is in trouble (or is ripe for disruption). But I think PE guys realize that, as well. They're just in it to make the quick, easy buck, rather than take on the burden of reshaping the industry. I wouldn't call them "risk averse" so much as I'd call them opportunistic. It's just a different kind of opportunity, and arguably a less socially valuable one.
It was a response to a particular point raised in the previous comment, specifically, about the position that PE companies are taking in the marketplace. I rambled a bit after addressing the point, and I editorialized a bit. I won't deny that much.
"You're obviously not a believer in PE."
Not generally, no. But I'm a believer in a (relatively) free market, and as such, PE is one of those "I don't agree with a word you say, but I'll defend to the death your right to say it" topics. I think PE has its place, but as most common practiced, it's most often counterproductive in the long run.
"the issue is, are PE-dominated markets ripe for disruption?"
I believe I answered that question in the affirmative. Admittedly, in a discursive way. But yes. I think the presence of a lot of PE players in a market is a pretty good signal that the market can be disrupted.
How about PE as a proxy for "incumbency?" That is to say, you're looking at companies who figured out a formula to "print money" then let themselves get complacent and fat, thereby becoming targets for PE. This would explain why they tend to be not so agile.
I just had an image of a cabal of attractive young women, somewhat resembling James Bond villainesses, but who are trained in business and economics, who seek out dalliances with PE firm executives in order to perform industrial espionage.
If I were not in tech, the firearms industry would be really attractive.
Has nothing to do with the article, but they just can't resist.
The stuff you ostensibly do when you're not on HN.
How do you know that? If what the article says is true, it cost them $500 to manufacture that mattress, or less. With a sale of $800, they're still making a good profit.