Market Trends January 2018

Bed-in-Box and the turn key “hands off” manufacturing approach, and more.

DYNAMIC TRENDS IN USA BEDDING MARKET
 
ISPA (International Sleep Products Association) reports according to David Perry Furniture Today “that ISPA now sees dollar growth (for 2017) of just 1%, with mattress unit shipment growth of a scant .5%”. Later he laments, “What happened?”

What is happening is this: the BED-IN-BOX companies (which continue to grow) and sales have moved past 10% share and no signs of slowing. Casper claims sales exceed $400 million, Target made a $1 billion offer to buy them, then eased back, Amazon bought Whole Foods and is reported to be buying Target.

Rough ISPA estimates are that 41.2 million units (mattresses and foundations) were sold in 2017—of which 23.2 million are mattress units (17.5 million innerspring and 5.7 million foam). These estimates do not make any attempt too count BED-IN-Box sales, estimated to be near 2 million units alone.

 

Simple analysis answers David Perry’s question: the mattress industry did grow considerably but it was due to BED-IN-BOX, of which, about 95% are foam type mattresses. Trend #1 is BED-In-BOX with no signs of slowing down.

 

Trend #2 is turn-key “hands off” manufacturing. The big disrupter in mattress manufacturing relates to BED-IN-BOX. The big player—Arsenal Capital investment in creating Elite Comfort Solutions, that is not only a foam supplier to a big industry, but has created a simple turn-key manufacturing operation that goes beyond making foam, and now make the array of foam mattress to specifications, then packages and drop ships via UPS or FED-EX direct too the consumer. Elite’s customer includes all the key brands: Casper, Tuft & Needle, Leesa, and a portfolio of brands sold on Amazon. The brands, in turn, are free to devote their capital to advertising and marketing—leaving the manufacturing and shipping to Elite Comfort Solutions.

Trend #3 is the growing uncertainty of Mattress Firm. Mattress Firm grew by acquisitions of huge bedding specialty chains across the USA including Sleep Train on the West Coast and Sleep’s in the East Coast—giving them around 3500 stores. On the brink of bankruptcy in 2016, Matttress Firm was acquired by Steinhoff International. Recent international accounting scandals involving Steinhoff, and departure of their top management, creates uncertainty of investments including Mattress Firm—who have recently announced US store closings and a new $250 credit line needed to continue operations.

Many of you may be puzzled regarding why American consumers may equate foam mattresses the same as innerspring. Foam mattresses have been sold in the USA since the 1950s—and were kept stronger by companies like SEARS, JC PENNEY, and MONTGOMERY WARD—all of whom sold a competitive line of innerspring and foam products at the same price points. The market share of foam products never got above 10% until Tempur-pedic introduced memory foam mattresses in 1992. Since then, the market acceptance, valuation, and share has continued to grow—to as much as 30%. Now, due to BED-IN-BOX momentum—the foam share may grow even higher.

The momentum toward on-line sales, the simplicity with which non-bedding retailers can add mattress sales via Elite Comfort Solutions, together with the question about Mattress Firm—all create a swirling market force which is difficult to forecast.

 

 

EXPLORING TOTAL US MATTRESS SALES

 

US Data of Historical Mattress Sales

 

 

MISSING DATA FROM ISPA REPORTS

Over the years, ISPA publishes a quarterly Bedding Barometer and an Annual Mattress Industry Report complied using a methodology which surveys ISPA members which are mostly traditional innerspring brands.

One overt flaw in their industry conclusions are the exclusion of outliers phenomena that are not within their scope of methodology. Two big examples of this are examined in the following analytical chart—one example going back to the 1980s when waterbed sales had achieved sales volumes near 1/3 the size of innerspring unit sales, and, the second example—which is current—where the new “BED-IN-BOX” trend is not accounted for or mentioned.

It is my conclusion that the “BED-IN-BOX” volume added to ISPA 2017 preliminary report—shows that the industry did grow in unit sales in 2017.