Not all disruption is purely technical. In the mattress industry the disruption is more around process. Direct to consumer, service, product iteration with direct customer feedback, more vertical. There are technical innovations (foam chemistry) but that's not something that I would consider disruptive.
Historically, mattress manufacturers (the big brands) sell direct to retailers with little to no customer feedback or service. The stores resell (middlemen adding to the customer cost) with little to no customer feedback passed back to the brands. The supply chain was very difficult to break into because it was guarded from new direct to consumer entrants.
It seems like these guys generated a tremendous amount of money for themselves and orders for the businesses based on which company they gave the OK to.
You guys seemed to stay out all that, which I really respect, but it looked like some competitors really went to lengths to get that "edge" in this product category.
Thank you! But I'm afraid/embarrassed we were part of the reason they exist.
It's very frustrating because so many people fall for the reviewers as "experts". I remember when the first of them, a blogger, called me to interview us. "I'm writing an article about you guys and btw you should setup affiliate links because more bloggers will write about you".. we setup links naively and had no idea what was about to happen. The blogger then wrote about a competitor, and then another, rebranded as an "expert mattress review site" and before we knew it we aided in launching a digital version of a mattress salesman who is paid commission. Later several other expert site clones popped up. They are SEOd to the max and I don't see them going away for awhile. We shut down our affiliate links realizing it made zero sense and was a mistake/incongruent with our values and mission. We were downgraded in the reviews the next week.
What I found really interesting was that some of the new look-alike brands that paid big kick backs leveraged the reviewers to speed track their growth without needing to rely on adwords/organic word of mouth.
I've yet to see any of the affiliates actually use real science/data or ASTM testing methods. It's "opinion based." We just ignore them knowing we'll lose some % of traffic and just stay focused on the customer.
Thanks for taking the time to respond. Especially as a co-founder it goes a long way! I'm still looking for that net30 D2C product of my own to get started. All the best!
Hey there, JT, Co-founder of Tuft & Needle. To clarify, Daehee and I started with $6k in 2012 and have raised no investments to date. We took a loan in 2016 of $500k for our SF retail store (that year our revenues were around $40mm) but did not use it and paid it right back. To be honest, we were wanting to learn how to leverage debt for growth but immediately decided that it wasn't needed and didn't make sense for us at that time. We've been fully unfunded and profitable every year.
That seems incredible. I guess I just don't understand how you could custom brand and design a physical product, find manufacturers and fulfill their MOQ's, store all of your product and market it for $6,000. Either way, I understand you approached this sector with a technology first mindset, and it's been a really impressive business model.
I've approached similar D2C products in different markets using your method but the initial costs just to get a product to market before advertising is usually close to about 10 times higher.
Thx! We were definitely a special circumstance. We found a tiny mom & pop manufacturer who had the equipment and had capacity. We negotiated 30 net terms (this was hard to get) allowing us to fund with negative working capital... customers buy the product, we paid mfgt 30 days later.
My co-founder and I also have engineering/design/product backgrounds so we didn't need to hire anyone to build our initial dotcom or product. We ran it all for the first 1.5yrs before we could afford to hire our first customer service team member in 2014.
Marketing expense was also kept to almost zero, branded search primarily, until around 2014.. we had to rely on word of mouth/organic. This forced us to build in such a way to keep costs low while ratcheting up the value prop which has translated into an efficient process we still have now. Our spend of advertising as a % of net rev is estimated at less than half of our next heavily funded competitor.
Hey this is JT, Tuft & Needle co-founder. Firstly, thanks for all your support and please send any feedback or thoughts any time. I'm at [email protected].
Since we started Tuft & needle in 2012, we've been bootstrapped and have been growing very fast while being profitable. We didn't view this merger as something that we needed to do. But it was something that we knew if done right and everything aligned with our goal of completely disrupting (converting it to being customer focused) the mattress industry from beginning to end, we would do it.
This wasn't a typical acquisition. Tuft & Needle combining with Serta Simmons was a merger operationally, legally, and financially. My co-founder Daehee and I structured the deal with Serta Simmons in such a way that we would have maximum impact towards accelerating the transformation of the industry. Daehee and I will be joining the executive team of the combined company, leading with the goal of both internal and external transformation. Our team in Phoenix will be not only be focused on growing Tuft & Needle, but also for dusting off Serta Simmons' other brands and implementing everything that we've learned and built to the other brands.
Regarding quality, what's really exciting for us is that through this merger we will be able to accelerate our product, feature and service roadmaps for Tuft & Needle. What we could do in 5 years we can now do it almost immediately. Specifically regarding quality and pricing, this is actually best case scenario for our customers, because we'll have access to more efficiencies to make our value and innovations even better.
Again, thanks for your support. This is going to take a lot of time and a lot of work. What we expected and hoped from our customers is cautious optimism that we can then validate and prove over the coming years that this merger was definitely the greatest step we could have taken for our customers and the market as a whole.
Historically, mattress manufacturers (the big brands) sell direct to retailers with little to no customer feedback or service. The stores resell (middlemen adding to the customer cost) with little to no customer feedback passed back to the brands. The supply chain was very difficult to break into because it was guarded from new direct to consumer entrants.