Over the past five years, consumer shopping habits changed in a way that benefited the mattress industry. Despite slow foot traffic, retailers have found success with higher-end products, and these bigger-ticket sales made up for the lack of foot traffic. Some retailers even adopted a luxury-only lineup.
But what Steve Karns, vice president of sales for Bedding Industries of America, brought up to me in conversation recently is that there is value in middle and lower-end consumers that some retailers may have unintentionally forgotten about.
“Lower-income consumers have vacated the market, and AUSP went up for retailers because the prices of mattress sales were higher,” he says. “But they will come back eventually, and not keeping lower and middle-priced products in your store will hurt you later.”
He says retailers need “bread-and-butter” price points, and by not having those, they are driving consumers online to buy cheap mattresses.
On the flip side, Colin Blackmon, executive vice president of sales and marketing at Corsicana, says retail consumers are changing the buying cycle as it relates to various categories of mattresses, but retailers have not abandoned lower price points.
“They need those price points to advertise,” he explains. “Many retailers and manufacturers are working harder to be more relevant in the more luxury price points. When the average consumer does see some relief in their disposable income, retailers will not have to “retool” their floors to a large degree. They will be prepared.”
Regardless, the connecting string behind these ideas is that having lower-priced mattresses helps retailers serve customers while hopefully building a relationship that allows the RSA to step the customer up into a better bed.
This thinking extends into middle-priced mattresses — using $1,000-$3,000 as the example range — because if retailers have lower-priced product — $999 and below— they can upsell by offering solid financing options.
Nick Bates, CEO of Spring Air, says that the tried-and-true method of starting a customer on the most expensive mattress works, and then, when they ask about the price, you can explain how financing works.
“Instead of talking about retail dollars, you talk about monthly payments,” Bates says. “You’re not going to charge them $3,000, you’re going to have 0% financing and pay $65 a month. That’s not that bad for a good night’s sleep. If they still object, then going down to $1,599 will sound better to them. It’s important to have the beds in that $1,000-$3,000 range, and it’s important to have beds down to $599. But if you go down to below $599, you have to hold the retail dollars in your pocket and hold the margin.”
He also adds that higher-end beds are not bad to have on the floor. Even if you only go up to a max price point of $5,000, it gives the retailer a chance of selling it versus not having it on the floor at all.
“If you have 40 beds on the floor, there’s no retailer that can tell me that all 40 beds are the same percentage of sales,” Bates explains. “You have five beds that are the best. You have five beds of the worst. So if you’re looking at your sales and your percentage of sales is based on your floor, let’s start to mix it up and make changes so that your five best and your five worst are forever changing.”
Even King Koil CEO David Binke, someone whose company works exclusively in the luxury category, says it’s important to keep middle and lower price points to be able to provide for consumers of any income level.
“I’d say between $1,000 and $3,000 is probably 55% to 60% of most retailers’ business,” he says.
“We don’t do anything below $1,000, and we do a nice job above $3,000. But those lower price points are still very important.”
He adds that a middle-class consumer could look at $1,500 as quite a step up from something on Amazon. And this effect has caused retailers to wean those lower prices out because they’re not competitive.
“From our point of view, small customers and big customers all still believe in the $1,000-$3,000 range,” Binke says.
Price points will continue to evolve in the mattress industry just as consumer buying habits will. And it’s difficult to determine what constitutes a lower, middle or high price point for each store. There’s no one right answer for every retailer, but continuing the conversation helps ideas flow.
