What can the bedding industry learn from Metro Mattress’ bankruptcy?

Last week, Metro Mattress asked a federal bankruptcy judge to approve the closure and liquidation of its remaining stores, 13 months after filing for Chapter 11 bankruptcy protection.

The chain failed to secure a buyer and was running out of funds to cover advertising and expenses, according to the filing. The chain had about 70 stores before the court approved the closure of nearly 30 locations across New England and New York earlier this year.

When a chain of that size goes out of business, it makes you wonder why.

With so many retail closures across the country, does it say something about the industry when a retailer of this size closes all its doors? Not necessarily.

One source I spoke with off the record said that though they do not have any insider information on Metro, they know of retailers in a few of Metro’s markets that are thriving. 

This suggests the conditions that led to Metro’s insolvency could have been self-inflicted, and others I spoke with had similar sentiments. 

But regardless of Metro’s situation, there are lessons to be learned about retail expansion from this.

Justin Trumbo, owner of Bed Tech Midwest, has extensive experience helping retailers open and scale stores across the country. While he couldn’t speak directly about Metro Mattress or its bankruptcy, he says the pattern that often leads to trouble in retail expansion is one he’s seen many times before.

“Players start small, and over time they grow into large organizations with dominant positions within their established trade areas,” Trumbo explains. “But once they reach that point, many forget what true economies of scale actually mean.”

Drawing from years of working alongside successful and struggling retailers alike, Trumbo says more stores does not mean economies of scale. True efficiency, he explains, comes from doing more with the resources already in place.

“If a company opens 10, 15 or 25 new stores and doesn’t open a new warehouse, add new management or create a new marketing area — that’s economies of scale,” he says. “They’re leveraging existing infrastructure to produce more.”

According to Trumbo, many companies lose sight of this principle when they try to expand too quickly or move into unfamiliar regions.

“When you enter a new market, that means a new warehouse, new trucks, new employees and a region where you’ve done no advertising and have zero market share,” he says. “If you have 70 stores spread across six markets, that’s six warehouses — each with its own costs, staff and logistics. Sometimes that kind of growth can simply become too much for a company to sustain.”

He adds that once retailers reach that level of expansion, the real opportunity lies in looking inward rather than outward.

“That’s the time to focus on the things you couldn’t do before — growing same-store sales, improving marketing campaigns and strengthening your community presence,” Trumbo says. “Opening stores is the easy part; eventually, you have to run what you’ve built.”

Gordon Hecht, a seasoned industry veteran with nearly 50 years of experience in the bedding industry, echoes Trumbo. 

Hecht previously held executive roles at Ashley Sleep and Serta Simmons. These unique experiences allowed him to work closely with retailers and understand how they run successful retail operations. And why some fail.

“Having overseen a network of over 100 mattress retailers, I have rarely witnessed one that went bankrupt due to a lack of sales,” he says. “They lose out due to overpriced occupancy costs, including being “over-stored” for a market. This would especially be true in western New York. Managing store count, store size, true lease costs and more can make or break a business. In Metro’s case, it was the proverbial straw.”

Steve Houk, owner of Boise Mattress, thinks there’s a lesson for manufacturers to learn in all of this as well.

“Big stores can go away, too,” he says. “There’s been a large focus on regional chains, and now a top regional chain is going out of business. It should be an awakening for manufacturers that smaller independent retailers deserve recognition and effort.”

For retailers, he says that some get caught up in growth and think that success means the number of stores instead of profit dollars, “which is what really matters,” he says. 

“If you’re going to expand, you need to do it with great caution and understand the risk,” he says. “You don’t want to take a risk that sinks the whole ship.”