The mattress industry is not one that’s particularly highly regarded. And even though mattress stores are, contrary to internet conspiracy theories, not in fact giant money-laundering operations (turns out they’re merely a vessel for executive-level graft), the whole business seems to leave a lot of questions unanswered. Why are mattresses so expensive half the time, while others are cheap? What’s with all the companies? How profitable are they? Is there really much difference between them?
To help us figure all this out is Seth Basham, an equity research analyst and managing director at Wedbush Securities, who specializes in the mattress industry. Let’s sink into this one and dream up some answers.
Sooo… why are mattresses so expensive? Are they overpriced?
It’s a bit complicated. Basham confirms that mattresses have pretty high profit margins within the larger furniture industry. At mattress stores, the retail markup is a pretty typical 100 percent — meaning the store will buy a mattress for, say, $500 and sell it for $1,000.
But it’s hard to say whether they’re actually overpriced — mattresses are for sale at all different prices! “You can buy a mattress that costs $200 to $300 or you can buy a mattress that costs $8,000 or $9,000,” Basham says. “It’s all about what you want in terms of features and quality. That said, there are mid-price mattresses that are pretty darn good quality for the money.” He says about half of mattresses sold are below $1,000, and half are above it.
What do I actually get for spending more money?
Basham says that there’s a lot of marketing involved in mattresses, and a bit of sleight of hand regarding the prices at which they’re offered (more on that in a bit), but there are clear differences in the quality and material that goes into them as well. “It’s not clear cut across the board, but generally speaking, you’re gonna get what you pay for,” he says. “You’re gonna get higher density foam in a density foam mattress that costs $2,000 versus one that costs $300. It’ll hold up for a longer period of time, you won’t sag into it, that type of thing.”
Those bed-in-a-box companies that sell a setup for as little as $200 or $300, Basham says, “have no support on the edges — if you try to sit on the edge of the bed and tie your shoe, you’re going fall right off, so there are definitely a lot of features you get when you pay up.”
What about all those online brands nowadays?
Yeah, there are more than a hundred now! They’re often made of similar materials and separated only by marketing. Until recently, all that competition was driving down the prices of mattresses, particularly at the low end of the market, creating a price floor. (That, and all the mattresses now manufactured in China and Southeast Asia.)
A couple things! One is the market. “Consumers are increasingly concerned about health and wellness and their sleep, and they’re willing to pay a premium for the mattress they choose,” Basham says. “And two, there are cost increases that are being passed on from suppliers to mattress producers and eventually to consumers.”
What’s causing the cost increases?
There’s a shortage of components that go into mattresses with coils — so any coil mattress, or a hybrid mattress (memory foam and coils). The coils, you see, are typically encased in a certain fabric that’s also used in personal protective equipment, and in 2020, the year of coronavirus, anything to do with PPE is in short supply. Meanwhile, there’s been an increased demand for mattresses this year, so the laws of supply and demand have increased prices.
Secondly, there’s been a cost increase in memory foam in the past few months, Basham explains, driven by the increased demand as well as by hurricanes in Texas and Louisiana, where some of the factories are based.
So there aren’t very many suppliers in the industry?
That’s right. While there are hundreds of brands out there, Basham says Tempur Sealy and Serta Simmons control more than half the market. There are also only a few foam suppliers out there, and a couple of major spring suppliers (though for other components that go into mattresses, there’s a more varied base of suppliers).
And this is what keeps the prices high?
Yes — these few suppliers can set high prices. However, these prices are attracting new suppliers to the business, and Basham says the supply-demand imbalances will work themselves out over time.
But remember as well that brand name counts for a lot in mattresses, including the ability to charge premium prices (along with offering better quality, obviously).
Okay, then, what’s the shadiness in mattresses?
Comparison-shopping for a mattress has always been a bit difficult, though in the past, mattress companies intentionally worked to make it more so! The way mattresses have been marketed for the past, oh, 50 years, you’d have the same Serta mattress sold at Macy’s, Mattress Firm, Nebraska Furniture Mart, etc., but it’d have a different name and a little design tweak for each store, so the consumer couldn’t compare and figure out if they were getting a good deal or not. “It’s a little bit of a sleazy process,” Basham says.
Has that changed?
A bit — these bed-in-a-box companies are offering the same models being sold online as in retail stores, and even mainstream brands have followed their lead, reducing the number of variations that they give to retailers within the past five years. But because mattresses are such an infrequent purchase, it’s a very competitive industry, with some shady tactics.
Speaking of which, why are mattresses always on sale?
Because, for one thing, sales work! And it works for mattresses in particular because people don’t shop for mattresses every day, and they think they’re getting a deal if it’s on sale. This is also another obfuscation tactic by the mattress industry to make it difficult to comparison shop. Finally, the stores can do this and still make plenty of money because of the initial markup.
What else makes mattresses so expensive?
Well, unlike a lot of other goods, there’s no used market — it’s essentially illegal to resell a mattress, Basham says. Then there’s the fact that mattresses are often, though certainly not always, an immediate purchase, unlike, say, cars or other furniture. If you’re moving and you need a mattress by the time you go to bed, well, you’re not going to wait to pull the trigger. Or if you’re getting poked by a spring on your old mattress, you’re not going to spend one more night on it than necessary.
Yet Basham says the average shopping period for a mattress is a number of weeks, not days or hours. Now that health and wellness are increasingly popular components of mattress shopping, people are taking more time and reading more reviews online (for whatever those affiliate-marketer’s opinions are worth). As opposed to simply going to a mattress store, getting the opinion of the mattress salesman, trying a few mattresses out and being steered to a certain high-profit-margin model, and still wondering whether or not you’re getting a good deal as you leave the store.
So, prices are set to remain high?
Yes — Basham thinks so. Right now there’s more demand than supply. Unrelated, mattress demand is also closely tied to housing demand, and when home sales go up, it has an impact on mattress sales. Thirdly, more people are spending their discretionary income on home-related goods while they travel and go out less.
The good news is, there are lots of low-priced options now, and you’re not solely at the mercy of the mattress salesman anymore, who knows a lot more about the margin and features of the products they’re selling than you ever will.