The Truth About Mattress Retail Markup – And Why We Should Be Talking About It

“Did you know that a $3,000 mattress probably only took $300 to make?” It’s a factoid that’s been floating around the Internet for some time now - but one that we at Sleep Retailer hadn't thought too much about until recently when we were reminded of it on Twitter. So we decided it was time to dig a little deeper into where these numbers come from and what they might say about the mattress retail industry's reputation.

The figure itself comes from Tuft & Needle, an online mattress brand that devotes an entire page of its website to revealing the “truth” about the mattress industry. And while we were still left scratching our heads at the company’s explanation of the industry’s “typical” pricing structure, many people outside of the industry have actually accepted it as fact: the page itself has been cited numerous times throughout the web (see here and here). Fighting back against this claim directly may be a fruitless endeavor for retailers - but the fact that it has been accepted as truth reveals certain vulnerabilities that the mattress industry has turned a blind eye to over the years. Namely, that the average consumer knows very little about what goes into making and selling a mattress. And that has left the door open for online brands to present themselves as a more honest and valuable alternative.

“Mattress stores are greedy,” exclaims Tuft & Needle on its website. “Say goodnight to over-priced, over-complicated mattresses and discover the truth in pricing.” It then offers an itemized list of the ‘average material cost’ for each component of a queen mattress - plus any additional markup, marketing and commission costs. Ultimately, this graph comes to the conclusion that a mattress that costs approximately $300 to make has a “typical retail price” of $3,000.

While it’s entirely possible that there are retail stores out there that have adopted such an extreme pricing structure - it’s hardly the industry standard. But the point of this graph is less about comparison shopping and more about positioning Tuft & Needle as a more honest option for consumers. The cost breakdown is presented as further proof of just how broken and unfair the traditional mattress industry is. This type of rhetoric is pulled directly from the standard playbook of most new direct-to-consumer online brands.

According to Jesse Derris, founder of the public relations agency Derris, who has helped companies like Warby Parker establish their brand identities, most direct to consumer (DTC) brands offer a relatable “core narrative” to explain how each business came to be. Derris explained to Inc. that DTC founder stories go something like this, “I believe I’m getting ripped off by X, so I launched a brand to solve the pain point.”

For Tuft & Needle, the mattress industry isn’t simply broken because it costs a lot to run a brick-and-mortar store - the industry is broken because “mattress stores are greedy.” By backing up this campaign with the inflammatory pricing breakdown, the company is implying that standard product mark-up is simply a way for retail stores to rip-off their customers and further pad their profits.

But this type of cost breakdown isn’t always used by online brands to attack their competitors. In fact, many DTC companies utilize this tactic as a way to help sell their own more expensive products. Known as “price transparency,” this strategy has become popular among the online apparel market, spearheaded by brands like Honest By, Oliver Cabell and Everlane. More than just offering an itemized list of each material cost, these companies will even go as far as to outline all of the other expenses that contribute to the higher price tag: from staffing, to research and design, utility costs, intellectual property rights, etc.

“Among the goals of transparent pricing is education,” Bryan Pearson explained in an article for Forbes. “If shoppers understand the reasons for a product markup they will be willing to cover it.”

According to Pearson, price transparency is an “astute effort in a time when nearly year-round retail market downs have shoppers questioning the real price of any products on the shelf.” This is especially true for the mattress retail market, which has long relied on big blow-out sale weekends and regular price flexibility. Shoppers know that the price tag on that mattress will inevitably go down at some point, which essentially destabilizes their perception of the products’ value. Who knows how much a mattress is actually worth if the price is constantly changing?

And that is how Tuft & Needle can get away with claiming that a $300 mattress sells for $3,000 in a retail store - because consumers were already kind of suspicious of the market to begin with thanks to its lack of clear, easy-to-understand product information and a general sense of price instability. By keeping consumers in the dark, the mattress industry allowed itself to be vulnerable to these types of claims.

So what can we do about it? In order to combat the “mattress stores are greedy” reputation, retailers need to adopt a more open and honest dialogue with their consumers about pricing, costs and value.

When it comes to higher-end mattress collections, price transparency could be a valuable selling strategy - details about ethically-sourced materials and artisan craftsmanship can help paint a clearer picture for the consumer as to why this mattress is worth a bigger investment. Of course, full price transparency is not going to be a viable option for every product nor is it a meaningful selling point for every customer.

But simply reframing the sales conversation to focus on true value can be a meaningful way to start regaining consumers’ trust. Whether you are selling an entry-level innerspring mattress or an ultra-luxury memory foam bed, it’s important for retailers to help their customers understand why a product is priced the way it is. Why is this one more expensive than the one sitting next to it on the showroom floor? Or the one that can be delivered in a box on their doorstep?

We know most mattress stores aren’t actually greedy. But do your customers know that?

Read more hereherehere and here.


This article originally appeared in Sleep Retailer eNews on May 24, 2018. 

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