Q&A: Protecting The Margins Of Retail Partners

Today’s bedding retailers are facing an onslaught of new challenges as e-commerce retailers and direct-to-consumer brands push the “race to the bottom” even lower than before. As consumer expectations shift towards entry-level prices, many traditional mattress brands have opted to slash price points in order to remain competitive. While some retailers can make up for a drop in prices with increases in sales volumes, others have been forced to cut margins. For this Q&A, we asked bedding manufacturers what they’re doing to help their retail partners in today’s changing marketplace.

What are you doing to protect the margins of your retail partners?

Malouf; Sam Malouf; Q&A“One of our most important initiatives for protecting retail margins is our MAP (minimum advertised price) policy with online retailers. Our goal is to set that high enough so that retail partners always have the best price and still make a healthy margin. So they get the visibility and validity of positive online reviews as well as incentive for buyers to come into their stores. On our own website, we list higher MSRPs to give retailers flexibility to customize pricing and sales while maintaining great margins. From a product cost perspective, we constantly analyze processes and negotiate with vendors to control pricing. Even though the cost of raw materials usually increases, we can say with confidence that in the last five years we’ve raised prices on less than 1% of our product offerings. We want to keep wholesale prices low, and we’ll keep working to do that. We don’t offer low introductory pricing to hook new accounts, then raise the price a few months down the road. We want to always be transparent and honest with our retail partners. As a company, we focus on value, even from product ideation. Whether it’s a $500 sheet set or a $30 mattress protector, value has to be a key tenet of the product. Every product has to have the best materials, best feel, best durability we can put into it at the target price point. We also put a lot of time, effort and resources into product packaging with the idea that customers will feel the quality of the product, and that higher perceived value justifies a price that supports strong store margins.”—SAM MALOUF, MALOUF CEO

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QA; PureCare; Sean Bergman“Finding lower priced products on the web can be problematic for any brick-and-mortar retailer. PureCare initiated a MAP internet pricing strategy from the day we began selling on the web. The fair market value price that we suggest brick-and-mortar retailers sell the product at is the price we demand it sold on the web under the PureCare brand. Therefore the brick-and-mortar retailer knows that if they sell the product at the price on PureCare’s price list, they know what margin they can expect, and that they won’t be undersold. We police this policy to ensure fairness, and it has allowed us to increase brand awareness without affecting the success of our brick and mortar retailers.”—SEAN BERGMAN, PURECARE CMO

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QA; Eclipse; Eastman House; Stuart Carlitz“We offer brands and collections limited distribution. Therefore, our dealers do not have to worry about other retailers selling the same models in their market at lower prices. With regard to e-retailers, we do not offer them the same models we sell to brick-and-mortar dealers.”—STUART CARLITZ, ECLIPSE INTERNATIONAL AND EASTMAN HOUSE PRESIDENT AND CEO

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QA; Goldbond; Bob_Naboichek“Our mantra has always been that we cater to the independent retailer who has to compete with the big guys in their market. They’re hungry for a brand like ours, where they can operate on significant margin and remain competitive. We provide them with two-sided mattresses designed with edge-to-edge steel and steel box springs that no one else in the industry is making anymore. The Gold Bond construction story is all about durability and longevity, which also makes for a great selling point for RSAs. We’re committed to our brick-and-mortar customers, and we don’t undercut them by selling the mattresses to e-commerce retailers. We’re diligent in protecting distribution. A consumer isn’t going to be able to shop our mattresses from store to store in their community. We work hand-in-hand with our retailers on training their sales teams on the unique quality story our mattresses offer so that they’re comfortable and confident in selling Gold Bond, which in turns nets a margin that allows the retailer to prosper.”—BOB NABOICHECK, GOLD BOND MATTRESS CO. PRESIDENT

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